Budget 2016: Doubling farm income easier said than done, say experts

The Modi government’s promise of doubling farmers’ income in a little over about five years, despite the budget’s pro-poor push, will require a dramatic improvement in yields, technologies, good price for farm produce, irrigation expansion and some magic, economists say.

Actually, it all depends on what finance minister Arun Jaitley meant when, in his budget’s speech, he said: “Government will, therefore, reorient its interventions in the farm and non-farm sectors to double the income of the farmers by 2022.”

If Jaitley meant a “nominal rise” – a term experts use for income not adjusted for inflation – then it is possible and has happened before, economist Abhijit Sen said. If the increase is to be “real” – or income that is adjusted for inflation – then it is “a lot of fluff”, he added.

This is because growth in income is always benchmarked against a rise in prices because inflation shrinks purchasing power.

To begin with, the first challenge is to make farm GDP – a measure of total farm income – grow at a targeted 4%. Currently, the sector is growing at 1.1%.

Even if farm GDP grows at the current targeted level of 4%, achieving a 100% increase in farmers’ income (or double) is impossible. For this, farm GDP actually has to grow at 15% annually for the next five years.

“The point is the budget has been determined by two parameters. One, it sticks to the fiscal limit and makes operational the pay commission’s recommendations. Therefore, you have very little to play with,” Sen said.

Former prime minister Manmohan Singh said the government’s plan to double the farmers’ income in the next five years was an “impossible” dream.

Analysts said the real long-term healing touch could come from the budget’s focus on expanding irrigation facilities. At the all-India level, only 46.9% of 141 million hectares of India’s total cropped area has irrigation cover, while farmers in the rest are heavily exposed to weather shocks.

In his budget speech, Jaitley announced adding 28.5 lakh hectares to the country’s irrigation network under a more “effective” Pradhan Mantri Krishi Sinchayin Yojana. Additionally, 23 of 89 irrigation projects under a separate scheme are targeted to be finished before March 31, 2017, he said. Together, this can boost agriculture productivity in many critical areas.

“However, a lot depends on how states implement these programmes,” said YK Alagh, former agriculture minister and economist.

On the face of it, allocation to the agriculture ministry went up by nearly 127% to Rs 35,983 crore from the previous year’s Rs 15,809 crore. However, a big reason for this jump is the shifting of the government’s share of interest payments for farm loans to the agriculture ministry’s budget from the finance ministry.

Source : Hindusthan Times