Kurukshetra Union Budget 2019-20, Rural Development and the Interim Budget 2019.
In terms of budgetary allocation for agriculture, there has been an increase of 80% in 2019-20 over 2018-19. Over the years, several new challenges have emerged before the agricultural sector especially, declining factor productivity, an increase in the cost of cultivation and a decrease in the net returns per unit area.
- The agriculture sector in India goes through cyclical Movement in terms of its growth. The average annual growth rate in real terms in agriculture and allied sector has remained at around 2.88% during 2014-15 to 2018-19.
- Study of Gross capital formation in agriculture and allied sectors shows that the share of public investment in agriculture has increased while the share of private investment has declined during 2014-15 to 2016-17.
For a safe and food secure future the agriculture landscape has to undergo a tremendous transformation and shift from the philosophy of 'Green revolution led' productivity to 'Green methods led' sustainability in Indian agriculture.
- Increasing sustainability in agriculture - In the revised guidelines of Paramparagat Krishi Vikas Yojana during the year 2018, various organic farming models like natural farming, Vedic farming, Homa farming, zero budget natural farming have been included wherein flexibility to adopt any model of organic farming lies on the states depending on the farmer's choice.
- Adopting appropriate Technologies for smallholder farm - The custom hiring centers are set up to promote the use of high tech machinery for the mechanization of small and marginal farmer holdings especially in difficult terrains.
- Animal husbandry and Dairying - India ranks first in milk production, accounting for 20% of world production. But there exists a wide inter-state variability in milk production. All India per capita availability of milk is 375 grams per day it varies between 71 grams per day in Assam to 1120 grams per day in Punjab.
- Rashtriya Kamdhenu Aayog has been proposed to set up to upscale sustainable genetic up-gradation of cow resources and to enhance production and productivity of cows.
- Fisheries sector - India is the second-largest fish producer in the world with a total production of 13.7 million metric tonnes in 2018-19 of which 65% is from inland sector. Almost 50% of Inland fish production is from culture fisheries. Fish and fish product exports emerged as the largest group in agricultural exports.
- A separate Department of fisheries was created in February 2019.
- The government has merged all the schemes of the fisheries sector into an umbrella scheme of Blue Revolution: Integrated Development and Management of Fisheries.
- Fisheries and aquaculture infrastructure development fund has been approved.
- Pradhan Mantri Matsya Sampada Yojana - to stablish a robust fisheries management framework by addressing critical gaps in the value chain.
- MSP and food grains procurement - MSP is announced to give guaranteed prices and assured market to the farmers and protects them from price fluctuations.
- Initiative like SFURTI & ASPIRE have been launched to give a boost to the traditional industries and improve the technology of such Industries.
- Formation of 10,000 new Farmer Producer Organisations (FPOs) to ensure economies of sale for farmers over the next 5 years.
- Agricultural credit - If credit is not available to purchase seeds at the time of sowing or if lack of credit delays the administering of fertilizers it can severely impact agricultural productivity.
- Interest subvention of 2% per annum to lending institutions on use of their own resources has been offered.
- An additional interest subvention of 3% per annum to such of those farmers repaying in time.
To attain sustainable development goals (SDGs) of ending poverty and bringing in inclusive growth, activities related to agriculture need to be closely integrated with the SDG targets. Corporate Investment in Agriculture India is the world's largest producer of pulses and Spices and the second-largest producer of Wheat and rice following China. There is a need for more investment in food processing, building warehouses, facilitating the movement of seeds to the market by the corporate highlighting the fact that agriculture is the backbone of the rural economy. The current private corporate investment in agriculture as a percentage of the total annual investment in agriculture is about 2%. Therefore, agriculture in India is highly reliant on the government. The improvement and triumph of this sector are unimaginable without the vital corporate private investments.
Significance of the Private sector and Agricultural R&D
- In recent years despite the continuously growing investments in R&D by the private sector, documentation of agriculture and expenditure data is very cumbersome and remain inadequate.
- There has been excessive controls and regulations in the agriculture sector.
- Agri-biotechnology has been the fastest-growing sector attracting huge resources for R&D through small and medium enterprises.
- Most of the research carried out by the private sector enterprises focus on the provision of input technologies such as machinery, chemicals, seed and food processing.
- The private sector is becoming increasingly active in commerce such as hybrids of maize, pearl millet, sorghum and vegetables, tissue culture, transgenic etc.
- To give incentives to the private corporate sector with its presence growing rapidly in poor crops and regions there is an increasing need to provide enabling policy and the environment with effective IPRs and biosafety arrangements.
