A nudge for agri growth

A back-to-back read of the agriculture sections in the Economic Survey and the highlights of the Union Budget leave one perplexed, but somewhat reassured. While the Economic Survey starts with adverse effect on agriculture due to climate change  -which could reduce annual agricultural incomes in the range of 15-18 per cent for irrigated lands and up to 20-25 per cent for unirrigated areas - the Budget has promised to double farm income. 

It has made some right interjections to boost the sector by assuring to support it both at the back-and-front ends. Given the state of this sector, the measures announced by the government should have long-term benefits provided they impart continued support. 

For a moment, if one were to discard the alarm set by the Economic Survey as far-fetched; or for that matter, blame it for over dependence on the precipitation and temperature data, recent data by the Central Statistics Office (CSO) suggest agriculture output is far from what was expected.

According to the first advanced estimates by the Central Statistics Office, agriculture sector is estimated to grow at 2.1 per cent in FY18 against 4.9 per cent in FY17.

The highly agri-focused Budget speech by the Finance Minister was, therefore, reassuring. The government's promise of doubling farm incomes by keeping the minimum support price (MSP) of all unannounced Kharif crops at least at one and half times of production cost is a good step to reduce farmers' distress. This may also reduce farmers' preference to grow paddy and wheat. The Centre buys rice and wheat at MSP, while in other crops it enters the market only when the market rates fall below the support price.

The government, however, needs to ensure that raising the MSP does not fuel inflation, which may render the entire exercise futile.

A Rs 2,000 crore corpus in the Budget for developing and upgrading agricultural marketing infrastructure in over 22,000 Gramin Agricultural Markets (GrAMs) and 585 agricultural produce market committees (APMCs) is welcome. It will bring a larger number of small farmers in the formal network who otherwise resort to distress sale. 

Equally encouraging is the measure to link these GrAMs electronically to e-NAM (National Agriculture Market), a pan-India electronic trading portal exempted from regulations of APMCs. This would provide farmers facility to make direct sale to consumers and bulk purchasers and not fall prey to middlemen. 

'Operation Green' to address price volatility of perishable commodities like potatoes, tomatoes and onions, by getting in professionals in the sector, is promising and will take care of seasonal food inflation. It is well known that inflation in India is caused mostly by supply disturbances of food items. 

Finally, agriculture matters. It still accounts for 16 per cent of GDP, employs 49 per cent and feeds 130 crore Indians. Besides, a well fed agriculture sector pushes demand, therefore the economy. This Budget's agri-and-rural push will most definitely provide fillip to the overall economic growth.

— The writer is Director-Economic Advisory, EY India. Views expressed are personal