REPOST: Budget 2014 sows the seeds of growth in agriculture

This report from Business Today sheds some light on the current standing of India's agricultural sector.

Rajat Wahi, Partner and Head of Consumer Markets, KPMG India | Image Source: businesstoday.intoday.in

Over the last few years, the agriculture and food sector has been performing below par. A weak monsoon means the future too will be challenging. So the expectations from the Union Budget were high. The measures announced were broadly centered around three key growth drivers - boosting agriculture production, improving agri infrastructure and enhancing credit support to farmers with an ultimate of aim of ushering in a second Green Revolution accompanied by a 'protein revolution'.

Like his predecessors, Finance Minister Arun Jaitley too reiterated the need to reduce dependence on monsoon. He allocated Rs 1 billion towards an initial study for the much-anticipated national river grid project that has the potential to revolutionalise Indian farming. To improve productivity, there is a dire need to check imbalanced use of nutrients. The government's plan to implement soil health cards on 'mission mode' and set up mobile testing labs could promote sustainable practices. The formulation of a new urea policy indicates a potential modification of the Nutrient-Based Subsidy (NBS) regime to ensure optimised use of fertilizers.

The work performed under the Mahatma Gandhi National Employment Guarantee Scheme (MGNREGA) has now been linked to agriculture-related activities. This is a positive move and could check the continuous migration of workers to non-agri sectors while creating productive agricultural assets. To complement this measure, Rs 300 billion have been set aside towards the Rural Infrastructure Development Fund (RIDF) and Rs 50 billion towards scientific warehousing to minimise post-harvest losses.

Improving market infrastructure could go a long way towards improving price discovery and realisation, leading to improved farmer remuneration and the much-needed disintermediation in the sector. Setting up an Rs 5 billion-worth price stabilisation fund, the budget introduced several schemes to improve market infrastructure in a bid to create a 'national market'. However, a lot still needs to be done at the grassroots level to improve last mile connectivity for product and information flow. This may require significant contribution from the states.

Finally, credit to farmers has been a major pain for the sector over the past years. Setting a credit target of Rs 8 trillion for banks, the budget also introduced several measures to improve credit availability to landless farmers and farmer-producer organisations. While renewed focus on long-term loans for asset creation is a welcome move, close monitoring of grant applications may be required. Overall, the focus on asset creation and productivity enhancement indicates a positive thrust to address the critical bottlenecks faced by the sector while creating an enabling environment for sustained growth.

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