Ignoring the agricultural sector in distress

A potato farm on the outskirts of Varanasi.

A potato farm on the outskirts of Varanasi. , Photo Credit: AFP

Tthe report released by the Finance Ministry and the vote-on-account presented by the Finance Minister are concerned more about portraying a glowing image of the government than about the financing plans for 2024-25. For the same reason, one is constrained to confine the discussion on the Budget to one question: was the distress in agriculture over the past decade alleviated by policy, or has it been exacerbated?

Marginal increase in allocations to agriculture, fisheries, and animal husbandry

Income and profitability

All official data appear to indicate the latter. First, there was a strong downward pull on agricultural prices leading to a squeeze on farmers’ incomes. The sectoral deflator in agriculture and allied sectors — estimated as the difference in the growth rates of gross value added in current and constant prices — declined from 9.4 in 2013-14 to 5.0 in 2019-20 and 3.7 in 2023-24.

Second, the stagnation or fall of agricultural prices in the market was not ameliorated by any rise in minimum support prices (MSP). For major foodgrain crops, the MSPs rose by an average of 8-9% per annum between 2003-04 and 2012-13, but only by about 5% between 2013-14 and 2023-24. The refusal to adequately raise MSPs affected the government’s ability to intervene effectively in the market to control prices — on the farmers’ side as well as on the retail side.

Third, a promise was made that real incomes of farmers would be doubled between 2015 and 2022. But the issue appears to have disappeared from policy and media discourse in recent years. In fact, real incomes of agricultural households from cultivation fell by about 1.4% between 2012-13 and 2018-19. The fall of incomes from cultivation was not only owing to the stagnation or fall of agricultural prices, but also due to a sharp rise in the costs of inputs in agriculture, particularly fertilizers.

Fourth, rural unemployment rose between 2011-12 and 2018-19. For rural men, the rise was from 1.7% to 5.6%. For rural women, the rise was from 1.7% to 3.5%. Rural unemployment rates fell after 2018-19 but their levels remained higher than in 2011-12 in 2022-23: at 2.8% for men and 1.8% for women. More importantly, the fall of rural unemployment was accompanied by a rise in the share of self-employed women among all women workers. And most of this rise in the rural areas was in agriculture. In short, there was a crowding of the agricultural sector by unemployed workers from the non-agricultural sectors at a time when agricultural prices were not rising and agricultural incomes were falling.

Fifth, real wages in rural India have never risen after 2016-17 and have even fallen after 2020-21 – particularly in the context of the crowding of the agricultural labour market. These trends have been true for agricultural wages and non-agricultural wages in the rural areas. All rises in nominal wages were wiped out by inflation.

Finally, public investment in agriculture, in general as well as in specific fields like agricultural research and extension, were stubbornly stagnant, and occasionally even fell, over the past decade. Consequently, capital investment in agricultural and allied sectors did not rise. Most of the long-term bank credit supplied to agriculture was also diverted away as short-term loans to corporates and agri-business firms.

It is thus clear that incomes and profitability in rural India were under severe stress across the two terms of the Union government.

Painting a rosy picture

Yet, the Finance Ministry’s report and the Budget speech attempt to paint a totally different picture. They cherry-pick and cite absolute numbers on the increases in agricultural production. But they ignore the fact that the index numbers of production of all principal crops grew by 3.1% annually between 2003-04 and 2010-11, but only by 2.7% annually between 2011-12 and 2022-23. If we consider the index numbers of yield, the fall was sharper: from 3.3% per year to 1.6% per year. In short, the fortuitous spurt of agricultural growth during the pandemic years was inadequate to reverse the long-term decline of agricultural growth beginning from the early-2010s.

The Budget Estimates for 2024-25 also do not inspire confidence. There is no plan in the Budget to substantively reverse the decline of growth in agriculture — either through welfare measures or through investment measures.

In 2024-25, the most important heads and flagship schemes in agriculture and allied sectors are to face a spending cut. Fertilizer subsidies are to fall from ₹1.9 lakh crore in 2023-24 to ₹1.6 lakh crore in 2024-25. Food subsidies are to fall from ₹2.1 lakh crore in 2023-24 to ₹2 lakh crore in 2024-25. The allocation for the Pradhan Mantri Gram Sadak Yojana is to decline from ₹17,000 crore in 2023-24 to ₹12,000 crore in 2024-25. If ₹90,000 crore was the spending under MGNREGS in 2022-23, the allocation for 2024-25 is only ₹86,000 crore. The transfers under the PM-Kisan scheme remain the same as during its inception in 2019, implying a fall in the real value of cash transfers.

There was much mention in the Budget speech on blue revolution in the fisheries sector, but the budgeted allocation for the sector has been increased by only ₹134 crore. The budgeted allocation for the Department of Animal Husbandry and Dairying has increased only by ₹193 crore between 2023-24 and 2024-25.

The revival of agricultural growth from its long-term slump requires imaginative policy shifts and decisive fiscal measures. But the interim Budget provides no indications of such a plan or even intent.

R. Ramakumar teaches at the Tata Institute of Social Sciences, Mumbai

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