Whither Rural Economy?

According to the Socio-Economic and Caste Census (SECC) data, released in 2015, the main earning members in 75 percent of India's rural households had an income of less than Rs 5,000 a month. Also, 50 percent of rural households make a living through casual manual labour. This underscores the need for greater public spending.

The deficit rainfall for two years hit hard farmers across the country. Also, the rural non-farm sector is in no happy position for lack of demand for manufacturing products. Hence, rural real wages experienced a declining trend.

No doubt the thrust of the 2016-17 budget is on agriculture and rural development. There is now a cess of 0.5 per cent on all taxable services that would be used to finance improvements in agriculture and schemes to benefit farmers. The result: dedicated long-term irrigation fund with a corpus of Rs 20,000 crore. The related measures include: an outlay of Rs 19,000 crore for rural roads (all habitations are to be connected by 2019), achieving universal village electrification in the next two years, introduction of a health insurance scheme that would provide upto Rs l lakh as coverage against hospitalization costs for economically poor households, with senior citizens above the age of 60 eligible for another Rs 30,000 in top-up cover. Also, all families below the poverty line will get cooking gas. But all that glitters is not gold! In most cases statistical figures are for fun, having little relevance to the ground reality.

It doesn't matter what the Modis and Jaitleys are saying—or not saying—the plight of farmers is worsening. Two consecutive droughts forced the government to raise allocations for farmers and farmers' welfare by 90 per cent in the Budget 2016-17. The actual expenditure on this sector was Rs 25,917 crore in 2014-15. The revised estimate for 2015-16 was Rs 22,958 crore. The Budget 2016-17 made a provision of Rs 44,484.51 crore. For rural development, the revised estimate for 2015-16 was Rs 79,279 crore. This has been enhanced to Rs 87,765 crore in the Budget 2016-17.

Farmers' income is likely to double by 2022 as per official estimates. It is puerile to presume that larger allocations will ensure higher growth rates, particularly in the agricultural sector. Agricultural credit is a case in point. In the last decade, it has increased from Rs l lakh crore to Rs 9 lakh crore. Yet, farming remained unremunerative and farmers' suicides are still on the rise.

Raising agricultural yields is crucial for sustainable agricultural development. India has to increase crop yields in rainfed areas which account for nearly 55 percent of the country's arable land. For the first time the government recognises the importance of organic farming. The Param Paragat Krishi Vikas Yojana aims at bringing five lakh acres under organic farming over a three-year period. The government has launched a value chain based organic farming scheme called organic value chain development in northeast region. The budget provision for these two schemes is Rs 412 crore. In the absence of a concrete action programme this organic busiess remains a vague idea, not to be translated into action.

The budget provides a big push to stalled irrigation projects. Most of the funds will be spent on completion of existing irrigation schemes. Around 89 irrigation projects under the Accelerated Irrigation Benefit Programme that have been languishing for a long time will be given top priority. This will help in irrigating 8.06 million hectares. These projects require Rs 17,000 core in 2016-17 and Rs 86,500 crore in 2017-18. The government would ensure that 23 of these projects are completed before 31st March, 2017. A new programme for sustainable management of groundwater with an initial allocation of Rs 6,000 crore has been proposed to be launched in 2016-17. Funding for this would come from multilateral agencies, albeit it is yet another uncharted course that has no sound potential.

The budget 2016-17 has provided a total allocation for Agriculture, Cooperation Farmers' Welfare a sum of Rs 35,984 crore. This is far higher than the revised estimate for 2015-16—Rs 15,809.54 crore. But, one should note that the 2016-17 figure includes Rs 15,000 crore for interest subsidy for short-term credit to farmers. This head earlier appeared as part of the demand for grants of the Finance Ministry.

The stress on agriculture and rural development is desired. But, funds alone cannot deliver the goods. Agricultural productivity has to increase dramatically and far fewer people have to depend on agriculture. This means, planned rural migration needs to be encouraged. Arun Jaitley's Budget speech was silent over this.

The hard reality is that the woes of farm sector cannot be eliminated in a year or two. As rightly observed, "the fact is Indian agriculture remains so deeply rain—fed and irrigation has been neglected or funds so pilfered that no government can achieve the needed output outcomes within a five-year frame."

Also, the crop insurance scheme will not boost farm output. It is more about government paying the subsidy premium. And it covers only 20 percent of farmers, there is need for bringing more farmers under its net.

In the rural sector, higher allocations alone cannot radically alter the gloomy scenario for the better. Most rural schemes suffer from high incidence of leakages. The employment guarantee scheme is now a source of mega corruption. The scheme failed to provide even 100 days of employment to a poor rural household in a year. Also, some departments are not able to utilise the funds allocated for lack of advance planning. Good governance appears to be the answer to all the ills of India's rural economy.
[contributed]

Frontier
Vol. 48, No. 42, Apr 24 - 30, 2016