- There is a need for relaxing rules for companies investing in contract farming, transport marketing, warehouses and food processing.
Case studies of a Few Corporates
- In 2006 Pepsico provided direct seeding machines to farmers for paddy sowing which helped reduce water consumption by 30% and also cut down Greenhouse gas emissions by 75%.
- Mahindra Agri Solutions Limited (MASL) inaugurated a grape packhouse facility in Nashik in 2019. It can pack 90 tonnes of grapes per day and has been also certified by international bodies. The successful grape revolution in the fields of Nashik, Sangli, and Baramati has been credited to MASL as it has convinced farmers to switch to grape cultivation which provides more than income.
- ITC Limited has also made its contributions through new varieties of seeds, farm inputs, and paddy transplanters which have been successful in reducing the crop cycle and also decrease the cost of cultivation.
- Reasons for which companies would like to invest in Australian agriculture are secure land ownership, export-oriented production, established infrastructure, safe high-quality food products, rapid Technology adoption, and availability of skilled labour and management.
- Agricultural corporations are becoming more prevalent in Japanese agriculture to help aging farming households to continue cultivating their fields, educate next-generation farmers and new entrants to farming and improve sound business decision making.
Government Efforts to Encourage Corporate Investments
- There have been efforts since 2012 to encourage farmer producer companies which are hybrid between cooperative societies and Private Limited companies registered under the companies act.
- They may be given priority for cultivation on pooled land and for allied infrastructure development to harvest the desired Economics of scale in operations.
- Government has recently relaxed the land ceiling limit for oil palm cultivation under National Mission on oilseeds and oil palm (NMOOP) to attract corporate bodies to oil palm production and derive maximum benefit of 100?I.
- The Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act 2017 provides the opportunity for the private sector to set up private markets, internet marketing channels, online market platform, etc.
- Exemption to FPCs under Income Tax Act has offered and it an exemption to all FPCs with the turnover of up to Rs100 crore per annum by considering their incomes and agricultural income.
- There is 100% foreign direct investment in food retail to encourage foreign investments in establishing appropriate post-production infrastructure to strengthen the food supply chains.
- Ministry of Agriculture and farmers welfare in collaboration with startup India launched an Agriculture Grand Challenge.
- There is a budget proposal (2019) by the government to form 10,000 farmer producer organizations as FPOs in the next five years.
An FPC set up in 2011, has expanded tremendously to become the largest FPC in the country with a membership of 8000 farmers and a turnover of rupees 300 crores. It has become India's largest grape exporting company and it may well be on course to revolutionize the fruits and vegetable business in favor of growers just as Amul did for milk producers of Gujarat. Taking up the example of the Silk industry, it can be observed that in countries like China and Japan, while silkworm rearing is a small farmer's job the process ahead involving the seed production, reeling and weaving are executed mostly by corporates which bring in technology, efficiency, quality and economies of scale in operations. It is advised that the corporate sector in India be encouraged and incentivized to participate in the Silk industry. Agriculture growth is dependent on investments from the private sector but first, large investments in public goods like roads, power, education, research, irrigation extension, finance, warehouse, etc. are essential to attract private investments. Rural Infrastructure in Union Budget 2019-20 The Government of India has taken the infrastructure sector mainly highways, renewable energy, housing, digital infrastructure, and urban transport as a priority sector for which an allocation of about Rs 6 lakh crore has been earmarked for the infrastructure sector in the union budget 2018 19. However the 2019-20 capital long term growth and attaining US$5 trillion economies for which a budget provision of rupees hundred lakh crore sorry amount for 5 years in the infrastructure sector.
- Road Infrastructure caters to transport over 60% of total goods and 85% of total passenger traffic.
- In the 2019-20 budget, there is a provision for the core network up-gradation of 1.2 Lakh Km of rural roads under the Phase III of Pradhan Mantri Gram Sadak Yojana aiming to improve the ease of living for the rural population.
- Roads are also being built under the green technology with the use of the cold mix, terra zyme, iron slag, cement stabilization, cast plastic panel, and cell field concrete and nanotechnology.
- The growth and telecom sector has generated innovations, entrepreneurship through the startup India & standup India and has made mobile communication among more than 80 crore population contributing significantly with about 1.75% of the Indian GDP for the year 2015, according to the Broadband India Forum.
- About 1.5 lakh gram panchayats are been connected with optical fiber for providing internet and Wi-Fi hotspots and access to Digital Services at low tariffs through digital India and Bharat net project.
