Friday, February 14, 2020

Does the Budget 2020 Provide Solution to the Woe of Agriculture?

The way GDP growth rates in last few quarters have shown downward trend has surprised everyone. International Monetary Fund (IMF) had predicted a growth rate of 7.3% in April 2019 for Indian economy. But by the end June 2019, independent institutions across world started doubting about those growth numbers. Now Indian economy is expected to grow at 5% in the current fiscal year. Even government’s advance estimates are around 5%. However government along with IMF and many independent institutions has called this trend to be a short term temporary phase (ET, 2020). These institutions are optimistic that Indian economy would be able to resume high growth numbers in next few quarters. But a lot is dependent on the efforts and stimulus provided in the central budget for fiscal year 2020-21.
Indian agriculture sector is undergoing through a phase of distress (Upadhyay, 2019). Because of relatively falling income from farm produces in comparison to other professions and businesses, there is an urgent need to address this distress. As suggested by many economists also, the cause of the slowdown in Indian economy somewhere lies in falling demand in rural economy (Upadhyay, 2019).

The allocations of the funds in the budget for fiscal year 2020-21 for erecting a numbers of infrastructures in rural economy make it as a dream budget for Indian agriculture sector. This 16 points budget for agriculture proposes to reform laws relating to agriculture, expansion of credit facilities to left-out farmers, construction of warehouses and cold storages in rural areas through PPP model and self-help group, establishment of transportation facilities, earnings from barren land, changing crop pattern and use of solar energy. For all these schemes, the government has allocated Rs 2.88 lakh for agriculture and village development (GoI, 2020).

A large portion of agriculture produce (mainly perishable) is wasted upon either in transit or due to lack of proper storage capacity in rural areas. For proper and timely transportation of agriculture produces, the government has announced schemes such as Kisan Rail and Krishi Udaan. Also the budget plans to build warehouses and cold stores through Public Private Partnership (PPP) model with help of Self Help Groups in every village/block to address the bottleneck. Government has asked NABARD to geotag all the existing warehouses and cold stores in the country to figure out which areas lack these facilities. The government will provide viability gap funds to establish these. However the availability of skilled labour to manage these facilities is also a problem. Government can strategically use Skill India to skill rural youth to provide with skilled labour to these facilities. This will make these facilities self-sustaining. This will increase employment opportunities in rural economy leading to lower migration to urban centres which to help at least containing the increasing pressure on civic systems in urban centres. If this wastage of agriculture produce is minimized, the income of farmers will increase automatically.

In rural areas, timely availability of electricity is scarce. Considering the supply bottleneck in electricity generation and distribution, the government proposes proliferation of agriculture with solar power by helping 20 lakh farmers installing solar pumps under the Prime Minister Kisan Energy Security and Upliftment Campaign. This would not only bring down farmers’ dependency on formal source of electricity for irrigation but also bring down overall cost leading to increase in income.

Even after introduction of Kisan Credit Card facility to provide access to bank lending to farmers, a large number of small and marginal farmers still don’t have access to formal lending system. Government in this budget has set a lending target of Rs 15 lakh crores to farmers. It also proposes to link to all the beneficiaries of Prime Minister Kisan Samman Nidhi to KCC. This will help to provide bridge finance at lower rate of interest to these farmers leading to better financial conditions.

As per the budget plan ‘One District One Fruit’ scheme will be promoted by the government. The implementation of this scheme will not only increase the fruit production but also result into improvement the quality as result of economies of scale. Also it would be easier to market and provide infrastructure with proper policy support from the governments. Efficient use of system will lead to increase into income for the farmers. To promote dairy, fishery and animal husbandry, the government has set target to increase fish production by 200 million tonnes and 100% increase in milk production. This will augment the income of farmers.

Government has proposed to reform laws relating to land lease and marketing will help the farmers in long run. However any reform in contract farming is still contested. The government has allocated Rs 6000 crores for Financing of Negotiable Warehousing Receipt along with linking e-Negotiable Warehousing Receipt (e-NWR) and e-Nation Agriculture Market (e-NAM). This will facilitate inter-state trade of agriculture produces leading to better pricing which will eventually enhance farmers’ income.

Economists have stated that root cause of the current problems in Indian economy lies in falling demand in rural economy which has been caused by slowdown in rural economy due to demonetisation and confusion around GST regime. Also agriculture sector has historically been facing some structural weaknesses. The way funds in the budget have been allocated to agriculture sector on different accounts, presents an opportunities to address structural issues in Indian agriculture sector. If this budget is implemented in letter and spirit, this would not only provide solution to agricultural distress but also help to double farmers’ income by 2022 as envisioned by Modi government.


  • ET. (2020, January 20). IMF cuts India’s FY20 growth forecast to 4.8%. Retrieved from The Economic Times: 
  • GoI. (2020, February 1). Union Budget. Retrieved from Union Budegt:
  •  Upadhyay, R. K. (2019, October 21). Causes and the Nature of the Slowdown in the Indian Economy. Retrieved from The Deliberation:
  •  Upadhyay, R. K. (2019, August 2). Devastating Impact of British Rule on Indian Agriculture . Retrieved from The Delibberation:
- Rajeev Kumar Upadhyay

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