31

Jan

Union Budget : Focus on Farm Sector is of Crucial Importance.

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Prof Shivaji Sarkar

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New Delhi Friday | 31 January 2025

"Indian farming is currently experiencing a slowdown," meaning the growth rate of agricultural production in India has significantly declined, with farmers facing decreasing income due to factors like rising input costs, stagnant crop yields, fluctuating market prices, and a lack of modern farming techniques, leading to concerns about food security and rural livelihoods in the country.

The slow-down in agricultural growth has become a major cause for concern. India's rice yields are one-third of China's and about half of those in Vietnam and Indonesia. The same is true for most other agricultural commodities.

Indian agricultural workers lack skills due to low wages, lack of proper housing facilities, low standard of living, lack of social consciousness, lack of proper education etc. Most of the farmers in India are poor and do not have enough money for land development.

 

Article at a Glance
Indian agriculture is facing a significant slowdown, with declining growth rates and farmers experiencing reduced incomes due to rising input costs, stagnant yields, and fluctuating market prices. Despite being a global agricultural powerhouse, India's rice yields are notably lower than those of China and Southeast Asian countries.
 Many farmers lack skills and resources, exacerbated by inadequate government investment and support. Although the government plans to increase agricultural spending by 15% to around $20 billion in the upcoming budget, challenges remain, including underdeveloped infrastructure and regional disparities in poverty.
 The World Bank emphasizes the need for improved agricultural productivity, diversification, and inclusive strategies to alleviate rural poverty. Ensuring food security and enhancing rural livelihoods are critical, as a significant portion of India's population relies on agriculture for their income. Policymakers must implement effective reforms to foster a more productive and competitive agricultural sector.

 

Though every budget has an elaborate section on agriculture, there is little government investment. These are formulations to make cash available to farmers through various loan provisions from public sector banks. Despite certain subsidy on fertilisers being retained, most other subsidies have been cut.

However, this year the government may plan to increase spending for the agriculture sector by about 15% to around $20 billion in the budget, two as per farm ministry sources, marking the biggest increase in six years, as it tries to boost rural incomes and curb inflation.

The total allocation for agriculture and allied activities for FY 2025-26 may increase to about ₹1.75 lakh crore, according to reports. The government is also expected to increase the limit for subsidised farm loans to ₹5 lakh from the current ₹3 lakh per farmer under the Kisan Credit Card (KCC) scheme.

Overall, India's agricultural institutions and infrastructure are underdeveloped. The development of a class of agricultural entrepreneurs is hampered by conditions of poverty, deprivation, and unequal distribution of land resources.

It is also important to note that about three-quarters of India’s families depend on rural incomes, the majority of India’s poor (some 770 million people or about 70 percent, according to World Bank) are found in rural areas. The national statistics put it at 54 percent.

India’s food security depends on producing cereal crops, as well as increasing its production of fruits, vegetables and milk to meet the demands of a growing population with rising incomes.

India is considered a global agricultural powerhouse. It is the world’s largest producer of milk, pulses, and spices, and has the world’s largest cattle herd (buffaloes), as well as the largest area under wheat, rice and cotton. It is the second largest producer of rice, wheat, cotton, sugarcane, farmed fish, sheep & goat meat, fruit, vegetables and tea. The country has some 195 m ha under cultivation of which some 63 percent are rainfed (roughly 125m ha) while 37 percent are irrigated (70m ha). In addition, forests cover some 65m ha of India’s land.

 

Challenges: Three agriculture sector challenges are important to overall development and the improved welfare of its rural poor, says a World Bank report.

It stresses on raising agricultural productivity per unit of land as virtually all cultivable land is farmed. Water resources are also limited and water for irrigation must contend with increasing industrial and urban needs. All measures to increase productivity will need exploiting, amongst them: increasing yields, diversification to higher value crops, and developing value chains to reduce marketing costs.

The WB stresses that reducing rural poverty through a socially inclusive strategy that comprises both agriculture as well as non-farm employment, must also benefit the poor, landless, women, scheduled castes and tribes. Moreover, there are strong regional disparities: the majority of India’s poor are in rain-fed areas or in the Eastern Indo-Gangetic plains. Reaching such groups has not been easy. While progress has been made - the rural population classified as poor fell from nearly 40% in the early 1990s to below 30% by the mid-2000s (about a 1% fall per year) – there is a clear need for a faster reduction. Hence, poverty alleviation is a central pillar of the rural development efforts.

It calls for ensuring that agricultural growth responds to food security needs.  The sharp rise in food grain production during the Green Revolution of the 1970s enabled the country to achieve self-sufficiency in food-grains and stave off the threat of famine. Agricultural intensification in the 1970s to 1980s saw an increased demand for rural labour that raised rural wages and, together with declining food prices, reduced rural poverty. However agricultural growth in the 1990s and 2000s slowed down, averaging about 3.5% per annum, and cereal yields have increased by only 1.4% per annum in the 2000s. The slowdown in agricultural growth has become a major cause for concern. India’s rice yields are one-third of China’s and about half of those in Vietnam and Indonesia. The same is true for most other agricultural commodities.

Policy makers will thus need to initiate and/or conclude policy actions and public programs to shift the sector away from the existing policy and institutional regime that appears to be no longer viable and build a solid foundation for a much more productive, internationally competitive, and diversified agricultural sector.

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