India’s agriculture sector continues to show signs of distress, reporting a modest 2% growth in the first quarter (April-June) of the current financial year. The sector had posted 1.4% growth in the same quarter last year. The disaggregated figures show that the growth numbers for both the years were below the long-term average for the farm sector. Additional challenges persist, including low farmer incomes, unpredictable monsoons, unemployment, and issues related to the minimum support price.
India’s agriculture sector contributes hugely to the GDP and provides livelihoods to millions. Its importance to the country’s economic and social fabric is evident from the attention it receives from the government. On Monday, the sector received a boost of nearly Rs 14,000 crore, with the government announcing seven new initiatives for agriculture and allied sectors.
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A leg-up for climate-resilient agriculture
In light of the challenges posed by climate change, these new schemes are designed to help farmers adopt climate-resilient agriculture. Of the proposed Rs 14,000 crore outlay, Rs 2,817 crore has been allocated for a digital agriculture mission, while Rs 3,979 crore is earmarked for a crop science programme. The Union Cabinet also approved Rs 2,291 crore to enhance education under the Indian Council of Agricultural Research (ICAR).
Farmers hold significant sway in elections, and with elections to several key state assemblies round the corner, the timing of these announcements is notable. Haryana, a state heavily dependent on agriculture, is set to vote on October 1. The state government has taken steps such as the Chief Minister’s recent announcement of Rs 525 crore in direct payments to 520,000 farmers just before the Election Commission set the polling date. However, farmers in Haryana continue to protest at the Shambhu border over MSP-related disagreements.
The ruling BJP has previously faced backlash from farmers, losing ground to the opposition in recent Lok Sabha elections. Whether these newly announced schemes will sway farm votes remains to be seen.
Persistent challenges
Beyond election dynamics, the agricultural sector requires substantial reforms in areas such as research, education, climate resilience, natural resource management, and digitisation, as well as the growth of livestock and horticulture. While the new schemes promise to address these issues, economists argue that the increases in allocations for agriculture, fisheries, and animal husbandry are marginal. Major problems remain, including stagnant farmer incomes, low MSP, and rural unemployment.
A favourable monsoon could provide a much-needed boost to the sector, potentially increasing rural consumption. Experts expect agricultural growth to pick up in the coming months, as the 2024 southwest monsoon has been one of the best in recent years.
Solving farm sector woes
As the government and policymakers look ahead, addressing the persistent challenges in the rural economy is critical. One pressing issue is the stagnation of MSP. Between 2003-04 and 2012-13, MSPs for major food grain crops increased by an average of 8-9% annually. However, this rate slowed to around 5% between 2013-14 and 2023-24. The reasons for this slowdown and whether current prices are adequate need further examination.
Additionally, the government’s unfulfilled promise to double farmers’ real incomes between 2015 and 2022 should be revisited. Although largely absent from recent policy and media discussions, real incomes of agricultural households from cultivation declined by about 1.4% between 2012-13 and 2018-19, driven by a steep rise in input costs, particularly fertilizers.
Another urgent area for intervention is rural unemployment. Although unemployment in rural areas fell after 2018-19, levels in 2022-23 remained higher than in 2011-12, at 2.8% for men and 1.8% for women. Of particular concern is the rise in self-employment among rural women, driven largely by an influx of workers into the agricultural sector due to stagnation in non-agricultural employment. This shift occurred even as agricultural prices were flat and incomes fell.
The announcement of new schemes ahead of elections could be seen as an attempt to quell criticism of previous underwhelming Budget allocations. However, reversing the sector’s long-term decline will require bold policy changes and substantial fiscal investments. Without significant capital investment in agriculture and allied sectors, the farm sector’s challenges are unlikely to be resolved.
Anil Nair is Founder and Editor, Policy Circle.