India’s pro-farmer budget offers hope for rural poor

Two years of poor monsoons have hit farmers’ crops and in turn affected incomes for rural areas. The finance minister’s plan to double farmers’ incomes is welcome, but some analysts say they fall short on skills and training.

Agriculture is a major contributor to the nation’s economy and it provides livelihoods especially for rural people, including Vilas Dumada, above, than any in other economic sector. Subhash Sharma for The National
Beta V.1.0 - Powered by automated translation

Vilas Dumada, 49, lives in the rural village of Nandore, more than 100 kilometres north of Mumbai. The farmer has lived there all his life, tending the 6,000 square metres of land that he shares with his two brothers, as did his father and grandfather before him.

He earns about 20,000 rupees (Dh1,096) a year. There is no running water to serve the locals, most of whom are dependent on agriculture, and the roads are in extremely poor condition.

Mr Dumada cannot read and write and he does not watch television. He says he has never heard of India’s prime minister, Narendra Modi, and he certainly does not know about the country’s union budget – which was unveiled on Monday last week and focused on the rural poor and farmers like him.

“A farmer’s life is difficult,” says Mr Dumada.

Arun Jaitley, India’s finance minister, in his budget for the financial year that starts next month and runs through March next year, pledged to double farmers’ incomes in the next five years, among other measures to help the agricultural sector. The budget for the farming sector is 360 billion rupees (Dh19.7bn) for the next financial year, compared with about 250bn rupees in the 2015-16 financial year.

The industry has struggled since the monsoon rainfalls have been poor for two consecutive years, which has severely affected crop production. This, in turn, hits rural spending.

Agriculture is a major contributor to the nation’s economy and it provides livelihoods for more people than any in other economic sector, particularly in rural India.

About 68 per cent of the country’s population lives in rural areas, according to the World Bank.

Several farmers have taken their lives following crop failures, unable to cope with the burden of their debts – an issue that has gained worldwide media attention in recent years.

Mr Jaitley’s focus on rural India in his budget was seen by many as an effort to win over voters, but the country’s rural and farming economies desperately need some help.

Harshavardhan Neotia, the president of the Federation of Indian Chambers of Commerce and Industry, says that the budget signalled that “the government has ensured that all steps will be taken to fortify the viability of the agriculture sector in the coming years”.

“Creation of a long-term irrigation fund, a further push to the soil health card scheme, incentivising production of pulses, implementation of a unified agriculture marketing scheme and bringing on board more states to reform the APMC [agricultural produce market committee] act are encouraging initiatives,” he says.

“The state of the agriculture sector on account of two consecutive years of monsoon failure was precarious and it deserved the attention that was needed.”

Crisil Research, which is part of Standard & Poor’s, says in its budget report that it had “taken note of rural distress”.

“The farm sector has seen a 94 per cent increase in allocation, with crop insurance and irrigation being the biggest beneficiaries,” says Crisil.

“Overall, after years of neglect, some key issues facing rural India have received attention.

This push on rural sectors will propel consumption in areas such as tractors, two-wheelers and fast-moving consumer goods.

The fast-tracking of irrigation projects, increase in farm credit, higher allocation to NREGA [the Mahatma Gandhi national rural employment guarantee act] and extension of interest rate subvention to farmers will boost rural incomes.”

Narendra Tare, 42, is another farmer in Nandore. He grows vegetables on 4,000 square metres of land, and he also has a small shop that sells basic grocery supplies.

He makes about 30,000 rupees a year, but he says that is below the poverty line. He can get 2 kilograms of subsidised rice a month for each member of his family, but beyond that, he says, the government has done very little to help him.

He is sceptical about any benefits the union budget could bring for him, saying that these would probably go to certain areas of the country. He believes they are unlikely to reach him. He explains that there might be schemes that could help him but he would not know how to take advantage of them.

“I don’t have a single income, so how can they double it?” Mr Tare says.

“There are no transport facilities in the night and in the early morning. The hospital is good for nothing,” he says, echoing Mr Dumada’s sentiment that life in rural India is hard.

He has two sons, 21 and 18, who are studying.

“All the expenses are going up,” says Mr Tare.

But the experts are upbeat.

“The government has shifted its focus from large cities to rural areas, showing a clear intent to uplift those who belong to the bottom of the pyramid, especially the agricultural sector,” says Sunil Khanna, the president and managing director of Emerson Network Power India.

Hemant Kanoria, the chairman and managing director of Srei Infrastructure Finance, says: “This is the first budget in decades that has rightly given an implementation-based thrust to agriculture and rural segments.

“I think the specifics covered are practical and will surely yield results. It is not only about vision but would actually act as a booster for the economy, covering the largest segment of our country’s population.”

The rural sector will largely benefit from social sector schemes unveiled, he says.

“This budget has not only substantially enhanced the outlay for agriculture, it is also replete with many well-thought-through measures that address almost each and every aspect in the entire agri-value chain, right from irrigation to credit enhancement to procurement of agri-produce to market access or usage of digital platform to reach out to larger sections of the rural population.

“Add to that, the outlay allocated for building rural infrastructure. I feel this would provide considerable fillip to demand generation at the rural level and would also open up entrepreneurship opportunities.”

Yusuff Ali, the managing director of the UAE-based LuLu Group, explains that the Indian government’s rural push will have knock-on positive effects on other parts of the economy.

“The finance minister’s focus on agriculture was keenly awaited and will enhance expenditure on the rural and agriculture sectors, which in turn will enhance food security and boost exports,” he says.

The car sector is another area set to benefit.

“The biggest positive in the announcements made [in the budget] is the impetus given to the rural, agricultural and infrastructure segment,” says Vinod Dasari, the president of the Society of Indian Automobile Manufacturers.

“We believe that this will boost the consumer sentiments of rural India, which had been subdued for more than a year. We believe that an uplifted consumer sentiment will give a much-needed boost to the automobile industry.”

Urmila Vedga, 35, who runs a small snack stall in Nandore, says she lives to hand-to-mouth. She and her husband live below the poverty line. They have two young children to support.

Living in rural India is tough, she says, and she hopes that they will get a boost from the budget. But she is happy.

“I was born and grew up here,” she says.

Although the shift towards developing India’s rural and farming economies is certainly positive, there remains more to be done, some analysts say.

“There still are a few misses,” says Crisil. “These include poor focus on agri-markets development and push to agriculture investment, inadequate steps to increase farm profitability and absence of a long-term solution to impart skills training and create employment in the non-farm sector.”

Follow The National's Business section on Twitter