Income support: Budget 2019 showstopper

The decline in public, as well as private investment, has led to a slowdown in the growth of agriculture and allied sectors in the last five years. The crisis in the agrarian sector had intensified over the last few years. It is now the political talking point with many farmers' rallies, marches and protests being held all over the country. The good news, however, is that this year’s budget has a slew of initiatives for farmers. But will that bring relief to them?

An income transfer scheme has been introduced for small farmers having cultivable land of up to two hectares under Pradhan Mantri Kisan Samman Nidhi. Farmers will be provided direct income support at the rate of Rs 6000 per year. This will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs 2000 each. The scheme, proposed to be fully funded by the central government, expects to benefit around 125 million small and marginal farmer households. Will this give a boost to agriculture and change the focus from the country’s food security to farmers’ income security?

Plenty of problems in the offer

Speaking at the panel discussion on budget organised by the Centre for Budget and Governance Analysis (CBGA), New Delhi on February 2, 2019, Yogendra Yadav, president, Swaraj Abhiyan says that the budget turned out to be a “disappointment” that “rubs salt into the wounds of farmers”. Tenants, women farmers, sharecroppers and the landless have been excluded in this programme that replicates the income guarantee models introduced in the states, Odisha, Telangana and Madhya Pradesh by the state governments in the recent past.

Income support scheme could be fraught with implementation issues, especially where the land records system is weak. “Policy-makers should leave entitlement programmes like direct income support to the states to announce and implement. It is really about which tier of governance is suited for implementing which programmes,” says Pinaki Chakraborty, professor at National Institute of Public Finance and Policy, New Delhi.

The budget kept silent on whether the implementation of Swaminathan Commission report that recommended raising the minimum support price to at least 1.5 times of the comprehensive cost of cultivation is underway. “In the guise of the Pradhan Mantri Kisan Samman Nidhi, farmers will be provided direct transfer. Simply put, each person in a household of five people would receive a share of Rs 3.33 per day, which is not even enough to buy a cup of tea,” says Yadav taking a dig at Prime Minister’s pet programme ‘chai pe charcha’ (discussion over tea).

The average farmer household debt is Rs 47,000 in India as per official records and the amount of Rs 6000 a year seems to be miserly. “While it is understandable that the government is trying to blow its own trumpet with promises for the future in an election year, it lost the opportunity to provide an account to the citizens of the last five years achievements through the elaborate outcome framework developed under the budget process,” Yadav says. There has been a decline in real wages in rural India since 2014 and agriculture is facing one of its worst slumps with farm gate prices crashing, yet the government continues to talk about doubling farmers’ income by 2022. “The government should present a report card on the progress on doubling income so far,” says Yadav.

The government made the scheme effective from December 1, 2018, so as to pay the first instalment by March 31, 2019, right before the national elections. “It is unconstitutional on the part of the government to make massive budgetary commitments to the tune of Rs 75,000 crore payable by the incoming government just for the Pradhan Mantri Kisan Samman Nidhi in a vote-on-account (interim budget),” says Jayati Ghosh, professor of economics, Jawaharlal Nehru University, New Delhi speaking at the panel discussion.

“Farmers have been demanding a resolution of issues of land rights; ensuring affordable inputs; resolving problems of water management; access to credit; fair system of crop insurance; and, a more responsive trade policy. These issues have not been resolved yet,” says Ghosh.

Ghosh writes in an article in The Telegraph (Feb 1, 2019) how this amount of Rs 6000 per household is tiny "relative to the average costs of cultivation of most crops across India”. If we take only the costs of all purchased inputs plus the imputed cost of family labour, then the average cost of production for wheat is slightly more than Rs 30,000 per hectare and that for rice is above Rs 40,000 per hectare. “If a farmer cultivates both crops (and almost all crops are part of double or triple cropping patterns), then the cost per hectare is at least Rs 70,000 per year. For a holding of two hectares, the costs come to at least Rs 1,40,000,” she says.

While the income support programme is a short-term relief to a structural crisis, a programme like MGNREGA, which has the potential to boost rural wages and purchasing power, has received an allocation of Rs 60,000 crore this year, which is less than last year’s revised estimates (over Rs 61,000 crore), despite a backlog of pending payments. 

The budget does not deliver enough for the social sector this year. Even while the government made all the right noises regarding the rural sector, key infrastructure programmes like rural roads and rural housing saw a decline in allocation. The budgetary allocations for flagship programmes such as the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) did not see increased focus, nor has an attempt been made to revive Rashtriya Krishi Vikas Yojana (RKVY) to incentivise the states to increase public investment in agriculture and allied sectors.

“The budget has a focus on the rural economy, employment and welfare of the poor while being fiscally prudent. The pro-farmer, pro-poor budget is in the right direction,” says Tuhin Ghosh, spokesperson, BJP, speaking at the panel discussion held by CBGA. Priyanka Chaturvedi, spokesperson of Congress, speaking at the panel discussion says that “the Congress would introduce a minimum assured income to each poor person supporting around 300 million people. This would obviate the need for periodic farm loan waivers to farmers”. The details of this will be clear later but there is a growing consensus among India’s two major political parties that a targeted basic income is the new future for welfare in India.

Dubbing the farmers' income support programme as fiscal impropriety, Yamini Aiyar, president and chief executive of Centre for Policy Research, New Delhi was critical of “the brazen budget declaration on increased spending and revised taxation policies that hand out many concessions without focussing on the much needed reforms to improve the quality of public services. The last five budgets have seen a push for an insurance-based public-private partnership. It remains to be seen if a state that has failed to get basic provision right can perform the far more complex task of regulation that includes addressing issues of pricing, quality control etc.”

Water and sanitation

• The finance minister, while presenting the budget, talked of the fifth dimension of Vision 2030 of having “clean rivers, with safe drinking water to all Indians, sustaining and nourishing life and efficient use of water in irrigation using micro-irrigation techniques”. He added that the government “has initiated the world’s largest behavioural change movement with the Swachh Bharat Mission. India has achieved 98 percent rural sanitation coverage and as many as 5.45 lakh villages have been declared open-defecation free.”

• As per the budget documents, the government has built 2.13 crore household toilets in 2018-19 and more than nine crore household toilets have been constructed so far since 2014-15. As regards budgetary allocations, the total allocation for the Swachh Bharat Mission (SBM) is Rs 12750 crore of which SBM (rural) got Rs 10,000 crore and SBM (urban) Rs 2750 crore in 2019-20. This is lower than the previous year’s allocation of Rs 17843 crore for 2018-19 (BE).

• With less than a year left to meet the SBM target of an open defecation free India, the decrease in funding for sanitation in this year’s budget is unexpected. The focus should now have been ODF plus, which goes beyond toilet construction and is for sustainable WASH services.

• The allocation for National Rural Drinking Water Programme (NRDWP) has improved (Rs 8200 crore) as compared to last year (Rs 5500 crore) but is still less than that in 2014-15 (Rs 9242 crore). “The allocation for SBM has been made at the cost of the allocation under NRDWP over the years. The government could have simultaneously focused on the water supply programme as well,” as per a CBGA report. This is especially considering that just 18.5 percent of total rural households have piped water supply as on Jan 2019.

• Again, in the budget speech, the government remained silent on the implementation status of the National Water Quality Sub Mission (NWQSM) on arsenic and fluoride launched in 2017 to provide safe drinking water to about 28,000 affected habitations in the country by March 2021 with an outlay of Rs 25,000 crore.  

So, from the perspective of social sectors, budget 2019 is high on optics even with a meagre allocation for farmers but poor on how the actual delivery will happen.