Budget 2021-22: Blueprint for Sustainable Development of Agriculture

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.