Union Budget 2018: What Modi is doing for farmers

By Pratik Parija

India will boost farmers’ returns by increasing purchase prices for crops by more than 50 percent of the output cost, a move aimed at fulfilling Prime Minister Narendra Modi’s promise of doubling farm incomes by 2022.

The government will increase the minimum support price for monsoon-sown crops such as rice, soybeans, cotton, and pulses said Finance Minister Arun Jaitley, who presented the government’s budget in parliament for the financial year beginning April 1. The announcement meets the ruling party’s pledge on farm incomes in its 2014 poll manifesto.

Farmers are agitated over falling commodity prices and high debt levels. Bumper harvests, boosted by a normal monsoon in 2016 after back-to-back droughts and good rain last year, have hurt prices of several crops. Depressed levels, combined with poor arrangements for government-assured purchases, triggered protests by farmers at a time when Modi’s party faces as many as eight state elections this year and the national poll in 2019.

Increasing the support price is not adequate and it is more important that farmers get the full benefit, Jaitley said. If prices fall below support levels, then the government should purchase either at the support price or ensure farmers fetch the minimum level, he said.

“These measures will somewhat alleviate the stress of the farmers and help revive the rural economy which has seen a sharp slowdown in the current fiscal,” K Ravichandran, a senior vice president at ICRA Ltd., a local unit of Moody’s Investors Service, said in an email.

National Institution for Transforming India, the government’s think tank known as NITI Aayog, in consultation with federal and state governments, will make a plan to ensure farmers get adequate prices for their crops, Jaitley said.

Export Potential

India’s agriculture export potential is as high as $100 billion against the current export of $30 billion, he said. To realize this, export of agri-commodities will be liberalized, said Jaitley.

The government will allocate 20 billion rupees ($312 million) to an agricultural market infrastructure fund for developing thousands of farm markets, Jaitley said.

About 800 million people of India’s 1.3 billion depend directly or indirectly on farming, with agriculture accounting for about 16 percent of the economy. The country is the world’s top grower of cotton and the second-biggest producer of wheat, rice, and sugar.

This article was originally published on Bloomberg Quint.