- DigiGaon is being planned for providing the platform for the financial services telemedicine, education, e-Governance and skill development.
Renewable Energy Infrastructure
- India is emerging as one of the largest producers of energy from Renewable Sources catering to about 20% of the total installed power capacity and with hydropower, it contributes about 33%.
- It is envisaged that the incentives provided would make India a global hub for R&D and manufacturing of advanced energy storage and EVs by 2022.
- Housing as a basic need and right both in rural and urban areas is reflected in the Pradhan Mantri Awas Yojana - Housing for all.
- PMAY- G call targets about 1 crore houses by March 2019 with the unit cost for minimum support of near rupees 1.5 lakh per household with the provision of bank loan up to rupees 70000 and skilling of 5lakh rural masons by 2019 and allows 200 different housing designs across the country based on local conditions.
- Budget 2019-20 aims at 1.95 crore households under the Pradhan Mantri Awas Yojana to eligible beneficiaries by 2022.
National Rural drinking water program
- The 2019-20 budget tries to provide water security with the provision of water supply in an integrated and Holistic manner to promote achieve Har Ghar Jal (piped water supply) to all rural households by 2024 and Jal Shakti Abhiyan for improving the groundwater availability.
Health and Education
- The budget has laid special focus on research and skill development along with plans to set up a Higher Education Commission.
- It has significant components such as study in India program so that more foreign students choose India as a higher education destination.
- The National Research Foundation to fund, coordinate, research in the country. It will consist of four major divisions: Sciences, technology, social sciences and arts, and humanities.
Storage and warehouses
- The budget promotes wide investment in agriculture infrastructure and supports private entrepreneurship for value addition in the farm sector like storage and warehouses. The Pradhan Mantri Matsya Sampada Yojana also would address the critical infrastructure gap in the fisheries sector.
Giving priority to the infrastructure is a progressive measure which can be treated as social capital that accelerates the productive activities, livelihoods, and quality of life. MSMEs: Key component for India's $5 Trillion Economy Micro small and medium enterprises sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades i.e since the 1960s. It has unremittingly acted as a bulwark for the Indian economy providing it resilience to ward of global economic shocks and adversities.
- Nearly one-third of the aggregate economy gross value added.
- Approximately one-third of manufacturing output in the country.
- Three-Fourths of all establishments in the country.
- 11% of the manufacturing GDP.
- 63% of the GDP from service activities.
- 4% of India's manufacturing output.
- Provide employment to around 120 million persons.
- Contribute around 45% of the overall exports from India.
Significance of MSMEs
- It offers the opportunity for both self-employment and wage employment outside the agricultural sector.
- Contributes in constructing an inclusive and sustainable society through balanced regional development, gender, and social balance and environmentally sustainable development.
- They complement industries as ancillary units and contribute significantly in the inclusive industrial development of the country.
- They act as vital components and backward linkages for large scale industries. For example, large scale cycle manufacturers of Ludhiana rely heavily on the MSMEs of Malerkotla.
- About 20% of the MSMEs are based out of rural areas which indicate the deployment of significant rural workforce in the MSME sector.
- In India, capital is scarce and labor abundant, MSMEs have lower capital-output and capital-labor ratios than large scale industries, therefore, better serve growth and employment objectives.
- They generate the highest employment per capita investment and go a long way in checking rural-urban migration by providing people living in isolated areas for the sustainable source of employment.
- Nontraditional products account for more than 95% of MSME exports.
- Access to credit- Launch of the 59-minute loan portal to enable easy access to credit for MSMEs. There is also a provision for 2% interest subvention for all GST registered MSMEs on fresh or incremental loans.
- Access to market- Public sector companies now have to compulsorily procure 25% of their total purchase from MSMEs.
- Technology up-gradation- For access to technology 20 Technology hubs with 100 spokes in the form of tool rooms will be set up throughout the country.
- Ease of doing business - A number of initiatives have been initiated for facilitating business for getting clearances and certifications.
- Social security for MSME Sector employees - A mission has been launched that ensures that employees have access to Pradhan Mantri Jan Dhan accounts, provident funds, and insurance.
This policy initiative a clear and consistent aimed at transforming the ecosystem for the sector by influencing birth (encouraging startups), operations and growth by simplifying laws and regulation, orderly and easy exit. Thus the emerging focus of India's MSME policy aims at covering the entire life cycle of MSMEs to ensure a healthy vibrant and competitive MSME sector.