the Union budget for 2007-08 is big on illusions, small on vision. Despite the hype about its tilt towards the agriculture sector, the budget has failed to put together a package to bail out the ailing sector. Also, despite being the first budget of the 11th Five-Year Plan, it has failed to give an overall direction for the plan period.
The state of agriculture can be gauged from the available estimates while the economy grew at 9.2 per cent in the 2006-07 fiscal, agriculture and allied activities grew at 2.7 per cent. The poor performance of the sector holds good for the entire 10th plan period (see table Stunted growth). But despite the hype and the admission that agriculture has received far less than its due, especially in comparison to the corporate sector, the budget has failed to address the palpable crisis. The share of agriculture and allied activities in budgetary allocation has declined from 7.8 per cent in 2006-07 to a projected 7.5 per cent in 2007-08 (see table Patchy record). As a proportion of gdp, agriculture's share has been declining--down from 1.5 per cent in 2000-03 to 1.26 per cent in 2007-08. This issue has not been addressed. In absolute terms, however, the allocation for agriculture and rural development has gone up to Rs 50,122 crore, an increase of 25 per cent, over and above the fertiliser subsidy.
"Due to the small expenditure on agriculture in the last decade, the sector has been crippled. The budget does not recognise the severity of the situation," says Praveen Jha of the Centre for Economic Studies and Planning, Jawaharlal Nehru University, Delhi.
It needs to be noted, however, that allocations for seven flagship rural programmes have been hiked. The budget for the Bharat Nirman programme has gone up by 31.6 per cent. After three months of feuding between the Union ministries of finance and rural development, 130 more districts have been brought under the National Rural Employment Guarantee Act. Similarly, the allocation for the Backward Region Grant Fund has been hiked by 8 per cent.
But apart from two schemes, the budget's 18-point plan for agriculture is old hat. The new schemes are the Aam Aadmi Bima Yojana, an insurance scheme for landless labourers, and a groundwater recharge plan, which is part of a larger focus on water management. There are some other proposals for expansion of credit and extension programmes, and proposed changes in the fertiliser subsidy regime.
The centrepiece of the budget's water strategy is the allocation of Rs 1,800 crore to dig 7 million wells for groundwater recharge. The government proposes to fully subsidise marginal farmers to dig wells and give a 50 per cent subsidy to other farmers. But though the finance minister has raised the allocation for the Accelerated Irrigation Benefit Programme from Rs 7,121 crore to Rs 11,000 crore to extend irrigation facilities in rainfed areas, other budgetary provisions take the sheen off this hike. First, the government has made a provision of only Rs 100 crore for the new Rain fed Area Development Programme, under which it formed the National Rain fed Areas Authority last year. According to the government's own assessment it needs a minimum of Rs 10,000 crore every year for the next 15 years for development of rainfed areas, which constitute 60 per cent of India's cultivable areas. "The sum is paltry and only has a symbolic value," says Mohammad Salim, deputy leader of Communist Party of India (Marxist) in the Lok Sabha, a key ally of the United Progressive Alliance government. Moreover, it failed to table a status report on 35 central irrigation projects to be completed during 2006-07 or the progress on irrigating 900,000 additional hectares of land.
The budget also has some avoidable accounting tricks. For example, in relation to a scheme for the restoration of water bodies the government started in 2005, it has tried to create the impression that it has made a financial commitment, though, in fact, the World Bank is funding states to run the programme, with only Tamil Nadu having signed up to date.
Rounding off the water-related projects, the government has also promised to set up pilot projects on water harvesting in 32 agricultural universities.
Apart from the new insurance scheme, the government also proposes to expand farm credit from Rs 190,000 to Rs 225,000 crore. In the absence of any radical plan for revitalising the agricultural sector, it also proposes to extend the agriculture extension programme of the 1960s by raising the allocation for the Agriculture Technology Management Agency from Rs 50 crore to Rs 230 crore and expanding its operations from 262 districts to 300. The budget also promises a pilot project for direct delivery of subsidies to farmers. It is symptomatic of the overall strategy, or lack of it, that the government is yet to formulate a response to the recommendations of the National Commission on Farmers.
Observers say this budget has squandered the opportunity to correct the mistakes of the 10th Plan and formulate realistic ameliorative targets for the 11th Plan. During the 10th plan period (2002-07), the Indian economy had an average growth rate of 8.6 per cent, meeting the government's target, but it failed miserably in meeting the agricultural growth target of 4 per cent. Agriculture grew at only 2.3 per cent.
The finance minister has set a target of 10 per cent overall growth rate over the 11th plan period by projecting an ambitious 4 per cent growth in the agriculture sector with faster employment generation, alongside reduction of regional imbalances and greater access to basic physical infrastructure, including health and education. The Economic Survey 2006-07 has stated that for achieving 4 per cent growth, initiatives for the efficient use of resources and conservation of soil, water and ecology on a sustainable basis needs to be taken up. There is also a genuflection to land reforms. But something seems to have been lost in the translation of diagnosis into policy.
There are more fundamental problems. Prime minister Manmohan Singh has admitted on a number of occasions that growth has not been inclusive. On the employment front, while the 10th Plan target was to create 50 million jobs, only 47 million was created according data from the 61st round of the National Sample Survey Organisation's survey. The realisation that growth was leaving large sections behind made 'inclusive growth' the buzzword before the budget was tabled, fuelling expectation that the government would offer a radical reform package for rural areas.
The Economic Survey 2006-07 says that with the declining share of agriculture in gdp, the scope of absorbing a substantial quantum of additional labour in agriculture appears limited. "Where are the jobs going to come if we continue to neglect the agriculture sector?" asks Amitabh Beher, executive director of the Centre for Budget and Governance Accountability, a Delhi-based advocacy group.
Like him, others are also questioning the wisdom of putting out a bits-and-pieces budget without a holistic, coherent policy framework.
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