Budget 2016-17: Farmers Have Got Their Due Share

This short piece on budget can hardly claim to be a comprehensive or even partial overview of all the announcements made. The intention is to briefly focus on a few aspects that relate to my own research in the past decade, qualitatively, with no numbers to support: agricultural and rural development, tobacco control and public investment.

Like many commentators have said, this is one of the most ‘inclusive’ budget in the recent years and definitely the unique superlative for the current Modi government. Some of the criticism that have opined that there is too much focus on rural development and agriculture is simply not true.

Broadly, there have been two different strands of criticism.First, the allegation mainly from the opposition, that this is a populist budget keeping in mind the general elections of 2019, recent defeats of NDA in Bihar, etc., or other state elections that are imminent. Second, more neutral commentators feel that the initiatives announced for these sectors are possibly too late and too little - for example doubling farmers income by 2022 is not a big deal at all.  

The first one above is easy to brush aside and perhaps a far too common observation for a student of political science or economy. Whenever any government attempts a good initiative, with little room to criticize, the opposition fears being branded anti-populist. Hence it accuses the intention of the government, suggesting that the initiative is sort of an investment to earn votes in future.

In almost all cases, such accusations are true, but they cannot be used to suggest that these initiatives are bad in themselves, because, the beauty of democracy lies in the fact the government at some point has understood the pulse of the people and cater to them even if merely to earn votes. Such a selfish attitude of the government can for sure result in improvement of public welfare. At the end of the day, they are elected by people, who should be taken care of, for the government to be re-elected.

Furthermore, in the current context, it is far-reaching to say that the government is merely eyeing a major election three years from now to announce major sops now. If anything, such an argument merely adds strength to the government.

The second one is pretty nuanced criticism, with can be given more weight.

First of all, it is too harsh to say that doubling of ‘real farmers’ income in six years is not a big deal. However, what is worrisome, is that a large part of the increased funding, which in itself could be argued as too little, is merely being allocated to rural development/other banks and/or for schemes/ideas with broad and not specific targets.

Examples are ‘balanced’ use of fertilizers, expanding organic farming, more crop per drop of water, crop insurance premium subsidy (which is a great idea, but has been contentious in the US Farm Bill as it may lead to moral hazards). Nevertheless, it is too much to expect all these details in the speech of Finance Minister; so, to be awaited eagerly are the details of the funds allocation and schemes/ideas outlined in the area of rural development and agriculture.

Further, sweeping statements and policies on Genetically Modified (GM) crops (as made in the Economic Survey 2015-16) should be avoided as they involve food security of generations to come.

Outside rural development and agriculture, it is reasonably justified to say that the budget has very little to offer. However, rural and agro economy is still a major part of Indian economy and hence boosting rural demand will have multiplier effects on the whole economy. Furthermore, it infinitely pains every thinking person among us to see a farmer, who feeds everyone, commits suicide, for not being able to feed him and his family. We are all obliged to do something to the cause of farmers, not as charity, but merely as a token of gratitude and dutifulness. So, we should have no problem with the extensive focus on these two ‘pillars’ of economy.

It is disappointing to see very little effort taken towards tobacco control. A 10-15 percent rise in excise taxes in tobacco products other than bidi is far too little in this regard. There is no reason why bidis should not be taxed while cigarettes are taxed at substantially high rates. The policymakers should get out of the attitude of the fear of job losses and other economic adverse effects, due to tobacco control. Even the medium term economic gains arising from improved public health due to reduced tobacco consumption can be high enough to offset any potential losses in the short term. Further, the government could earmark the increased tobacco tax revenue to rehabilitate workers in the sector and absorb them into rest of the economy.

Public investment, including that for infrastructure, has not increased much. This is a cause of worry for all sectors of the economy and for PM’s flagship schemes such as Make in India. Perhaps the government aims at an efficient allocation of this investment with minimum leakages and corruption, in which case, there is some hope indeed.

If not making any overall judgement on the budget, we should at least applaud the initiatives taken towards agricultural and rural development. So, eagerly we Indians await, to see how these initiatives reach the farmers and rest of the economy in the years to come.