Focus on non-farm sectors in rural areas

Growth in rural sector in general and agriculture in particular is slow in the recent past. Estimates indicate that a majority of the poor lives in rural India. As per official statistics, the total percentage of population living below poverty line is 25.7% in rural areas and 13.7% in the urban areas. Although there are no statistics on rural growth, advanced estimates of Central Statistical Organisation (CSO) show that agriculture will grow only at 2.1% in 2017-18 in spite of a good monsoon. Farmers distress is evident in widespread agitations of farmers.  

Their incomes are lower due to decline in output prices and increased cost of inputs like fertilisers and labour. The non-farm sector is now contributing about 2/3rd of rural economy and about 95% of rural economy is informal. Rural entrepreneurs are complaining about stagnant demand, higher cost of production, and lack of logistics, frequent power cuts and lack of skilled manpower.  They are also complaining of procedural hurdles and lack of understanding and complexity of shifting to GST from the existing tax system.  Although adverse impacts of demonetisation and GST faded away, there are no visible signs of positive impacts in rural areas except increase in bank deposits. 

In view of the forthcoming general elections, budget is an opportunity to provide big relief to distressed rural and farm sector to kick-start rural growth with more allocation of funds along with appropriate reforms and schemes. For the last three years, the Government of India is running many flagship programmes to help farmers and rural sector. The ongoing flagship programmes like Rastriya Krishi Vikas Yojana (RKVY) aim at increasing farmers’ incomes. Prime Minister Krishi Sinchayi Yojana (PMKSY) is aimed at increasing area under irrigation. 

Prime Minister Fasal Bhima Yojana(PMFBY) targets increased coverage of crop insurance  and e-National Agricultural Markets (NAM) for increasing market efficiency and Soil Health Card (SHC) Scheme to reduce costs and increase profits. Such schemes need to be given high priority with more funds along with proper adjustments based on the experience in last three years.  

Now, all the assets created under different schemes like RKVY are geo-tagged for better monitoring and identifying end-users. From this year onwards, fertilisers subsidy will also be linked to Aadhaar. It is also recommended that all land records as also soil health cards should be Aadhaar-linked for better monitoring and increased transparency in delivery of subsidies under schemes like investment subsidy of Rs 8,000 per acre in Telangana.  

Since 1980s, the engine of growth of rural economy has shifted from farm to non-farm sector and it is contributing to about 60% of the incomes in rural India. Rural construction sector absorbed 74% of the new jobs created in non-farm sectors in rural areas between 2004-05 and 2011-12. The government has to focus on rural housing and roads to continue this growth and to provide gainful employment for semi-skilled and unskilled labour. There is a need for skill-oriented job creation under MUDRA.   

The Dalwai Committee on doubling farm income has recommended that India has to invest about six lakh crore in warehouses, cold chains and market infrastructure to link farmers to markets. Given that public funding is limited, private sector needs to be encouraged to invest. Private sector contribution is only 2 per cent of annual investment in agriculture sector. If proper incentive structures exist, private sector can increase their share of rural investments through schemes like viability gap funding. 

The role of employment guarantee programme MGNREGA and the public distribution system (PDS) is noteworthy for social safety and also for removing poverty. Some studies pointed out that if MGNREGA and PDS function well in the rural areas, they lift incomes of the poor on average 12%, which is a significant amount.  MGNREGA should be linked to agriculture wherever possible. Under PDS, basket of commodities should also include nutria-rich cereals like millets to increase demand for dryland farmers produce. 

Problems of tenant farmers 
Tenants have to pay about 30% to 40% of the average sales value of production to landlords for leasing land in most of the villages. This is unbearable if the crop fails, as it happens once in every three years.  There is an increased distress and suicides among tenant farmers. Further, tenants are not eligible to avail of government schemes like subsidised seed, bank loan and subsidies on drip etc. There is a need for a clear policy on land-lease markets in line with the recent NITI Aayog report to reduce burden on the tenants, at the same time protecting the ownership rights of landowners. 

Income support 
In the recent past, input prices like fertilisers and labour are increased, but output prices like prices of wheat, pulses, onion and tomatoes are decreased, resulting in less profits to farmers. Similar situation was also observed in rural and khadi industries.   Hence, there is a need to focus on price or income support not only for agricultural sector but also to village and khadi industries. 

Price stabilization fund  
The prices of farm produce are more volatile now. There is an urgent need to increase funds allocation under Price Stabilization Scheme and also Market Assurance Scheme suggested by Dalwai Committee on doubling farmers’ incomes to reduce price risk of farmers. 

Big push to farm and rural sector
Overall, this budget needs to give extra helping hand to the farmers, village artisans and rural industries to increase and stabilise their incomes, so that their future is secured and medium term goal of doubling farmers’ income by 2022 will be achieved.  

By: A Amarender Reddy
(Writer is Director, National Institute of Agricultural Extension Management, MANAGE, Hyderabad)