Nirmala Sitharaman, India's finance minister (centre) with Anurag Thakur, India's finance and corporate affairs minister (left). (Bloomberg)
Nirmala Sitharaman, India's finance minister (centre) with Anurag Thakur, India's finance and corporate affairs minister (left). (Bloomberg)

Budget marginally raises spending for the agriculture sector

The amount set aside for the agriculture sector for the next financial year is 4% short of the 154,775 crore initially allocated (budget estimates) in the 2020-21 budget
By Zia Haq, New Delhi
UPDATED ON FEB 02, 2021 03:01 AM IST

The Union Budget marginally raised spending for the “agriculture and allied activities” sector by 2% for the fiscal 2021-22, numbers in budget documents showed on Monday as finance minister Nirmala Sitharaman announced a new cess to fund farm modernisation, steps that come amid a widespread agitation by farm unions against a set of pro-reform farm laws.

Total money set aside for a sector that employs half of all Indians stood at 148,301 crore for 2021-22 , up from 145,355 crore spent in 2020-21 (revised estimates), a hike of 2,946 crore.

The amount set aside for the sector for the next financial year is 4% short of the 154,775 crore initially allocated (budget estimates) in the 2020-21 budget.

Also Read: Only concerned about having farm laws repealed, budget does not matter: Farmers

The figures also revealed the government was able to spend 6% less in agriculture in the current fiscal than it had originally planned to ( 145,355 of actual projected spending against initial budgetary provisions of 154,775).

The finance minister on Monday proposed an “Agriculture Infrastructure and Development Cess” “on a small number of items”, saying there was an “immediate need to improve agricultural infrastructure”. This cess “will ensure enhanced remuneration for our farmers”, she said.

Agriculture is the only sector that has clocked positive growth despite the pandemic, growing 3.4% both in quarter 1 and quarter 2 of 2020-21, and cushioning the economy. In contrast, India’s overall economy shrank 24% and 7.7% in the two respective quarters.

Directionally, the budget appeared to continue a focus on farm modernisation through funding of an Agriculture Infrastructure Fund announced by the Modi government last year as part of the first Aatmanirbhar (self-reliance) stimulus tranche. The fund would also be used to modernise regulated markets known as agriculture produce marketing committees (APMC).

Sitharaman had announced the 1 lakh crore fund, for which the budget has levied the new cess, to offer medium-to-long term debt financing for investment in farm projects.

“The budget announcement for the agriculture sector (has) maintained the reform momentum but lacked coverage of wider issues of the sector. Announcements such as extension of farm credit provision to farmers, commodity expansion to Operation Green and extension of the agriculture infrastructure fund to APMC did hit the target,” said Ajay Kakra, leader of food and agriculture at PwC India.

The agriculture ministry has got a 5.63% budget allocation raise, standing at 131,531 crore for 2021-22. Half of it would be spent on the flagship PM-KISAN, a cash transfer scheme for cultivators, for which nearly 65,000 crore has been set aside. For the 2020-21 fiscal, the ministry’s revised budget is estimated to be 124,519 crore, according to the budget documents.

Some economists argued the total allocation was dismal, given the potential of the sector at beating back the pandemic. “The resolve of doubling farmers income again showed a lack of allocations and the required policy shifts,” said Sudhir Panwar, a former member of the erstwhile UP Planning Commission.

To benefit domestic growers, the budget raised customs duty on cotton from zero to 10% and on raw silk and silk yarn from 10% to 15%. The government would be withdrawing end-use based concession on denatured ethyl alcohol and rates were being uniformly calibrated to 15% on items like maize bran, rice bran oil cake, and animal feed additives, the budget stated.

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