Union Budget may provide impetus to agri start-ups and farm research - Hindustan Times
close_game
close_game

Union Budget may provide impetus to agri start-ups and farm research

Jan 27, 2022 09:02 PM IST

The upcoming Budget, to be presented by Union finance minister Nirmala Sitharaman, is likely to stress “technology diffusion” to improve farm incomes, for which start-ups are critical.

New Delhi: The Union Budget is expected to announce measures to boost agri start-ups which are fast becoming the backbone of farm value chains, provide higher allocations for farm research, and launch performance-linked incentive (PLI) schemes in the food sector which were announced as part of the Atmanirbhar Bharat (self-reliant India ) programme, officials with knowledge of the developments said.

Finance minister Nirmala Sitharaman. (Sanjeev Verma/HT PHOTO)
Finance minister Nirmala Sitharaman. (Sanjeev Verma/HT PHOTO)

Also Read | Union Budget may tweak customs duties, ensure ease of import compliance

Hindustan Times - your fastest source for breaking news! Read now.

The farm sector is crucial to the Indian economy because it employs the most people and spurs overall demand. It assumes greater significance this year as it was one of the few to record positive growth during the pandemic. Agriculture has chugged on unharmed by successive waves of coronavirus infections. In 2020-21, when India faced a rare recession due to the pandemic, agriculture was the only sector to post positive growth of about 3.1%. This helped keep farm incomes steady. Higher fertiliser subsidies, increased by 14,000 crore during the summer-sown season, kept farm growth up.

The Budget is likely to stress “technology diffusion” to improve farm incomes, for which start-ups are critical, the officials cited above said.

In December 2021, the government had to roll back a set of reform-oriented legislation in the farm sector, which had brought out tens of thousands of farmers in protests across states, such as Punjab, Haryana and Uttar Pradesh.

“The likely focus on the agri tech space in the upcoming Budget is really a continuation of the previous year’s budget’s approach. This has also been at the heart of campaigns such as Start-up India and Stand-up India,” one of the officials cited above said on condition of anonymity.

The creation of the 1 lakh-crore Agri Infrastructure Fund with a focus on post-harvest food management facilities has already accelerated the creation of digital firms in the farm sector.

The Budget is likely to ease norms and address problems around compliance issues highlighted by entrepreneurs during pre-budget consultations with start-ups, a second official said.

India currently has nearly 1,000 agri startups across agricultural value chains. According to data from Agfunder, the country’s agri startups saw an increase in funding from $619 million in the first half of 2020 to $2 billion in second half of 2021. This compared with China’s $4.5 billion in agri-tech funding for the same period.

Most start-ups are involved in providing agri tech services based on digital tools such as artificial intelligence, machine learning, and the internet of things to manage farm operations, automation of supply chains, and increase efficiency of resources.

The Budget is also likely to see enhanced allocation for agricultural research and development, which, at 8,514 crore in FY22 accounted for 0.3% of the total allocation for agriculture. There are proposals to increase allocation for R&D by another 0.5%, which will be a big boost, the first official said.

Research by economist Ashok Gulati and his colleagues at the think tank Indian Council for Research on International Economic Relations (ICRIER) have shown that every 10 lakh invested in farm research pulled 328 people out of poverty, while only 26 people were helped by the same amount spent on subsidies.

India continues to be a laggard in farm research funding. According to OECD data, China and the US spend about 0.8% and 1.2% of their total budgets on agricultural research.

“Higher allocation towards R&D would essentially boost sustainable production and reduce import reliance on key items such as oilseeds,” said Avinash Agrawal, an analyst with Comtrade.

The Budget’s support to agriculture is also likely to see a higher target for farm credit disbursed by scheduled banks, and a boost to the Centre’s PLI scheme for the food processing sector. The PLI scheme offers eligible firms and sectors a 4-10% incentive on incremental sales over the base year of 2019-20 for a five-year period. When a firm achieves a given sales target, it qualifies for the incentive.

The allocation for the PLI schemes in the food processing sector stood at 10,900 crore for FY22, and is likely to be enhanced, the officials said, but declined to put a figure to it. The food processing sector is critical because it contributes around 13% to India’s GDP.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away! -Login Now!
SHARE THIS ARTICLE ON
Share this article
  • ABOUT THE AUTHOR
    author-default-90x90

    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On