The Union Budget 2021-22
has truly been a “Budget like never before”, with its thrust on reforms and
investment in infrastructure across sectors. The roadmap for a $5 trillion
economy has indeed been set by the Budget.
With about 42 percent of
India’s workforce engaged in agriculture and allied activities, the importance
of the sector in increasing income,
employment and achieving inclusive growth, is well-documented. Therefore, it is imperative to accelerate
investment in the sector to enable sustainable development. Capital
formation in agriculture is of critical importance for the sustainability of
agricultural growth. Hence, it is a
matter of concern that the percentage share of Gross Capital Formation (GCF) in
agriculture and allied sector Gross Value Added (GVA) at 16.4 percent (2018-19),
is too meagre to address the issue of sustainability of Indian agriculture.
Therefore, capital formation through rural infrastructure development and term
loans to the agriculture sector assumes significant importance.
Investment in rural
infrastructure is a pre-condition to enable the acceleration of agricultural
growth, creation of new economic opportunities, and generation of employment.
It is, therefore, worth appreciating that the Union Budget 2021-22 has enhanced
the allocation under Rural Infrastructure Development Fund (RIDF), administered
by NABARD, by a whopping 33.3 percent to `40,000 crore over the allocation in the
previous year’s Budget. During its 26-year
journey, RIDF has evolved into a dependable and timely source of funding
for rural infrastructure projects for state governments. Therefore, the present
hike in the allocation under RIDF promises to accelerate investment in rural
infrastructure, resulting in the much-needed capital formation in agriculture,
leading to sustainable agricultural growth, while raising crop productivity,
generating employment and doubling farmers’ income. As documented by
NABARD, irrigation projects financed
under RIDF have resulted in more than 30 per cent increase in irrigated area,
leading to the creation of 341 lakh ha of irrigation potential, `57,427 crore additional
value of production, more than 50 per cent increase in cropping intensity, and
generation of 1,401 crore non-recurring employment (as on 31 March 2020).
Another important move in
the Budget has been the availability of Agriculture Infrastructure Fund (AIF) to
APMCs for augmenting their infrastructure facilities. Also, 1,000 more APMC mandis will be integrated with e-NAM. Presently,
1.68 crore farmers are registered and `1.14 lakh crore of trade value has been
carried out through the existing 1,000 e-NAMs, which have displayed transparency
and competitiveness into the agricultural market. These announcements should
assure farmers that APMCs are here to stay, and would indeed grow stronger, to
face competition from private mandis, leading to transparent price
discovery, benefitting the farmers, especially the small and marginal holders. The
AIF, with a corpus of `1
lakh crore was created by GoI under Atma
Nirbhar Bharat Abhiyan, for the development of farm-gates and aggregation
points, and post-harvest management infrastructure. The scheme involves credit
support by banks and financial institutions to primary agricultural credit
societies (PACS), marketing cooperative societies, farmer producer
organisations (FPOs), self -help groups
(SHGs), farmers, joint liability groups (JLG), multipurpose cooperative
societies, agri-entrepreneurs, startups and central/state agency or local body
sponsored public-private partnership projects. Interest subvention and credit
guarantee for loans up to `2
crore is also available to eligible borrowers. The allocation under the scheme
in the Budget has been increased significantly from `208 crore (RE 2020-21) to
`900 crore, which augurs
well for agriculture marketing reforms.
India is a water-stressed
country, and 78 percent share of water is consumed by the agriculture sector.
While water-use efficiency under conventional irrigation ranges between 30 per
cent and 50 per cent, the same is around 80-95 percent in case of micro irrigation.
The total potential of micro irrigation in India is estimated at around 69.5 million
hectares (Mha). But, the coverage of micro irrigation is only 10.25 Mha (2018). It is therefore, commendable that the
Budget has doubled the corpus of Micro Irrigation Fund (MIF) to `10,000 crore. The MIF,
created under NABARD, facilitates state governments in mobilizing additional
resources for expanding the coverage of cultivated land under micro irrigation
and
incentivizing its adoption beyond the provisions of the Pradhan Mantri Krishi
Sinchai Yojana – Per Drop More Crop (PMKSY-PDMC). As on 31 October 2020, the
cumulative loans sanctioned and released under MIF stood at `3,806 crore and `1,095 crore, respectively,
to the state governments of Andhra Pradesh, Gujarat, Haryana, Tamil Nadu and
West Bengal, for facilitating them to expand micro irrigation to an area of
12.6 lakh ha. involving 10.06 lakh farmers, of which about 78 percent belong to small and marginal holder category.
The enhancement in the budgetary allocation would extend the benefits under the
scheme to other states and larger number of farmers.
Enlargement in the scope
of the ‘Operation Greens Scheme’, from
tomatoes, onions, and potatoes (TOP) to include 22 perishable products, is a landmark
announcement in the Budget. The scheme
promoted by the Ministry of Food Processing Industries, aims to boost
value addition in agriculture and allied products and their exports, and
provide support to promote FPOs, agri-logistics, processing facilities and
professional management. The integrated development of horticulture value
chains would provide support to farmers when prices of agri-produce
is low. Therefore, the expansion of the scheme promises to provide income
security to a sizable number of farmers.
India is the second
largest fish producing country in the world, and fisheries is the
fastest-growing (12 percent real GVA growth in 2018-19) sub-sector of
agriculture and allied sector in the country. Therefore, the announcement in the Budget on the development of modern fishing harbours, fish
landing centres and a multipurpose seaweed park, promises to develop the sector in a
well-calibrated and sustainable manner,
to accelerate domestic and foreign trade, and in the process significantly
improve the income and livelihoods of fish farmers
Adequate and timely
availability of bank credit, at affordable rates of interest is essential to
improve agricultural productivity and sustainability. Therefore, the enhancement in the target for agricultural
credit to `16.5
lakh crore in the Budget from `15
lakh crore in FY21, is welcome. It is also important to note that the focus will be on ensuring increased credit
flows to high-growth and high-value activities, viz. animal husbandry, dairy,
and fisheries. A thrust on credit by banks to these sub-sectors along with
horticulture, farm mechanisation, warehouses and cold chains, to farmers, FPOs
and agri-entrepreneurs, is imperative to
increase the share of agriculture term loans in total agriculture credit
disbursed, from the current 40 percent to 60 percent, to accelerate capital formation in agriculture.
The Budget provides the
much-needed big push for investment and
infrastructure development in the agriculture sector, to enhance productivity,
value of output, income and employment, towards achieving a sustainable 5
percent annual growth of agri-GVA, which is vital to support the achievement of
a $5 trillion economy within a reasonable time-frame.
