Budget2017: Agriculture and Rural Development

The Finance minister presented union budget on 1 February 2017. We have analyzed what is there in the budget for agriculture and rural sectors in this article.

Feb 2, 2017 18:35 IST
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Union Budget AgricultureBackground of Agriculture Sector before the Budget

The Union Budget was presented in the parliament by the finance minister Arun Jaitley on 1 February 2017. This year’s budget announcements have come in the backdrop of plummeting farm incomes despite a rebound agriculture growth of 4.1 percent and healthy production of rain-fed Kharif crops in 2016-17.
The impacts of demonetization were not that beneficial for the agriculture sector. The incomes of the farm were affected due to it. Consequently, it caused the reduction in the prices of fruits and vegetables. Wholesale prices of pulses have fallen below the rate of support prices which are set by the government following a very productive harvest.
The government’s approach of increasing the financing capability of existing institutions by establishing dedicated funds is being seen by experts as a deft move to secure funds for the government’s farming initiatives without affecting the fiscal roadmap.
Agriculture in the Union Budget 2017
The Union Budget 2017 has opened the doors for market reforms in agriculture, set a higher target for farm credit and increased funding for crop insurance, as the government stepped up to tackle distress in rural India. We have analyzed those budgetary allocations and their impacts on agriculture and rural sectors below:

1. Development through NABARD

Finance Minister Arun Jaitley sought to give a farmer-friendly and rural push to the Budget. The finance minister relied more on routing finances through financial institutions like the National Bank for Agriculture and Rural Development (NABARD) rather than increasing budgetary allocation for programs. This will ensure the proper management and applications of the funds allocated for targeted cause.
The budget for 2017-18 also opted for National Bank for Agriculture and Rural Development (NABARD), for implementing schemes to develop the dairy sector and improve access to irrigation. To improve access to irrigation, the budget allocated Rs20,000 crore for the long-term irrigation fund under NABARD under per drop, more crop initiative.
Under the ‘Har Khet Ko Pani’ initiative, the budget allocated of Rs5,000 crore for setting up of a dedicated micro-irrigation fund under NABARD. Additionally, it also allocated of Rs8,000 crore for the setting up of a dairy development fund under NABARD.
Overall, NABARD’s refinancing capacity has been increased by almost Rs 34,900 crore across various initiatives.

2. Changes in Agricultural Laws

The finance minister proposed a model on contract farming to help farmers get better value for their produce. This model law will be circulated among states across the entire country.
The Budget elaborated the government’s earlier goal of bringing in more regulated agriculture markets on the electronic National Agriculture Market (e-NAM) platform.  In the budget, it is also mentioned that the coverage of the electronic National Agricultural Market (e-NAM) would be expanded from the current 250 markets to 585 mandis.
At present, farmers are obliged to sell perishable produce such as vegetables and fruits in markets at the price rates managed by APMCs. This used to create a loss making scenario for farmers in past. In this budget, the central government has asked state governments to delist perishables produce from Agriculture Produce Marketing Committees (APMCs) and allow farmers to sell such items directly to consumers to get a better price.

3. Development Schemes

There is 24% increase in the funding for the rural and agriculture sector in fiscal 2017-18 to Rs1.87 trillion. The government has made efforts to provide the flagship crop insurance to all farmers.
For this, the budget increased the allocation from Rs 5,500 crore to Rs9,000 crore in 2017-18  for scheme Pradhan Mantri Fasal Bima Yojana (PMFBY). The government planned to bring 40% of cropped area under insurance and take it to 50% next year.
Programs like Rashtriya Krishi Vikas Yojana (RKVY) witnessed a 12 per cent reduction in allocation from the 2016-17 Budget Estimate of  Rs 5,400 crore to  Rs 4,750 crore in Budget Estimate 2017-18.
The Union Budget increased the allocation of the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) by 42.1 per cent in the 2017-18 Budget Estimates which means Rs 7,375.92 crore from Rs 5,187.01 crore. This was done with the purpose to accomplish pending projects and take up new ones.

Rural Development

The union budget 2017 provided a major thrust on the development of rural economy. It enhanced target for agricultural credit allocation, crop insurance, and irrigation. These are significant positives for rural sector and would help in reducing volatility in rural income.
The government increased allocation under MNREGA increased from Rs 38,500 crore to Rs 48,000 crore. And the road work under Pradhan Mantri Gram Sadak Yojna is accelerated to 133 km roads per day in 2016-17 from73 km per day during 2011-14.Increased allocation under MNREGA would help in strengthening social safety net in the rural economy.
The increased construction of rural roads would create a further demand for two-wheelers, especially gearless scooters, in the rural areas. The entry-level passenger vehicle sector also extracts 30% of its demand from the rural market and likely it will be able to maintain it in future.
The government’s plan of enhancing roads in rural areas would be beneficial for the commercial vehicle sector. The focus of the government on farmer welfare and rural development would be positive for the two-wheeler and tractors as entry level motorcycles have a sizeable dependence on the rural segment.
These increased investments will also support sales of vehicles used for providing last mile connectivity and they will also be positive for tipper sales that constitute approximately 25% of M&HCV Truck sales in India and have registered healthy growth (35-40%) during the current fiscal.
Cabinet approved an extension of tenure of loans under Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojana from 15 to 20 years.  For women empowerment, Mahila Shakti Kendra at village level will be initiated in this financial year. For fulfilling the basic need of electrification, the government has pledged to achieve 100% village electrification by May 1, 2018.
And, for fulfilling another basic need of housing, 1,00,00,000 houses  will be constructed by 2019 for those living in kaccha houses. The union budget announced an extension of tenure of loans under Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojana from 15 to 20 years. The government also pledged to double the income of the farmers in 5 years. It would be a brave step taken for the welfare of farmers if it gets implemented successfully.
The overall agriculture and rural budget gives a glimpse of the government’s motive to develop agriculture and rural sector of the country. The overall allocation of funds given to agriculture and rural sector shows that the government’s determination towards the welfare and well-being of these sectors.
However, some experts do feel that the government has much more things to in upcoming days and these allocations are merely the glimpse of that.

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