India’s agricultural production is not efficient. Despite cultivating a lot of land, the amount of grain produced is meagre. A significant portion of the population depends on this inefficient agricultural sector, which leads to poverty and environmental damage.
- Taking rice as an example, India’s yield per kilogram per hectare has increased from 688 in 1950-51 to 2809 in 2021-22.
- However, this yield is far below the global average, which is nearly double India’s yield.
- Even countries in Africa, known for their poor yields, are included in this global average.
- Despite the touted ‘Green Revolution’ over the past generation, India’s yield has not substantially improved to reach the global average.
Disproportionate Spending On Agriculture
- The Union government’s spending on agriculture surpasses its allocation for health, education, and several other social development sectors.
- Despite being a key area of Union budget expenses, agriculture is also a state subject, with collective spending by states likely exceeding that of the Union.
- The total estimated expenditure on agriculture by both Union and state governments is around Rs 7 Lakh Crore per year.
- Despite such high spending, crop yields remain poor and do not even match the global average.
- The underlying issue lies in the distribution of funds. Most of the spending does not focus on agriculture itself, such as research and strategies for future yield improvement.
- A large portion of the budget is used to maintain the status quo for farmers, as seen in the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan), which is essentially a basic income targeted at farmers.
- This raises the question: why not generalise this scheme instead of only targeting farmers?
- Non-farming individuals seeking equality could argue for a comparison of this return on investment with other sectors, like education.
The PM-Kisan Subsidy: An Inequitable And Ineffective Approach?
- The PM-Kisan programme primarily benefits land-owning farmers, escalating existing societal inequality.
- The question arises as to why landowners should receive PM-Kisan subsidies at the expense of landless laborers.
- Direct benefit transfer programmes like PM-Kisan are seen through the lens of agriculture but are actually social spending initiatives.
- These programs have inherent issues and have made little impact on addressing landless laborer’s concerns.
- Implementing a one-size-fits-all PM-Kisan-style solution across different states is inherently flawed and ineffective.
- This agricultural spending is even less beneficial than ‘freebie’ policies often criticized by fiscal conservatives.
Way Forward
- Subsidies that encourage existing farming practices provide no value.
- Centralisation of certain policy aspects, such as research, can be beneficial.
- Paying additional subsidies to wealthy farmers like those in Punjab, who already have high-yield land, is not valuable.
- India should aim to meet and exceed global average yields before considering such agricultural spending.
- A more effective approach would be for individual states to manage social policy aspects while the Union focuses on long-term solutions, such as research for improved crop yields.
Policy Proposals In The Budget Speech For Agriculture Sector
In her 2023-24 speech, the Finance Minister made the following proposals regarding agriculture:
- Digital Public Infrastructure: The project will be developed as an open-source, open-standard, and interoperable public good. This approach will facilitate inclusive and farmer-centric solutions by providing relevant information services for crop planning and health. It will also enhance accessibility to farm inputs, credit, and insurance, ultimately benefiting the agricultural community.
- Agriculture Accelerator Fund: The establishment of the Fund will serve as an incentive for young entrepreneurs in rural areas to venture into agri-startups. Its primary objective is to introduce state-of-the-art technology in order to enhance agricultural productivity and profitability.
- Agriculture Credit: The agriculture credit target will be increased to Rs 20 lakh crore with a focus on animal husbandry, dairy, and fisheries.
- PM Matsya Sampada Yojana: A new initiative, backed by an investment of Rs 6,000 crore, has been introduced to empower fishermen and fish vendors while enhancing the efficiency of the value chain.
- Storage: A comprehensive strategy will be implemented to establish decentralized storage facilities, enabling farmers to efficiently store their produce and achieve profitable prices by selling at the opportune moment.
- Cooperatives: Over the next five years, the government will actively support the establishment of versatile cooperative societies such as multipurpose, primary fishery, and dairy cooperatives in panchayats and villages that have yet to be covered.
Note: This editorial analysis is based on the article “Indian Agriculture has a problem. We farm too much for too little”, published on the Print, on 16 October, 2023. The Team GSpedia has also contributed supplementary information to this analysis.