The performance of the agricultural sector under Narendra Modi would be judged in 2019 by a single indicator: his grand promise to double per capita agricultural incomes between 2015 and 2022. However, available data does not indicate any satisfactory progress towards that goal. The year 2016-17 was a satisfactory year as far as overall agricultural growth rates were concerned. However, there has been a sharp deterioration of agricultural growth in 2017-18, the ongoing year. To begin with, if gross value added (GVA), year-on-year, grew at 4.1 per cent in the Q2 (July-September) of 2016-17, it grew at just 1.7 per cent in the Q2 of 2017-18. For 2017-18 as a whole, the growth rate of GVA in “agriculture, fishing and forestry” is projected to be only 2.1 per cent compared to 4.9 per cent recorded in 2016-17. The production of food grains had grown by 10.7 per cent in the Q2 of 2016-17; however, the corresponding growth rate in the Q2 of 2017-18 was just 2.8 per cent.

The poor growth rate of agriculture in 2017-18 had resonated in the surge of farmer’s protests over the last few months. The poor performance of the BJP in the Gujarat assembly polls has also been interpreted as reflective of a deep agrarian anger. The farmer protests were centred on two major demands: first, the government should announce minimum support prices (MSP) at 150 per cent of the C2 cost of production. Secondly, the government should announce a meaningful debt relief package to ameliorate the agrarian distress.

In the Budget 2018-19, Arun Jaitley has announced that the government would raise MSPs to 150 per cent of the cost of production. However, it is unclear how sincere the government is in making this promise. One reason for this suspicion is a false claim made in the same breath by Jaitley. He claimed that his government had “declared…MSP…for the majority of rabi crops at least at one and a half times the cost involved”. Data show that the rise in the MSP over cost of production in Rabi 2017-18 was 35.1 per cent for wheat, 18.4 per cent for barley, 25.6 per cent for gram, 17.6 per cent for lentil, 33.4 per cent for rapeseed and mustard and -6.4 per cent for safflower (see Table 1 and Figure 1). Only time will tell if the government would keep its promise to farmers. Also, there is no clear budgetary allocation made to meet this promise.

Table 1 Costs of cultivation and declared minimum support prices (MSP), rabi season, India, 2017-18, in rupees per quintal

Source: CACP reports

Even if MSPs rise in agriculture, there is no evidence that the benefits of higher MSPs reach the farmer. Data from the Situation Assessment Survey (SAS) of 2012-13 had shown that for all crops except sugarcane, less than 5 per cent of households reported sale to a government agency/cooperative that assured an MSP. Farmers largely sold their output to private traders. Only 31 per cent of paddy farmers and 39 per cent of wheat farmers were even aware of the MSP scheme. Worse, only 13.5 per cent of paddy farmers and 16.2 per cent of wheat farmers sold their harvest to procurement agencies. The reason: shortage/unavailability of procurement agencies and local purchasers. Village surveys conducted by the Foundation for Agrarian Studies, Bengaluru have also demonstrated that the actual prices received by farmers were lower than the MSP.

Figure 1 Actual percentage rise in minimum support prices (MSP) benchmarked against 50 per cent rise, rabi season, India, 2017-18, in per cent

Nothing illustrates the failure of the Modi government in procurement as the pulses procurement of 2017-18 (see Figure 2). Farmers were promised higher MSPs for pulses during the sowing season of 2017, but when farmers responded with higher production, the government failed to procure in adequate quantity. As a result, market prices for pulses crashed. The failure of pulses procurement was another factor that drove farmer’s protests across rural India in 2017-18.

There is no increased allocation in the budget to ensure that higher MSPs will be paid, or larger capacities of food storage and warehousing will be created. In fact, if the expenditure for food storage and warehousing rose by 27 per cent between 2016-17 and 2017-18, the rise between 2017-18 and 2018-19 is projected to be only 19.5 per cent.

Figure 2 Movement of market prices and MSPs in selected markets, Arhar and Moong, 2017-18, in rupees per quintal

The other major promise made by Jaitley in the budget is related to agricultural credit. There was no announcement to provide any relief to the indebted farmers. But he claimed that the government would increase the supply of agricultural credit from Rs 10 lakh crore to Rs 11 lakh crore. Agricultural credit is not a budgetary allocation and is provided by banks. Still, such a mechanical 10 per cent rise in agricultural credit pays no attention to the sharp rise in the costs of cultivation in recent times, which necessitates raising credit limits for crops. It also pays no attention to including the yet-unbanked farmers into the net of the formal banking network. There is no announcement to revive the co-operative credit network, which is in deep crisis post-demonetisation. Finally, there is no attention paid to ensure that agricultural credit reaches the genuine farmers. In 2016, about one-fourth of the agricultural credit was given by urban branches India. Only about 41 per cent of the agricultural credit was given to small and marginal farmers (represented by loans of up to Rs. 2 lakh). About 14 per cent of agricultural credit carried a loan size of more than Rs 1 crore going primarily to institutions and corporates engaged in agricultural production. Credit is simply not reaching the farmers, and the budget is totally silent on this problem.

Finally, spending in agriculture is projected to grow slower in 2018-19 than during 2017-18. If the total revenue expenditure in agriculture and allied activities grew at 25.3 per cent between 2016-17 and 2017-18, it is projected to grow only at 16.2 per cent between 2017-18 and 2018-19. In crop husbandry, if the expenditure grew at 29 per cent in 2017-18, the growth rate is projected to be only 14 per cent in 2018-19. The growth rate of expenditure on rural development is to rise by a meagre 1.6 per cent between 2017-18 and 2018-19; within rural development, the expenditure on MGNREGS is to stay at the same amount of Rs 55,000 crore in 2018-19 as it did during 2017-18.

Table 2 Percentage change in expenditures in agriculture and rural development, functional classification, revenue, 2016-17 to 2018-19, in rupees crore and per cent

Source: Budget documents.

Budget documents also show a major compression of transfers by the centre to the States under Centrally Sponsored Schemes (CSS) in agriculture and fisheries (see Table 3). In Table 3, I have provided data for the budget estimates (BE) and revised estimates (RE) of 2017-18. In every scheme cited in the table, the RE were lower than the BE by a significant margin. In all the CSS together, the difference between the BE and the RE was (-)17.3 per cent of the BE. The transfers under the Rashtriya Krishi Vikas Yojana (RKVY) fell by about Rs 1700 crore, or 35.8 per cent in 2017-18. In Pradhan Manthri Krishi Sinchai Yojana (PMKSY), the fall was to the tune of 11.8 per cent. In Blue Revolution under fisheries, the fall was to the tune of 24.8 per cent. In other words, the expenditures at the State level were squeezed out by the absence of transfers from the centre. At the State-level, this led to a huge fall of agricultural expenditures in 2017-18. Only time can tell if the squeeze on transfers would continue into 2018-19 also.

In sum, the budget does not make any special effort to either boost agricultural growth or give relief to the distressed farmers. It is more a political rhetoric wrapped in jumlas.

Table 3 Budgeted expenditure (BE) and Revised expenditure (RE) under major centrally sponsored schemes in agriculture, 2017-18, in rupees crore and per cent

Source: Budget documents.