Neglect of agriculture R&D in budget risks India’s food security and growth
Relevance: GS Paper III
Why in News?
The budget neglects the farm sector by prioritizing welfare over research.
More About the News:
- The recent budget has raised concerns over the prioritization of welfare measures over critical investments in agricultural research and development (agri-R&D), which could have significant implications for India's food security and long-term growth.
Economic Growth vs. Agricultural Decline:
- In the fiscal year 2023-24, the Indian economy achieved an overall GDP growth rate of 8.2%, with projections indicating it will likely stay above 7% in FY25. Despite this positive outlook, the agriculture sector saw a decline in growth from 4.7% in FY23 to 1.4% in FY24.
Given these circumstances, one might have anticipated the budget to provide a significant boost to the agriculture sector. The Finance Minister has outlined a roadmap for achieving Viksit Bharat @2047, identifying nine priority areas.
- With agriculture topping the list, there were high expectations for a substantial allocation aimed at improving productivity and enhancing climate resilience, particularly through agricultural research and development (agri-R&D).
Budget Allocation and Agri-R&D:
- Studies show that investing in agri-R&D yields significant returns, with marginal returns estimated to be over tenfold, translating to a potential Rs 10,000 crore increase in agri-GDP for every additional Rs 1,000 crore invested. Such investments could have accelerated growth in the agriculture sector.
- However, the budget allocation falls short of these expectations. The Department of Agricultural Research and Education (DARE) has received Rs 99.4 billion, marking a marginal increase of just 0.7% from Rs 98.8 billion in FY24 (Revised Estimate).
- This allocation is well below anticipated levels and represents a real-term reduction. Our research indicates that agriculture R&D expenditure reached Rs 160 billion in 2020-21, predominantly funded by the public sector (89%) with a smaller contribution from the private sector (11%).
- While these figures provide an overview of the scale, it's crucial to assess this spending relative to agriculture's Gross Domestic Product (Agri-GDP), known as Agriculture Research Intensity (ARI).
- ARI peaked at 0.75% in 2008-09 and has since declined to 0.43% in 2022-23, with further reduction expected in FY25 due to decreased allocations in real terms.
- This trend is concerning for food security and combating food inflation. The vision of Viksit Bharat@2047 risks being unrealized if the agrarian-rural economy is neglected.
- Nearly two-thirds of India's population resides in rural areas, with agriculture employing the largest share of the workforce (45.8% in 2022-23).
- In the latest budget, Rs 1.52 trillion has been allocated for agriculture and allied sectors.
- The Ministry of Agriculture and Farmers’ Welfare received Rs 1.22 trillion (Budget Estimate), reflecting a modest 5% increase from Rs 1.16 trillion (Revised Estimate) in FY24, which only compensates for inflation.
- Conversely, the Ministry of Fisheries, Animal Husbandry and Dairying saw a more substantial 27% increase, rising from Rs 56 billion (Revised Estimate) in FY24 to Rs 71 billion (Budget Estimate), signaling positive growth in this sector.
Welfare and Subsidy Focus:
- Much of the assistance provided to the agriculture-food-rural sector focuses on welfare measures and subsidies.
- Key components include food and fertiliser subsidies, as well as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
- Although these initiatives are not directly under the agriculture ministry, they benefit the agri-food-rural sector by supporting either farmers or consumers.
- The Agriculture Ministry itself contributes significant income support through programs such as PM-KISAN, credit subsidies, and PM-Fasal Bima Yojana.
- Together, these welfare and subsidy measures are projected to total Rs 5.52 trillion for FY25, slightly lower than the revised estimate of Rs 5.8 trillion for FY24.
- This support constitutes 11.5% of the overall budget amounting to Rs 48 trillion and a substantial 21.4% of the central government’s net tax revenue for FY25.
Food Subsidy and Political Considerations:
- The food subsidy allocation stands at Rs 2.05 trillion for the current fiscal year, down from Rs 2.12 trillion in FY24. Despite this reduction, the subsidy primarily benefits consumers rather than farmers.
- The decision to provide free rations to over 800 million people under the PM-Garib Kalyan Yojana may be politically sound.
- However, there are ongoing questions regarding the necessity of sustaining such extensive support for such a large population.
- This discussion gains significance following the Finance Minister's statement highlighting that around 250 million people have been lifted out of multi-dimensional poverty over the course of the Modi government's tenure.
Policy Reorientation and Sustainable Practices:
- The Government of India has acknowledged such concerns in the Economic Survey 2023-24 by recognizing the necessity to realign agricultural policies that have been conflicting, neglecting farmers' interests, and unintentionally harming natural resources.
- While these policies have increased agricultural productivity, they have also led to soil fertility decline, groundwater depletion, heightened emissions of nitrous oxide and methane, and nutrient deficiencies in crops.
- Additionally, they have contributed to public health issues by promoting diets rich in sugar and carbohydrates rather than fiber and protein.
Conclusion:
There is an urgent need to transition agriculture into a growth engine by adopting farming practices that benefit both farmers and the environment. Effective policy making, including the reorientation of subsidies, can foster higher value addition in agriculture, enhance farmers' incomes, and create opportunities for food processing and exports.
