According to a recent report by the Indian Council for Research on International Economic Relations (ICRIER), approximately 73% of India's agriculture budget is directed towards welfare schemes and subsidies. This amounts to a substantial US$ 54.34 billion (Rs. 4.55 trillion). The report, authored by Mr. Ashok Gulati and Ms. Purvi Thangraj, sheds light on the allocation trends within the agriculture sector and suggests a need for a strategic shift in spending to better address the challenges facing rural India.

Budget Allocation Overview

In the fiscal year 2024-25, the central government allocated a total of US$ 74.05 billion (Rs. 6.2 trillion) to the agriculture sector, which represents 13% of the overall national budget of US$ 575.66 billion (Rs. 48.2 trillion). Notably, over 50% of this budget is consumed by food and fertilizer subsidies, including significant programs such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Despite these allocations, the impact on rural incomes has been limited, with the average monthly income for a rural family falling below US$ 238.86 (Rs. 20,000).

Challenges and Criticisms

The report highlights that, while the budgetary allocations for welfare schemes are substantial, they have not effectively addressed the persistent issue of low rural incomes. This situation has broader implications for the economy, including:

Reduced Demand for Non-Agricultural Goods: Low rural incomes affect the purchasing power of rural households, thereby limiting demand for non-agricultural goods and constraining growth in the manufacturing sector.

Inefficiencies in Traditional Welfare Schemes: There is an increasing recognition that traditional welfare schemes may not be the most effective use of funds. Investment in agricultural research and development, irrigation, and skill development is suggested to yield better economic returns.

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Findings from the Household Consumption Survey

The Ministry of Statistics and Programme Implementation’s (MOSPI) National Sample Survey Office (NSSO) conducted a household consumption survey which revealed stark differences in expenditure between rural and urban individuals. In the fiscal year 2022-23, rural individuals spent an average of US$ 45.06 (Rs. 3,773) monthly, compared to US$ 77.14 (Rs. 6,459) for their urban counterparts. This disparity underscores the need for a more effective approach to increasing rural income levels.

Recommendations and Future Directions

The report advocates for a strategic reallocation of funds from subsidies towards developmental expenditures. Key recommendations include:

Investing in Climate-Smart Practices: Promoting techniques that enhance agricultural productivity while mitigating environmental impacts.

Enhancing Crop Yields: Implementing measures that improve the efficiency and output of agricultural activities.

Budget 2024 Initiatives

In response to these challenges, Union Minister for Finance and Corporate Affairs Ms. Nirmala Sitharaman proposed several measures in Budget 2024 to stimulate growth in the agriculture sector:

New High-Yield Variety Seeds: Introducing seeds that promise better yields and resilience.

Natural Farming Provisions: Encouraging sustainable farming practices.

Self-Sufficiency for Oil Seeds and Pulses: Aiming to reduce dependency on imports.

Digital Public Infrastructure: Developing digital tools to support farmers in their operations.

Conclusion

India’s agriculture sector faces complex challenges despite significant financial allocations towards welfare schemes and subsidies. The ICRIER report highlights the need for a shift in focus from traditional welfare schemes to strategic investments in agricultural development. By addressing issues of low rural incomes and enhancing agricultural productivity through targeted initiatives, India can strengthen its rural economy and improve overall economic growth.

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