Budget (2009-10) A Overview

Agriculture plays an important role in the rural economy of India. This sector provides gainful employment as well as raw materials for a large number of industries in the country. Of late, amid economic reforms and trade liberalization, considerable changes have been noticed in this sector. The reform process introduced in the early 1990s failed to recognize the crucial importance of this sector due to which it has faced serious difficulties. These difficulties manifested in a variety of forms like loss of livelihood, consequent decrease in purchasing power of the rural masses, and a steady increase in input prices crippling the agricultural producers. Complete failure of land reform programmes in turn resulting in a distorted land holding pattern, the crisis in this sector during the post-liberalization has aggravated. Despite having vast potential of backward and forward linkages this sector has been neglected since 1990s and has not been given due importance in terms of public investment by the successive governments.

Looking at the core concerns of this sector, the growth of this sector in terms of increased public investment is of immense necessity at this juncture to revive the fate of the rural economy of India. There was a lot of hope that the present government would address these concerns by allocating funds in budgets. But the trend of budgetary investment of United Progressive Alliance (UPA) government towards this sector left no hope for the farmers to further sustain agriculture as a means of livelihood. The budgetary allocation/expenditure of the Central Government as well as the State Governments towards Agriculture and Allied Sectors and some of the major policy announcements of the Central Government’s plan programmers and schemes were assessed, besides the commitments of the UPA Government as announced in the National Common Minimum Programmed (NCMP).

Promises Made by the UPA Government and its Policy Initiatives

The National Common Minimum Programme of the UPA government was one of the initiatives to provide the best possible alternatives to the challenges of agrarian crisis of the country during 2004. It holds promises to address burgeoning unemployment and agrarian distress, but in practice what it has performed is no way different from the neo-liberal policy approaches of the previous NDA (National Democratic Alliance) regime for this sector.

Promises Made in for the Agricultural Sector

Declared in May 2004 the NCMP promised the following:

 Rural credit will be doubled in the next three years.

 All existing irrigation projects will be completed within three-four years.

 All dues of farmers will be cleared at the earliest.

 Public investment in agricultural research and extension, rural infrastructure and irrigation will be stepped up in a significant manner at the earliest.

 Crop and livestock insurance schemes will be streamlined to make them more effective.

 Controls that depress farm incomes will be systematically removed.

 All possible efforts will be made to maintain terms of trade in favour of agriculture.

Major Proposals in the Eleventh Five Year Plan

Looking at the context of the misery of this sector in terms of slowdown in growth rate, widening economic disparities between irrigated and rain-fed areas, increased vulnerability to world commodity price volatility following trade liberalization, uneven and slow development of technology, inefficient use of available technology and inputs, lack of adequate incentives and appropriate governance institutions, degradation of natural resource base, rapid and widespread decline in groundwater table, increased non-agricultural demand for land and water, aggravation in social distress in the form of upsurge in farmers’ suicide etc, the Eleventh Five Year Plan strategy is to accelerate sustained agricultural growth at 4% per annum. For achieving annual growth rate of 4 % the actions proposed during the Eleventh Five Year Plan period are as follows:

 Bringing technology to the farmers;

 Improving efficiency of investments, increasing systems support and rationalizing subsidies;

 Diversifying agriculture, while protecting food security concerns;

 Fostering inclusiveness through a group approach by which the poor, especially women, will get better access to land, credit and skills;

 Priority in agriculture research should be given in terms of increased investment;

 Research priorities have to shift towards evolving cropping systems suited to various agro-climatic conditions and towards enhancing the yield potential in rain fed areas through development of drought and pest resistant varieties;

 The Indian Council for Agriculture Research (ICAR) needs to be restructured with emphasis on greater accountability;

 Adequate emphasis will also be given to better ground water utilization; and

 Investment in irrigation and irrigation delivery systems.

Looking at the expenditure pattern of the present government towards agriculture and allied activities, the share of agriculture and allied activities from total expenditure and GDP declined drastically to 10.37 percent and 1.64 percent respectively compare to the previous budget (2008-09 RE). The obvious conclusion from this expenditure trend shows how committed is present UPA government at the centre towards reviving the rural economy of India as more than 52 percent of the total population of India depends on agriculture as their means of livelihood. (Table-2)

Graph-1: Percentage Distribution of Plan Allocations in Agriculture and Allied Activities Since the Seventh Five Year Plan

Source: Compiled from the data given in Economic Survey, 2007-08, GoI

Plan expenditure shows the commitment of the government towards the overall development of that sector over the plan period. Share of plan investment (both Center and States/UTs) in agriculture sector has been declining since 1985. Declined share of investment in agriculture shows that less priority has been accorded to this sector. During the Seventh Five Years Plan, the share of plan investment in agriculture and allied activities out of total plan investment was 5.8 % and this got reduced to 3.7 % in the proposed Eleventh Five Year Plan. (Graph--1)

Being the nodal agency for implementing Central Governments schemes and programmes for overall development of agriculture, the Ministry of Agriculture plays an important role in actualizing the felt needs of the agriculture sector of the country. But, looking at the budgetary allocation and expenditure of the Ministry of Agriculture from 1999-2000 till date gives a dismal picture both in terms of ratio to GDP and total Central Government’s expenditure. Share of expenditure of the Ministry from GDP and total expenditure was 0.18 % and 1.12 % respectively during 2004-05, and in the recent budget i.e. budget estimates of 2009-10, it slightly increased and reached 0.25 and 1.57 % respectively. (Table-3)

Expenditure under capital accounts of the Ministry