Budget 2022 has sparks that can trigger farm liberalisation

Monsoon, agriculture
Union Budget 2023 must step up funding for agriculture and rural economy which accounts for a fifth of India's GDP and employ 40% of the workforce.

There has been a lot of curiosity around the Union Budget announcements for agriculture. This is because Budget 2022 closely followed the withdrawal of the three farm laws – The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, The Farmers’ (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, and The Essential Commodities (Amendment) Act – in the face of protests by farmers.

There were also expectations that the Budget will have a few populist measures for agriculture and the rural sector in view of the upcoming assembly elections in five states including Uttar Pradesh. But the finance minister did not succumb to the temptation of populism as is evident in budget allocations for the farm sector and the rural economy.

It is crucial to ensure food security when faced with a pandemic that has infected half of humanity and forced the global economy to shut down. The decline in economic activity and trade, coupled with movement restrictions and disruptions in food supply chains, may lead to a rise in food prices and hence a decline in national budgets and household incomes. This can have severe implications for food security and consequently may lead to serious health concerns for future generations.

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Budget 2022 focus on food security

We may fight the pandemic with vaccines but it is equally important to ensure food security. India ranks 101 among 116 countries in the Global Hunger Index and is at the 71st position amongst 113 countries in the Global Food Security Index. In this situation, finance minister Nirmala Sitharaman said the Union government will pay Rs 2.37 lakh crore for wheat and paddy procurement under MSP operations with an expected procurement of 1,208 lakh tonnes of wheat and paddy from 163 lakh farmers in Kharif season 2021-22.

To ensure food security, the country is looking to double farmers’ incomes on a priority. Sitharaman also highlighted that the Indian Railways will develop new products and efficient logistics services for small farmers and small and medium enterprises. In addition, the finance minister said that the government will support ‘kisan drones’ for crop evaluation, land digitalisation, insecticide spraying, and nutrient spraying. Furthermore, the government will encourage chemicals-free natural farming as well as public-private partnerships for the delivery of digital and high-tech services to farmers throughout the country. This is undoubtedly a good step towards sustainable agriculture in the country.

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Towards hi-tech farming

Digital transformation will happen in many sectors if we go by the Covid-19 experience where new emerging technologies such as AI, automation, robotics, IoT, blockchain, and cloud computing played a pivotal role. These may be used in agriculture too to increase productivity and provide employment. A strong impetus may be given to the growth of start-ups in the field of new emerging agricultural technologies under the government’s Make in India initiative.

The technology helps in improving supply chains by providing a digital platform to connect farmers with customers. Precision farming offers solutions for increasing crop productivity and process efficiency. This will provide farmers better access to agricultural inputs and finance. Crop diversification is key to changing consumer preferences as well as generating stable employment and higher income. In this context, the finance minister said that the Union government, in collaboration with state governments, will provide a complete package to farmers to encourage them cultivate appropriate fruit and vegetable types as well as production and harvesting practices.

A rationalised and comprehensive programme to improve domestic oilseed production will be adopted to lessen reliance on imports. It indicates that the government is trying reduce imports through import substitution. The year 2023 has been declared the International Year of Millets. The finance minister said that the government will assist post-harvest value addition, increase domestic millet consumption, and brand millet products both nationally and globally.

Union Budget 2022 also tries to give alternative income sources to farmers. The finance minister mentioned that 5-7% of biomass pellets would be used in thermal power plants, resulting in a CO2 emission cut of 38 MMT annually, providing extra cash to farmers and job opportunities to residents, thereby helping minimise stubble burning in agriculture areas. Chemical-free, natural farming would be promoted across the country, with an initial concentration on farmers’ fields along the Ganga.

The government would also implement policies and make necessary legislative adjustments to encourage agroforestry and private forestry. Farmers from Scheduled Castes and Scheduled Tribes who want to start agroforestry will also be given financial assistance. The government also is focused on the agro-education sector. The finance minister mentioned in the Budget speech that states will also be urged to alter the agricultural university curriculum to fit the needs of organic farming, modern-day agriculture, value addition, and management.

Amid the devastating Covid-19 pandemic, this sector stood up to be counted. Help was provided through various measures including better credit facilities and market reforms as well as steps to promote food processing under the Atmanirbhar Bharat scheme. Various types of interventions by the government for the development of agricultural and allied sectors such as animal husbandry and dairying help the sector during the crisis.

Despite all these measures, the Budget 2022 cannot be termed as a remarkable one for agriculture, especially after the repeal of the three farm laws. The Budget has been influenced by both classical economics and Keynesian thought. It may be seen as the starting point of agricultural liberalisation. Liberalisation of agricultural services can increase productivity and may play an important role in alleviating poverty and unemployment.

(Suvayan Neogi is an economist at the Federation of Indian Mineral Industries. Sumathi Chakravarthy is Managing Director, Infinite Sum Modelling LLC, Seattle, USA.)