A Balancing act

Amit Kapoor AND Chirag Yadav -

The Indian Budget is finally out and to put it simply, Arun Jaitley did not disappoint. In fact, a majority of it was along expected lines. Most importantly, as promised, the government managed to do a commendable job of balancing economic populism with prudent economics.

However, as is always the case, the good did come with a tinge of bad.

It was a no-brainer that the Budget would focus on the agricultural sector after BJP’s electoral performance in rural Gujarat.

Jaitley went a step further and, in a major departure from the past, began his Budget speech with the government’s plan for the farming community.

He unveiled a litany of measures in line with the government’s aim of doubling farmer incomes by 2022.

First, the Budget allowed for setting the minimum support price (MSP) at 1.5 times the production cost for kharif crops. Even though this support to farmers will help increase their incomes, there are two questions that need to be asked. Will the effect of this jump in MSP be inflationary? Also, will it take away the incentive to reduce production costs? The answer to both of these questions is probably in the affirmative.

Only time will tell if the move has any such negative externalities for the economy, but the government should be prepared with commensurate remedies to tackle the eventuality.

The second significant move on the agricultural front has been a push to boost agri-business activities across the country and improve agricultural markets. Allocation has been doubled for enhancing food processing and specialised agro-processing networks from Rs 700 crores to Rs 1,400 crores. The government has also decided to follow a cluster-based approach for stimulating agricultural production.

Further, in a bid to formalise agricultural markets, the 470 Agriculture Produce Market Committee (APMC) promoted markets would be connected to the e-nam market platform and over 22,000 rural agricultural markets would also be developed.

These are positive moves to remove the middle man and ensure farmers receive the bulk of the prices paid by the consumer.

However, the e-nam platform is still in its formative stage and its performance has not been adequately tested. A bulk of the sale of agricultural products is still done through commission agents and it is doubtful that the practice will be done away with any time soon. — IANS