Agro-Focused Strategy: The Budget Implications-2010-11


By

Amiya K. Mohapatra
Faculty of Economics
ICFAI Business School (IBS)
Jaipur

Surendra P Kothari
Faculty of Commerce
SS Jain Subodh Commerce and Arts College
Jaipur
 


Introduction: Every year when the union budget is tabled in the parliament, from Political leader to Public, from Economist to Financial analyst, start studying of the budget. It is nothing but "Samundra Manthan". The outcome of this critical analysis may be good or bad or a mixed blessing. Recent budget-2010-11has been presented amidst curiosity and caution.

The budget of the country is not just a financial statement, but much more than that.  Its scope is quite wide spread from poverty to growth, down to development, rest to rescue etc. It reflects the political manifesto of the ruling party and furthermore it shows the attitude, cleverness, wisdom & trick of the current government to deal the matter of regional and national importance. Budget has multi-faceted dimension through which it fosters economic growth and development. The budgetary allocations of resources to a great extent determine the sectoral growth and overall prosperity of the country.  In the present context, we have highlighted the importance assigned to the agriculture sector as being of national importance.

Agriculture: In India, agriculture is always considered the mainstay of the large number of people. It directly or indirectly contributes fairly to the livelihood of the rural masses as a whole. Besides, its contribution to the GDP itself signifies its national importance. The food price inflation in the recent year laid more emphasis on the agricultural development. The food price have increased manifold over the years making the food basket costlier and threatens the survival of the poor masses. To make it more complicated, expectation of high growth of agri-production in the previous year unable to find its own way to moderate the inflation. However the erratic nature of monsoon, flood, and draught conditions only added flavors to the despair.

In the budget-2010-11, a lot of importance has been given to the agriculture sector, being the source of rural life and create income, employment of the country and help in reduction of inequality, poverty & unemployment.

Spot Light: In the budget a four-pronged agro-strategy has been announced, for raising agricultural production. The need of the day is to focus on agri-development strategy. To accelerate it, the government's agro-focused strategy through budgetary allocation is resolved to promote inclusive growth, raising the rural income, sustaining food security, eco-friendly technique to fight with the adverse effect of climate change. 

A FOUR-PRONGED AGRO-STRATEGY:

(A) Enhancement of Agricultural Production: It envisages extending the second generation green revolution in the eastern region comprises Bihar, Chhattisgarh, Jharkhand, Eastern U.P., West Bengal and Orissa.  To achieve the above Rs. 400 crores are allocated and mention the active involvement of Gram Sabha and farming families to make it more grass-root all-inclusive. It is proposed to organize 60,000 'pulses and oil seed villages' soon.

As an added step, Rs. 300 crores is allocated as a part of Rashtriya Krishi Vikas Yojna to increase the farm productivity by targeting dry land farming.  Besides it, inclusive intervention for water harvesting, water shed management and soil health is needed. To make it more progressive, a fund of Rs. 200 crores announced for conservation of farming through climate resilient agriculture initiative by which water conservation and preservation of bio-diversity is possible.

(B) Reduction in Waste Produce: It is proposed to minimize the wastage in storage as well as in the operation in the existing food supply chain in the country. So there is a  greater need of competition and opening up of  retail trade by which the gap among firm get prices, wholesale price and retail price can come down to minimum. This leads to value addition to the farming segment. The crop purchased for buffer stock and PDS get wastage due to shortage of storage capacity and lack of standardized storage facility to reduce the damage or pilferage. It should work on PPP model. To facilitate better storage, the government has planned to promote cold storage in India.

(C) Rural Credit Support: The availability of credit to the rural sector has-been increased from Rs. 3, 25,000/- crores to 3, 75,000/- crores. Under the debt waiver & debt relief scheme for farmers, the loan repayment period has been extended by six month up to June 30, 2010. As an incentive to those farmers, who repay the short-term crop loan in time, will get 2% interest subvention instead of 1%. So the effective rate of interest of such farmers will be 5% per annum.

(D) Infrastructure for food-processing sector: The budget signifies the importance of agriculture sector by providing state of the art infrastructure to the food processing sector. Ten Mega food parks have already been set up and government proposed to set up five more such projects.  As a farm to market initiative, external commercial borrowing will be made available for cold storage or cold room facility which includes farm level pre-cooling, for preservation of agriculture & allied products, marine products and meats.

Looking Ahead. The government has announced a new fertilizer subsidy policy in this budget.  This balanced fertilization which is meant for more direct transfer of subsidies to the farmers. Rural credit played a significant role in agricultural development. RRB which steers the growth process now gets extra capitalized so that rural economy will spur the growth. To streamline the growth process, a series of tax relief that includes confessional customs etc. are provided to set up cold storage. Service tax exemption may help food processing industry to grow faster .In this way the government targeted agriculture development in the budget.

References:

  • Speech of Hon'ble Finance Minister
  • Union Budget Report 2010-11
  • Reports from News Channels
  • Hindustan Times
  • Financial Express,
  • Business Standards
  • Economics Times.
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Amiya K. Mohapatra
Faculty of Economics
ICFAI Business School (IBS)
Jaipur

Surendra P Kothari
Faculty of Commerce
SS Jain Subodh Commerce and Arts College
Jaipur
 

Source: E-mail March 19, 2010

          

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