The first advance estimate for agriculture GDP in 2023-24 reveals a modest growth of 1.8 per cent, a significant dip from 4 per cent the previous year. This reflects stress in the farm sector. One had hoped that in the interim budget for 2024-25 (FY25), the Finance Minister (FM) would have been more generous towards this sector. However, a major increase in allocations has eluded it. Perhaps the FM is saving such allocations for the main budget in July.
The allocation for the Department of Agriculture and Farmers Welfare (MoAFW) has seen a slight uptick of 0.6 per cent. In real terms, its allocation has gone down. The Department of Agricultural Research and Education (DARE) received Rs 99.4 billion (BE) for FY25, a marginal 0.7 per cent increase over Rs 98.8 billion (RE) in FY24. The two together accounted for just 2.7 per cent of the total budget expenditure (Rs 47.6 trillion) and 4.9 percent of the centre’s net tax revenue (Rs 26 trillion). However, the Ministry of Fisheries, Animal Husbandry and Dairying witnessed a 27 per cent increase — a commendable step, especially because there is an urgent need to manage foot and mouth disease, increase productivity and reduce methane emissions.
Budgetary support in the agriculture-food sector has primarily revolved around welfare measures and subsidies. Key components in this domain include food and fertiliser subsidies, along with the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Though these do not come directly from the agriculture ministry they support the agri-food sector — either the farmers or the consumers. A major income support for the agriculture ministry comes in the form of PM-KISAN, credit subsidy and the PM-Fasal Bhima Yojana. All these measures combined amount to Rs 5.52 trillion (BE) for FY25, slightly less than INR 5.8 trillion (RE) in FY24. This support accounts for 12 per cent of the overall interim budget and a significantly higher —21 per cent —of the Centre’s net tax revenue in FY25. It is compelling to note that the budget allocations for food and fertiliser subsidies, individually, account for a much higher budget than that compared to the Ministries of Agriculture and Farmers Welfare and Fisheries, Animal Husbandry and Dairying.
In FY25, the budgeted food subsidy fell to Rs 2.05 trillion (BE), compared to Rs 2.12 trillion (RE) in FY24 — a 3.3 per cent drop. However, this still underscores a significant bias towards consumers, as the subsidy caters to them rather than the ‘annadata’ (farmers). Free ration to 800 million people through the PM-Garib Kalyan Yojana is, of course, an accomplishment. But the necessity of extending this support to such a vast number of people must be questioned, especially when the FM says that roughly 25 crore people have been lifted out of multidimensional poverty in the Modi government’s 10 years.
We feel there is an urgent need to rationalise the food subsidy, on the lines of what former PM Atal Bihari Vajpayee had done in streamlining the Targeted Public Distribution System (TPDS). Under TPDS, wheat and rice were given free to only the Antodaya category (extremely poor) of consumers but charged 50 per cent of the Minimum Support Price (MSP) to Below Poverty Line (BPL) category and 90 per cent of MSP to Above Poverty Line (APL) category. Rationalisation along such lines can save the Modi sarkar at least Rs 50,000 crore, which can be allocated for agri R&D and more irrigation, especially micro-irrigation. This could help the country to produce “more with less” and ensure food security in the face of climate change. But this is an election year, and one could not expect major changes in the interim budget. Perhaps, it can be taken up in the July budget.
The fertiliser subsidy has come down from Rs 1.89 trillion (RE, FY24) to Rs 1.64 trillion (BE) in FY25. Whether this will finally result in a reduction or not will depend a lot on what happens to gas prices in FY25. But what is needed is rationalisation, especially in minimising the diversion of fertilisers to non-agricultural sectors, including beyond Indian boundaries. It is widely acknowledged in expert circles that around 20-25 per cent of urea is diverted. A potential solution is to shift from subsidising the price of urea to directly empowering farmers through direct cash transfers. This will enable farmers to purchase fertilisers at market prices while reducing leakages. This shift could result in savings of Rs 30,000-40,000 crore. The funds could then be directed towards enhancing development initiatives like PM-KISAN.
The budget for agriculture seems muted. One only hopes that the July budget will have major announcements for farmers and make agriculture vibrant and sustainable.
Gulati is distinguished professor and Thangaraj is a researcher at ICRIER. Views are personal
Neglecting the Farm: Allocation for agriculture hasn’t gone up, subsidies haven’t been rationalised
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02.02.2024
The first advance estimate for agriculture GDP in 2023-24 reveals a modest growth of 1.8 per cent, a significant dip from 4 per cent the previous year. This reflects stress in the farm sector. One had hoped that in the interim budget for 2024-25 (FY25), the Finance Minister (FM) would have been more generous towards this sector. However, a major increase in allocations has eluded it. Perhaps the FM is saving such allocations for the main budget in July.
The allocation for the Department of Agriculture and Farmers Welfare (MoAFW) has seen a slight uptick of 0.6 per cent. In real terms, its allocation has gone down. The Department of Agricultural Research and Education (DARE) received Rs 99.4 billion (BE) for FY25, a marginal 0.7 per cent increase over Rs 98.8 billion (RE) in FY24. The two together accounted for just 2.7 per cent of the total budget expenditure (Rs 47.6 trillion) and 4.9 percent of the centre’s net tax revenue (Rs 26 trillion). However, the Ministry of Fisheries, Animal Husbandry and Dairying witnessed a 27 per cent increase — a commendable step, especially because there is an urgent need to manage foot and mouth disease, increase productivity and reduce methane........
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