Gopal Naik is a Professor of Economics and Social Sciences at the Indian Institute of Management Bangalore. He teaches MBA and Ph. D. students courses on managerial economics and econometrics. His research interests are in the areas of agribusiness, commodity markets, agriculture technology adoption, farmer producer organization, agriculture policy, rural drinking water and rural development
Gopi Sankar Gopikuttan is a PhD candidate in Public Policy at the Indian Institute of Management Bangalore. His doctoral research focuses on examining the role of farmer-producer owned entities in enabling greater market access and better livelihood outcomes for smallholder farmers.
Quite appreciably, the Union budget 2022-23 presented by the Finance Minister has taken a long-term view with its thrust on building infrastructure, despite it being an election year in some of the major states. For agriculture sector, the budget evokes mixed emotions. While it is futuristic in its outlook, whether the budget would lead to inclusive growth is doubtful.
The budget envisages agriculture development in line with the changing customer demands for high value food products and evolving international trade opportunities. Encouragement for millets and their value addition, support for increasing oil seed production, promotion of ‘Kisan Drones’ and hi-tech services to farmers, facilitation of private sector engagement through PPP models, and thrust on allied sectors are indeed steps in the right direction. Promotion of chemical-free natural farming will encourage cultivation of high value crops and is in tune with environmental sustainability goals. Proposals for irrigation, power generation and drinking water supply are likely to have positive effects on rural livelihoods.
Importantly, impetus is given to agri-business and value chain development. The blended capital fund to finance startups and rural enterprises, and support for FPOs are encouraging. In the broader context of agrarian transformation and state policies for enhancing returns to farmers through market linkages, such initiatives are need of the hour. Food processing industries and value chain investments would indeed generate off-farm employment to accommodate excess labour from agriculture.
Public investment in agriculture remains as an area of concern. There has been a decline in public investment in the post-liberalization period. The public sector share of gross capital formation in agriculture and allied sectors relative to its gross value added (at 2011-12 basic prices) has hovered between 2 and 3 percent in the past decade. Agriculture Infrastructure Fund announced in 2020 as part of Atmanirbhar package generated hope, but the progress has not been inspiring confidence.
The budget proposes the traditional route of MSP for assuring prices for producers. With limited storage infrastructure and procurement machinery, it is unlikely that the benefits of MSP would expand to a larger pool of farmers. Notwithstanding all its inefficiencies, the government is still projecting APMC system as the main channel for farmers to earn remunerative returns. Agriculture market reforms and APMC modernization are still unfinished agenda. A recurrent theme of the past few budgets, “Doubling of Farm Income”, is missing this year. Coincidentally, the year 2022 was set as the target for doubling farm income. According to the data from Situation Assessment Survey 2019, released last year, both the income from crop cultivation and its share in overall household income for agricultural households in real terms have declined.
The government is pinning its hopes on private sector for investments in agriculture. Creating a conducive environment is imperative to attract private investment. At farmer level, uncertainties with regard to property rights, infrastructure such as irrigation, power and rural internet connectivity, access to cheap credit, market volatilities in input and output markets need to be addressed. At enterprise level, there needs to be more stability with regard to trade policies and institutional ecosystem. The state governments also have to be taken into confidence. A two-pronged approach involving governance reforms and collectivizing farmers into sustainable enterprises can reduce uncertainties to a great extent. For inclusive growth, various elements of agri-logistics such as physical and virtual marketplaces, storage and warehousing, standards and grades, assaying facilities, and transport must be improved to overcome constraints of smallholder farmers to access markets. Translating the budget proposals into creative action plans is the key.