Finance Minister has had choices – maintain fiscal discipline and please foreign investors or to choose a conventional populist path to please the masses, which include farmers, poor and middle class. FM has opted for the second path. He opted for modest fiscal slippage to raise resources and create modest fiscal stimuli to address various issues. Agrarian distress was a priority and the budget outlay reveals the government's commitment to resolve the crisis. Allocation for rural India got increased to 14 lakh crore. Farm credit increased from Rs 8 lakh crore to 11 lakh crore. In a boost to address the dismal farm prices and farmer woes, government has roped in NITI Aayog to address these problems and formulise a strategy to increase MSP by 1.5 times of production cost. Government announced 'Operation Greens' to promote tomato, onion and potato production. And last but not the least – agriculture will be treated like enterprise – which can be called, a paradigm shift.
In order to fulfil PM Modi's promise to double farmers' income by 2020, the finance minister has initiated a bold move to hike minimum support prices for farm produce by 1.5 times, considering the fact that several commodities are trading far below minimum support prices. Especially, oilseeds and pulses are major areas where dumping from global markets and free fall in domestic prices become a double whammy for farmers. To promote digitalisation of mandis, eNAM project will be exempted from APMC rules – exemption of APMC cess – which may help reduce transaction costs.
The measures to boost farm sector growth are acceptable, however, it does look quantitative in nature. It is time to introduce qualitative support as well. MSP economics is now obsolete, it makes Indian farm produce all the more uncompetitive. It is rather time to make farming self sustainable. Productive growth is key for the betterment of agriculture. Measures to double farmers' income should be linked with output and not with the prices. MSP makes farming uncompetitive and makes Indian agri produce grossly inflated relative to global farm prices. This type of anomaly eventually makes India a dumping depot for global grain and farm producers.
Pro-active tariff management, setting up of price stabilising fund, stringent punishment to address fake and spurious seeds, effective vigilance on farm input costs, productivity boost, scientific farming and approval to GM crops are issues that need to be addressed.
Commodity market reforms – Another missed opportunity
In a bid to meet grandiose objectives in farm sector to woo votes of masses, government just forgot commodity markets. Budget just ignored the moribund state of commodity derivative industry, a vital tool to remove price inefficiency and an integrated part of modern market economy. As commodity markets, especially bullion, edible oil and cotton prices become highly volatile, it is high time to make domestic risk management practices mandatory and also bring in institutions to increased depth in commodity markets.
