Agriculture sector revival needs more budgetary funds
The year was 1996. The elections results were out and Atal Bihari Vajpayee had been declared the Prime Minister-elect. A day or two later, a closed-door meeting with some well-known economists was held in New Delhi. Since the PM-elect could not make it, another political stalwart Murli Manohar Joshi chaired the meeting.
The mandate before the economists was to suggest what kind of economic policies the NDA government must bring in so that it does not have to face anti-incumbency. Most of the economists present wanted to keep a close watch on fiscal deficit and find ways to reduce the current account deficit. There was quite a debate on the issues flagged, and of course, on other compelling issues like generating employment, increasing manufacturing and building on exports, among others.
When I was asked to suggest what the policy focus should be on, my reply was to provide 60 per cent of the Budget for 60 per cent of the population that was then engaged in agriculture. Many of my colleagues present did not agree with me, some even warned of an economic debacle if 60 per cent Budget was allocated for agriculture. Greater allocations for the industry and infrastructure sector were emphasised upon and that was taken as the sure way to lead to higher economic growth.
I, however, insisted it was time for a new template and economic thought, and unless an adequate budgetary provision was made for agriculture the country would not be able to bring around all-round growth. I knew my suggestion did not gel with the mainline economic thinking. However, in my understanding the only way to escape the pangs of anti-incumbency was to invest adequately in farming and rural development. The meeting ended with Joshi telling us that he would convey our views to the Prime Minister.
A couple of days later, I was amazed when the new government announced its intent to provide 60 per cent Budget for agriculture. A furore erupted in the media about the need to put so much resource in agriculture, with many experts even saying that it would pull back the economy. But my argument was that in its march towards a high-growth trajectory, India cannot afford to leave behind two-thirds of its population living in the countryside.
To make it possible, and in line with political philosopher John Rawl’s principles of fairness and justice, the policy effort should entail adequate fiscal resources to be made available for human capital investment, rebuilding farming and agriculture, setting up appropriate rural infrastructure, including in health and education sectors, and, in the process, revitalise the rural economy. In short, the paradigm shift in economic thinking and approach could have redrawn the contours of what the Prime Minister now refers to as Sabka Saath, Sabka Vikas.
However, as the Vajpayee government lasted only 13 days, the idea that could have laid a strong foundation for a transformative change was also lost.
Why am I sharing this is because the allocation for farming as a share of the total Budget has come down even further. This is worrisome, given that agriculture is responsible for livelihoods of millions. From an already low of 5.44 per cent in 2019-20, the share of agriculture in the Budget has further plummeted to 3.15 per cent in 2024-25. Knowing that it is the political and economic factors (more influenced by big business) that dominate resource allocations, the fault lines are clearly visible. No wonder, with 42.3 per cent of the population still engaged in agriculture, its growth is presently hovering around 1.4 per cent. Still worse, the average farm incomes have been on a steep decline. Real rural wages continue to stagnate for over a decade. The continuing farm distress is too severe to be ignored. As I have often said earlier, this is because agriculture has been deliberately kept impoverished.
Several studies have shown that roughly 60 per cent of the farmers want to quit agriculture, if given a choice. And if you are wondering how come Indian farmers fare so badly; one of the best indicators of what has led to the demise of agriculture comes from a recent study by the Organisation for Economic Cooperation & Development (OECD). The study shows Indian agriculture at the bottom of the heap, receiving a negative gross farm receipt of (minus) 20.18 per cent in 2022. India is the only country among 54 major economies where budgetary support has not been extended to cover up for farm losses.
It would have, however, made tremendous economic sense if agriculture had received optimal resources over the years roughly proportionate to its share in population. There can be no denying that with declining resource allocations, it is certainly futile to expect a miracle to take place in agriculture. If in 1996, the then NDA government had agreed to provide 60 per cent share of the Budget for agriculture and rural development, and if it had continued, the rural face of India would have been completely transformed by now.
Even now, with population in agriculture decreasing to 42.3 per cent, there are compelling reasons to ensure that at least 50 per cent of the annual Budget of Rs 48 lakh crore (trillion) is set aside for the farming and rural sectors. This is, perhaps, the best way to reach out to the four new ‘castes’ that have been spelled out — garib, mahilayen, yuva and annadata. Agriculture, in fact, provides livelihood to all kinds of caste configurations. Putting adequate resources in agriculture not only optimises performance and builds sustainable livelihoods but also fosters entrepreneurial aspirations. The World Bank, too, somewhere admits that appropriate investments in agriculture can help reduce poverty for 75 per cent of the world’s poor.
At a time when the world’s richest 1 per cent has accumulated more wealth than the bottom 95 per cent, there is no sense in hanging to economic theories that have worsened inequality. India, therefore, needs to script its own story. And, it all begins by rejuvenating agriculture.
