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Meet Rural India's Need To Beat Economic Slowdown

By focussing on our farmers and rural areas we can come out of the present economic slowdown.

There isn't a single budget that was not called Farmer's budget. Let's examine this claim and see what the farmers are expecting from the upcoming budget. The total allocation in the Union budget 2019-20 is around Rs 27.86 lakh crore. Out of this, the allocation for the Rural Development Ministry is Rs 1.18 lakh crore. For the Agriculture Ministry, it's about Rs 1.30 lakh crore. For the Animal Husbandry, it was just Rs 2932 crores and for Fertilizer subsidy it's Rs 80,000 crore. If we add them all, it amounts to about Rs 3.40 lakh crore only, which is about 12 per cent of the total budget. For a population of about 70 per cent that lives in the rural areas, whether this budget is appropriate or not, this is a matter of discussion.



The quarterly growth rate of the GDP is falling for the last many quarters. The economy is facing a serious question of demand revival. Since 70 per cent of the people live in the rural areas contributing about 30 per cent of the GDP and almost 50 per cent, our population is dependent on agriculture which contributes around 15 per cent of the GDP, any revival of demand necessarily means ensuring more money in the hands of the rural people. So to revive the demand, the policies and budgetary allocations must be focussed more on the rural economy.

The first and the best way to jump-start the economy and revive the rural demand is to increase the money given directly under PM-KISAN scheme. Started last year PM-KISAN scheme gives an amount of Rs 6,000 per farmer family per annum. In the last budget an allocation of Rs 75,000 crore was made for it but given the pace of disbursement this year, the government won't be able to spend that money. In the upcoming budget if the money paid under the scheme is increased to Rs 24,000 per farmer family per annum, then a demand revival in the economy can be assured. If there are budgetary constraints then the center may rope in the States to bear half of the amount.

Secondly, the farmers were promised that they would be given one-and-a-half times the cost of production of their produce. But this promise remains unfulfilled as only one-and-a-half times the A2+FL cost of production is being declared as MSP and not the Cost C2 which is the comprehensive cost of their produce as per the CACP calculations.

About one-third of the agriculture income comes from Animal Husbandry but this sector is highly neglected. Firstly it's technically not considered part of agriculture and its income is not exempted from Income Tax. Secondly, farmers' organisations like Amul and other co-operatives are facing tax discrimination. The income tax rate on the domestic companies was reduced last year from 30 to 22 per cent but strangely these farmer's organisations are still being charged Income Tax at the rate of 30 per cent. Till 2005-06 these farmer co-operatives were charged Income Tax at a rate that was five per cent lower than that of the companies. These farmer organisations ensure that 75 per cent of the money paid by the consumer reaches the farmers. So in this budget, the earlier scheme of five per cent less income tax rate than that on the companies on these farmer organisations should be restored i.e. about 17 per cent tax should be levied on these farmer co-operatives.

The government could also allocate handsome amount for agri-infrastructure, cold chain and other storage facilities. The fertiliser subsidy should also be transferred directly to the farmers under Direct Benefit Transfer. The ever growing food subsidy should be limited to only those below the poverty line. Oilseeds and pulses should be encouraged instead of other crops where surplus production is creating other problems. So by focussing on our farmers and rural areas we can come out of this economic slowdown.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency o





About Author

Madhu Kishwar

Madhu Purnima Kishwar is an Indian academic and writer. She was a professor at the Centre for the Study of Developing Societies (CSDS), based in Delhi, and the Director of the Indic Studies Project based at CSDS which aims to promote the study of "Religions and Cultures in the Indic Civilization".