Union Finance Minister Nirmala Sitharaman emphasised two key themes in the Budget-2024 – ‘consensus-building’ and a ‘policy framework’. Sitharaman stressed the need for consensus-building –or collaboration and cooperation – mainly between state and central governments during many junctures in her speech. She also highlighted the need for an economic policy framework to guide development and reforms. This approach marks a shift toward a more collaborative, transparent, and strategic policymaking in coming years.
But Budget 2024 has its share of hits and misses.
Hits
Pulses, oilseeds, potato, and onion found centre stage:
In a strategic move, the finance minister pumped new life into the otherwise dying schemes like PM-AASHA (agriculture ministry) and the Price Stabilization Fund (consumer affairs ministry). Allocation for the PSF has increased to Rs 10,000 crore from a paltry Rs 1 lakh in RE23-24. Similarly, for PM-AASHA, the allocation has increased from Rs 2,200 crore to Rs 6,438 crore.
Both schemes entail procurement of pulses and oilseeds, with the PSF also supporting government purchase of onions and potatoes. When utilised, these funds would give the much-desired fillip to the country’s crop diversification plans. The oilseeds under focus would be mustard, groundnut, sesame, soybean, and sunflower.
Role of digital, credible data re-emphasised:
As per the finance minister, the Digital Public Infrastructure (DPI) for agriculture will be centre stage. This includes expanding the digital crop survey (DCS) from less than 100 districts today to 400 districts in the current year and digitising land and other details of about 40 per cent Indian farmers (six crore out of 14.5 crore).
In the last few years, the central government’s production data has revealed gaps where despite bumper crop estimates, the crop prices have showcased double-digit inflation. Digitising the data offers prospects of addressing data quality issues.
In addition, the government, in collaboration with the states, will implement the DPI, including access to Jan Samarth-based Kisan credit cards.
Restructuring support to sugar sector:
In the last few years, there appears to be a structural change in the way Union Budgets support the sugar industry. Earlier, the support was mainly provided via general financial assistance, giving out loans for co-generation projects or for producing ethanol from alcohol. Now, the focus is singularly on the scheme for extending financial assistance to sugar mills for augmentation of ethanol production capacity.
About Rs 450 crore is budgeted under this scheme in FY25. This aligns well with the ongoing aggressive E20 mandates of the country where India aims to achieve 20 per cent blending of ethanol in fuel by ESY 2025-26 (ethanol supply year from 1 November to 31 October). The blending rate last year was 12 per cent and about 75 per cent of the ethanol for blending came from sugarcane-based derivatives.
Economic Policy Framework Approach:
The government intends to engage experts and release policy papers to create a roadmap for Indian agriculture. This is a welcome step as it would help make policy making robust and grounded, and also help bring predictability and transparency. The agriculture ministry is already developing tools like the Unified Portal for Agricultural Statistics (UPAg) to increase access to timely data and analytics on Indian agriculture.
Focus on animal husbandry, dairy and fisheries:
Schemes such as the National Programme for Dairy Development and Rashtriya Gokul Mission have reported increased allocations wherein the Ministry of Fisheries, Animal Husbandry & Dairying has been allocated Rs 7,138 crore, about nine per cent higher than last year’s Rs 6,577 crore. Besides, customs duty on shrimp and fish feed and certain broodstock have been reduced, which is likely to give an impetus to the fast-growing Indian marine exports.
Aligning production clusters with consumption centres:
Many private sector agritech investment companies are trying to do exactly this in order to improve production decisions and bring efficiencies along the value chain. Especially in perishables, such as vegetables and fruits, the produce suffers on account of huge losses during storage and logistics. With the Centre aligning with the concept, the efforts would bring ‘fork’ closer to ‘farm’.
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Misses
PM-KISAN allocation:
The PM-KISAN Samman Nidhi scheme was launched in February 2019. Since then, the financial assistance provided to each eligible farmer has remained at Rs 6,000. In real terms (using CPI-AL), this amount will only be worth Rs 4,643 in 2024-25. Inflation adjustment of this amount was anticipated in the current Budget.
Reduction in food subsidy:
Despite making the ration entitlements absolutely free, the food subsidy of the country is budgeted to fall to Rs 2.05 lakh crore in the current year from Rs 2.12 lakh crore in 2023-24 (revised estimates). There are palpable signs of rural distress and, as per the State of Food Security and Nutrition in the World (SOFI) report 2023, 75 per cent of Indians cannot afford healthy diets. With rising economic costs of both rice and wheat, a reduction like this is probably indicative of the government anticipating a lower number of beneficiaries under the scheme or GOI is predicting a lower level of rice/wheat procurement.
Underperforming credit subsidy:
About one quarter of Indian farmers still do not have access to institutional credit. In such a scenario, a reduction of Rs 400 crore under the Modified Interest Subvention Scheme (MISS) in the current Budget expenditure raises questions about the Union government’s future intent toward improving economic access of credit to farmers.
FPOs losing steam:
Farmer Producer Organisations are rightly understood to be levers of empowerment for Indian farmers as they improve their negotiation along a crop’s value chain. However, budgetary spends on the scheme for creating FPOs have been drying up. In 2023-24, about Rs 955 crore was allocated under the scheme, of which only Rs 450 crore was utilised (RE23-24). Current year’s allocation is Rs 582 crore.
Agricultural Research Funding:
Given the Finance Minister’s emphasis on bringing resilience to crops and yields and the damage the country has suffered on account of climate change in the last two years, we anticipated huge jumps in budgets, of say, the MoA’s Department of Agricultural Research and Education. Compared to previous year’s RE, the Budget has only gone up by Rs 64 crore. In fact, allocation toward salaries and pensions of the scientists and staff have actually been reduced.
Overall, it appears that the central government is trying to bring in rigour in its policymaking toward the agricultural sector and is also opening up to aligning with state governments for taking reforms forward.
There is some disconnect between the budgetary speech announcements and the budgetary allocations, particularly on bringing crop resilience toward climate change or yield augmentation. Big money is promised toward pulses and oilseeds, which would likely give a huge push to the country’s crop diversification efforts.
But we may recall that many big announcements happen outside the Budget speech too, and there are gaps between budgetary allocations and actual spends.
Shweta Saini is an Agricultural Economist and Co-Founder of Arcus Policy Research where Pulkit Khatri is Senior Consultant. Views are personal.
(Edited by Aamaan Alam Khan)