The agriculture sector’s growth rate dropped dramatically from 4.7% in 2022–2023 to 1.4% in 2023–2024 (Economic Survey 2023–24). In the Union Budget 2024–2025, we expected major reforms from the government to bring the agricultural sector back on track. The whole budget allocation grew by 7.35%, from 44.90 lakh crore in 2023–24 (revised estimate) to 48.21 lakh crore in 2024–25 (budget estimate). Capital expenditures rose by 16.93% over 2023-24 (revised estimate) in the 2024–25 budget, which is a reflection of the Union government’s strong commitment to fostering economic growth through infrastructure development investments.
However, the budgetary allocation to the agriculture sector has seen a mere 4.58% increase from Rs 1.267 lakh crore to Rs 1.325 lakh crore in comparison with the 2023-24 budget (revised estimate). Significant reforms were anticipated in the production sector, which the government has neglected in the agriculture sector for the past 10 years. Approximately 99.9% of all expenses are attributed to the revenue account, with only 0.08% represented as capital expenditure. While the capital spending share for the overall budget increased from 22.23% in 2023–24 to 23.05% in 2024–25 (revised estimate), the finance minister has not implemented a comparable plan to stimulate capital investment in the agriculture sector.
The amount of the overall budget allocated to the agricultural sector was a mere 3.36% in 2022–2023, which dropped to 2.82% in 2023–2024 and further declined to 2.75% in the 2024–2025 budget. The allocation for the Department of Agriculture and Farmers Welfare saw an increase of 4.6% compared to last year’s budget. The Department of Agricultural Research and Education saw a slight uptick of 0.65% in the 2023-25 budget. Together, these two accounted for just 2.75% of the total budget expenditure. I firmly believe that the government has fallen short of its duty to prioritise agricultural education and research. Compared to the previous year’s budget, the government should have increased the allocation by at least 5%, instead of the current 0.65%.
Major announcements
The government is moving in the right direction by prioritising natural farming for one crore farmers. To certify goods as natural, the government must, nevertheless, provide a robust institutional framework. Customers deal with a lot of asymmetric information when it comes to organic and pure natural products. A scheme-wise analysis shows that the government has given more priority to welfare-oriented schemes. It has allocated Rs 86,000 crore for MGNERGS, Rs 60,000 crore for the PM Kisan scheme and Rs 6,437 crore for the Pradhan Mantri Annadata Aay Sanrakshan Yojna (PMAASY) to boost agricultural productivity and farmers’ incomes. Overall, these three programmes are considered priority initiatives. However, the increased budget for these programmes will negatively impact production because of labour shortage.
Of all the programmes, the Krishionnati Yojana’s 16.8% increase in funding will holistically and scientifically aid agricultural development by raising productivity and output. The government should have increased the allocation for a similar scheme from the Department of Agriculture and Research. In response to strong farmer protests following the removal of the three agricultural regulations in 2021, the government has been attempting to raise the MSP for 23 crops. In a bid to appease the farmers, the government has increased the funding for PMAASY by Rs 6,438 crore, or 193%, above the previous year’s budget. Farmers’ incomes are expected to rise with the MSP increase for 14 crops in June 2024, ranging from 1.4% to 12.5%. However, with the cost of cultivation having more than doubled, farmers may not see a significant increase in their income. The government should have considered the recommendation made by Prof Swaminathan’s Committee in 2006 for increasing the MSP.
The government’s lack of focus on implementing production-driven reforms in the budget will further push farmers to face significant production and marketing-related uncertainties. The greater emphasis on providing income transfers and supporting short-term welfare-oriented programmes is not a solution for reducing the agrarian crisis and distress. Increasing productivity and encouraging more capital investment in agriculture should have been the government’s top priorities, along with supporting the food production sector and linking farmers to global value chains. To boost productivity and product quality, the government should have prioritised initiatives that encourage the use of geographic information systems (GIS) and artificial intelligence (AI).
(The writer is Associate Professor of Economics, Manipal Academy of Higher Education)