Budget 2020: Bold reform measures missing; more questions than answers

With rural consumption growth sliding, the 2020-21 Union Budget was expected to take bold measures to put money in the hands of the rural folk. But Finance Minister Nirmala Sitharaman failed to announce any big jump in the allocation for two big flagship schemes —PM-KISAN and MGNREGA — that have the potential to boost rural incomes. While she announced a host of measures to create storage infrastructure in rural India, all of them appear to have long gestation periods.

On measures for the rationalisation of fertiliser and food subsidy too, the Budget failed to lay down a clear road map. The cooperative sector, however, got a boost as it will now be eligible for tax concessions on par with the reduced rates applicable to corporates, which should provide some leeway to farmer-centric cooperatives such as Amul, apart from the host of sugar cooperatives.

The flagship scheme for the rural sector, MGNREGA, saw a close to 13 per cent drop in allocation for 2020-21, compared to the Revised Estimates for 2019-20, which had been increased by almost Rs 11,000 crore compared to BE of 2018-19. PM-KISAN’s allocation has been retained at Rs 75,000 crore in 2020-21. Under this, farmers are eligible for Rs 2,000 in income support in three equal installments. In 2019-20, the Budget documents showed that of the allocated Rs 75,000 crore, just around Rs 54,370 crore was spent as per the revised estimate. In 2018-19, when the scheme was launched, a meagre Rs 1,241 crore of the allocated Rs 20,000 crore, could be spent.  


The low spends in PM-KISAN in the first two years could be due to the drop in the enrollment of farmers over that period. So far, according to the PM-KISAN website, around 95 million farmers have enrolled for the scheme against an estimate of 145 million based on the 2015-16 agriculture census. The farm credit target for 2020-21 was fixed at Rs 15 trillion, which is more than the Rs 12 trillion allocated in 2019-20.

To subsidise the intervention subvention on short-term farm credit, the Budget allocates Rs 21,175 crore for 2020-21, which is 18.54 per cent more than the Revised Estimate of 2019-20.

This comes barely months after an internal working group report from the country’s apex bank, the Reserve Bank of India (RBI), showed that much of the subsidised farm credit goes to ineligible farmers and in some states, credit disbursal to the farm sector was higher than their agricultural gross domestic (GDP) product.

Allocations for the three big schemes for building rural infrastructure — that is PM-Awas Yojana (Grameen), PM-Gram Sadak Yojana and Ajeevika Mission — were maintained at the 2019-20 levels of Rs 19,000 crore for the first two and Rs 9,500 crore for the third.

The Budget allocated a mere Rs 500 crore for establishing 10,000 farmer-producer organisations (FPOs). Linking adoption of Model Acts on Farm Reforms to 15th Finance Commission could encourage states to adopt them as and when they are announced.


Sitharaman announced the expansion of the PM-KUSUM scheme to help 2 million farmers in setting up standalone solar pumps and help another 1.5 million farmers solarise their grid-connected pump sets. However, the Budget allocated for it was just around Rs 1,000 crore. The estimated outlay for the scheme was Rs 1.4 trillion when it launched in 2018-19.

For irrigation-related programmes too, the Budget allocation was far from satisfactory. The flagship Pradhan Mantri Krishi Sinchayee Yojana received an allocation of Rs 5,126 crore in the 2020-21 Budget compared to Rs 4,025 crore in the  2019-20 (RE), an increase of 27 per cent. Of this, the government has allocated Rs 200 crore to the Atal Bhujal Yojana, while Rs 1,050 crore was allocated to Har Khet Ko Pani under the Pradhan Mantri Krishi Sinchayee Yojana scheme.

“Due to the increasing gap between the ninput cost and the market price of commodities, farmers were expecting an increase in their incomes through a lowering of interest rates on agriculture credit and an increase in the payout under PM-KISAN (from Rs 6,000) but nothing came their way. The budgetary allocation for agriculture and allied sectors is almost similar to the 2019-20 BE, but subsidy allocated on fertiliser has been reduced by Rs 8,000 crore which could impact urea prices,” Sudhir Panwar, former member of the Planning Commission of Uttar Pradesh told Business Standard.

He said though the finance minister enumerated 16 action points for farmers, in the absence of any budgetary provision, these are mere rhetoric. “Finally, this Budget also did not answer a big question — how the is government planning to double the farmers’ income in 2022 without any public investment,” Panwar said.

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