Agriculture being at the top of the list raised hopes of a significant allocation for improving productivity and increasing climate resilience. (File Photo)
Let us start with the good news. In 2023-24, the Indian economy registered an overall GDP growth rate of 8.2 per cent, and it is likely to remain above 7 per cent in FY25 according to most projections. However, growth in the agriculture sector declined from 4.7 per cent in FY23 to 1.4 per cent in FY24. Against this backdrop, one would have expected that agriculture would get a booster dose in the budget.
Finance Minister Nirmala Sitharaman has provided a roadmap for the pursuit of Viksit Bharat @2047. She has identified nine key priority areas — productivity and resilience in agriculture, employment and skilling, inclusive human-resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development and next-generation reforms. Agriculture being at the top of the list raised hopes of a significant allocation for improving productivity and increasing climate resilience.
The best way to do that would have been to focus on agri-R&D. It’s well known that the marginal returns of investing in agri-R&D are over 10 times – in other words, an extra investment of 1,000 crore will mean Rs 10,000 crore in terms of agri-GDP. Such an investment could have pushed agriculture towards a higher growth trajectory. But, the budget expenditure numbers don’t give such an assurance. The Department of Agricultural Research and Education (DARE) has received Rs 99.4 billion, a marginal increase of just 0.7 per cent from Rs 98.8 billion (RE) in FY24. This is way below expectations, and in fact, in real terms, it is a climbdown.
Our research shows that agriculture R&D Expenditure touched Rs 160 billion in 2020-21, with 89 per cent coming from the public sector and 11 per cent from the private sector. While these numbers give an idea of the scale, it is important to consider the percentage relative to agriculture’s Gross Domestic Product (Agri-GDP), estimated as Agriculture Research Intensity (ARI). The ARI peaked at 0.75 per cent in 2008-09 and stands at 0.43 per cent in 2022-23. This will fall further in FY25, as the allocation to this segment has gone down in real terms. This is not good news for the country’s food security as well as for arresting food inflation.
The vision of Viksit Bharat@2047 could remain unrealised if the agrarian-rural economy is left behind. Almost two-thirds of India still lives in rural areas and agriculture engages the largest segment of the working population (45.8 per cent in 2022-23).
The budget has allocated Rs 1.52 trillion for the agriculture and allied sectors. The Ministry of Agriculture and Farmers’ Welfare received a budget of Rs 1.22 trillion (BE), an increase of just 5 per cent from Rs 1.16 trillion (RE) in FY24 – this barely compensates for inflation. The allocation to the Ministry of Fisheries, Animal Husbandry and Dairying has increased 27 per cent – Rs 56 billion (RE) in FY24 to Rs 71 billion (BE). This is a good sign for this fast-growing sector.
Much of the support for the agriculture-food-rural sector has focused on welfare measures and subsidies. Food and fertiliser subsidies and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are the key components of this support. Although these measures are not directed at the agriculture ministry, they benefit the agri-food-rural sector, aiding either farmers or consumers. Significant income support from the Agriculture Ministry itself comes through programmes like PM-KISAN, credit subsidies, and PM-Fasal Bima Yojana. In all, these welfare and subsidy measures are projected at Rs 5.52 trillion for FY25 – slightly less than the revised estimate of Rs 5.8 trillion for FY24. This support represents 11.5 per cent of the overall budget (Rs 48 trillion) and a notable 21.4 per cent of the central government’s net tax revenue for FY25.
The food subsidy is budgeted at Rs 2.05 trillion, down from INR 2.12 trillion in FY24. Despite this decrease, the subsidy still predominantly benefits consumers rather than farmers. Providing free rations to more than 800 million people through the PM-Garib Kalyan Yojana is perhaps correct from a political perspective. However, questions remain about the necessity of continuing this support for such a large population. This is especially pertinent in light of the FM’s statement that approximately 250 million people have been lifted out of multi-dimensional poverty during 10 years of the Modi government.
The Government of India has reflected our concerns in the Economic Survey 2023-24 by recognising the need to reorient agricultural policies that have been working at cross-purposes, overlooking farmers’ interests and inadvertently harming natural resources. Although these policies have increased agriculture productivity, they have diminished soil fertility, depleted groundwater, increased nitrous oxide and methane emissions and starved crops of nutrients. They have also undermined public health by becoming a catalyst for a diet rich in sugar and carbohydrates, instead of fibre and protein. There is an urgent need to transform agriculture into an engine of growth through farming practices that benefit both farmers and the planet. Effective policymaking through re-orienting subsidies, can generate higher value addition in agriculture, boost farmers’ incomes and create opportunities for food processing and exports. Perhaps that has been left for the next budget.
Gulati is a Distinguished Professor and Thangaraj is a consultant at ICRIER. Views are personal
