The 2022-23 Budget was presented at a time when the third wave of the pandemic had created a renewed set of uncertainties amongst the population. The economy was recovering, showing a GDP growth of 20.1% in the first quarter of 2021-22, but this growth rate fell to 8.4% in the second quarter of that year, indicating the possibility of a slowdown. The IMF accordingly downgraded India’s full-year growth projection from 9.5% to 9% for fiscal 2021-22. This difficulty in emerging from the shock of the pandemic arises from the fact that the economy is today faced with both supply and demand bottlenecks. Under such circumstances, if we wish to boost the economy, addressing both bottlenecks is important.
Rural demand today constitutes a major portion of demand in the economy and unless we take measures to improve rural demand, economic recovery is difficult to achieve. Boosting rural demand needs strategies favouring a multi-pronged approach of boosting both farm and non-farm incomes.
Currently, the rural sector is impacted by unemployment, especially among returning migrant workers, the inadequacy of the NREGS programme, and several other issues. If we look at the budget allocation for the Department of Agriculture and Farmers’ Welfare, there is only a meagre increment, from Rs 1,18,294 crore (revised estimate of 2021-22) to Rs 1,24,000 crore. While Finance Minister Nirmala Sitharaman announced that paddy and wheat procurement would benefit 1.63 crore farmers, procurement does not benefit large sections of small and marginal farmers and they are limited to selected crops only.
In our analysis of NSSO’s most recent round of data on the situation assessment of farm households, we observe that less than 20% of paddy-growers and 10% of wheat-growers sold their products to procurement agencies, clearly showing that large sections of farmers remain excluded from accessing procurement benefits.
The question of how to provide better market access to small and marginal farmers, so that they can get a better price for products that are not directly procured by the government, remains an issue. This was a focus of the last three Budgets. However, the problem of large sections of farmers not getting remunerative prices continues, and it has not been addressed in this Budget.
Further, for returning migrants looking for jobs in rural areas, NREGS plays an important role, and there has been a growing demand to increase the support for this programme. However, we do not observe an increase in support. Instead, we see a decline to Rs 73,000 crore in the budget allocation of 2022-23 from the 2021-22 revised estimate of Rs 98,000 crore. Various studies reveal that there is unmet demand for NREGS employment support in the country, especially during the ongoing pandemic period.
The government has often tried to address the concerns of farmers by providing them subsidised credit support under the interest subvention scheme. However, here too, we only see a small increase in budget allocation from Rs 19,468 crore to Rs 19,500 crore. The most recent NSSO report on the situation assessment of farm households shows that access to credit from the formal sector has increased to some extent, but almost a third of farmers continue to remain indebted to the informal sector, where professional money-lenders and agricultural money-lenders dominate the market.
Adoption of crop insurance also is an area of concern, and the latest NSSO data shows that the penetration of crop insurance adoption continues to remain inadequate. Only 19.5% of jowar farmers and 13.9% of paddy cultivators had at least one crop insured. The Budget has not shown any renewed promise here either as the allocation for PMFBY, at Rs 15,500 crore, is lower than 2021-22’s budgeted allocation of Rs 16,000 crore. The drone technology mentioned in the Budget should be used to assess farm losses for providing crop insurance benefits.
Thus, on several fronts, agriculture and rural allocations have not been increased sufficiently enough to create an adequate surge in rural demand. Of course, infrastructure projects declared in the Budget will create some rural employment in sectors like construction and thereby generate rural demand. However, it will take a considerable time for such impacts to materialise, and immediate measures are needed to address the distress of poorer communities in rural and urban regions. As there are fears that inflation pressures will continue to prevail, this Budget may not help to boost rural demand adequately anytime soon. There is an increase, however, in the allocation to the agro-processing sector, which is helpful, and we can only hope that the rural non-farm sector will generate some income and employment opportunities for the rural populace in the immediate future.
(The writer is Professor,
Institute for Social and
Economic Change, Bengaluru)