Interim budget gets farm tilt right

The interim budget has a definite positive tilt towards farm related activity which can be seen in both the announcements made as well as the provisions. The two main announcements which will have a good effect are: interest rate subvention for farmers, which have been increased from 2% to 5% provided loans are serviced on time; and the cash transfer of ~6,000 per annum for marginal farmers.

There was talk on providing relief in the form of loan waivers which has been eschewed by the government. However, it has increased the outlay on the subvention scheme which, in a way, is better as it encourages farmers to service their debt, which is good for banks. It does not vitiate the credit culture as waivers do. Here, the farmer gets into the habit of repaying the loans knowing well that the cost comes down further. There is an additional ~3,000 crore made here. This will also be positive for banks which will be more willing to lend to farmers knowing that the servicing ability improves with the cost going down. The cash transfer spoken of in the budget is the most rudimentary form of basic income being given as it has targeted the marginal farmer (defined as one who has less than 2 hectares). This is targeted and has the benefit of not being universal which requires more funding. Now, it can be argued if this amount is adequate as ~6,000 per annum will not be adequate to run a household and more likely to be a supplement. Given the coverage of 12 core families, the outlay of ~75,000 cr is large. The challenge here will be in implementation where the right set of people has to be identified and transfers ensured. These people should also be having access to a bank account .

The Budget has otherwise focused on maintaining or increasing the allocations on existing schemes. The agriinsurance programme has been increased by ~1,000 cr and this is where it could have been aggressive. Farm distress is caused by lower output due to rains and in case all crop loans are covered under the PMFBY then there would be an automatic cover for them and the issue of farm-distress and loan waivers would not arise. This is one area which needs to be looked into in the medium term; insurance is the right response to monsoon failure. NREGA has also witnessed higher allocation which is a positive though work needs to be put to ensure that the coverage increases and beneficiaries better targeted. The commitment shown to this scheme by successive governments bears testimony to its effectiveness; it has helped farmers especially during the two seasons when they do not find work. An issue which could have been tackled is the provision of minimum support prices. Maybe this is more in the domain of states as the markets technically come under their purview. The focus has hence been more on direct benefits rather than creating structures to ensure that the market can be better used by farmers to deliver results. Here even the eNAM has not been focused on, which comes as a surprise.