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Key points from the Union Budget 2023-24 for the Agricultural sector in India

with Drishti Vishwanath

  • The Union Budget 2023-24 enlarges the vision for Amrit Kaal proposed in the budget 2022-23, wherein a technology driven and knowledge-based economy is promoted with 7 priorities: inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power and the financial sector.
  • The focus on infrastructure development (both physical and digital) continues.

Agriculture in the Inclusive Development Tenet/ Priority

  • Digital public infrastructure for agriculture will be built as an open source, open standard and inter operable public good. This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.
  • An Agriculture Accelerator Fund will be set-up to encourage agristartups by young entrepreneurs in rural areas. The Fund will aim at bringing innovative and affordable solutions for challenges faced by farmers. It will also bring in modern technologies to transform agricultural practices, increase productivity and profitability.
  • A cluster-based and value chain approach will be adopted through Public Private Partnerships (PPP) to enhance productivity of the cotton crop
  • An Atmanirbhar Clean Plant Program will be launched to boost availability of disease-free, quality planting material for high value horticultural crops at an outlay of Rs 2,200 crore
  • Making India a global hub for millets– the Indian Institute of Millet Research, Hyderabad will be supported as the Centre of Excellence for sharing best practices, research and technologies at the international level.
  • The agriculture credit target will be increased to ` 20 lakh crore (an increase of 11 percent) with focus on animal husbandry, dairy and fisheries
  • Boost to the Fishery Sector: new sub-scheme of PM Matsya Sampada Yojana with targeted investment of Rs 6,000 crore to further enable activities of fishermen, fish vendors, and micro & small enterprises, improve value chain efficiencies, and expand the market
  • Promotion of Co-operative based economic development : A new Ministry of Cooperation was formed with a mandate to realise the vision of ‘Sahakar Se Samriddhi’. To realise this vision, the government has already initiated computerisation of 63,000 Primary Agricultural Credit Societies (PACS) with an investment of ` 2,516 crore. In consultation with all stakeholders and states, model bye-laws for PACS were formulated enabling them to become multipurpose PACS. A national cooperative database is being prepared for country-wide mapping of cooperative societies
  • Setting up of Decentralised Storage Capacity: This will help farmers store their produce and realize remunerative prices through sale at appropriate times. The government will also facilitate setting up of a large number of multipurpose  cooperative societies, primary fishery societies and dairy cooperative societies in uncovered panchayats and villages in the next 5 years

Agriculture in the ‘Reaching the Last Mile’ Priority

  • In the drought prone central region of Karnataka, central assistance of ` 5,300 crore will be given to Upper Bhadra Project to provide sustainable micro irrigation and filling up of surface tanks for drinking water.

Agriculture in the ‘Infrastructure and Investment’ Priority

  • One hundred critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. They will be taken up on priority with investment of ` 75,000 crore, including ` 15,000 crore from private sources
  • The Union Budget continues to demonstrate a strong commitment to boost economic growth by investment in infrastructure development; there has been a 37.4 percent increase in capital expenditure over the revised estimates 2022-23.

Agriculture in the ‘Unleashing the Potential’ Priority

  • Galvanise an effective AI ecosystem and nurture quality human resources in the field: For realizing the vision of “Make AI in India and Make AI work for India”, three centres of excellence for Artificial Intelligence will be set-up in top educational institutions to facilitate cutting edge applications and scalable problem solutions in agriculture, health, sustainable cities.
  • One hundred labs for developing applications using 5G services will be set up in engineering institutions to realise a new range of opportunities, business models, and employment potential- applications such as precision farming.

Agriculture in the ‘Green Growth’  Priority

  • Launch of PM-PRANAM: PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth” will be launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers
  • Setting up of Bhartiya Prakritik Kheti Bio-Input Resource Centres: Over the next 3 years, we will facilitate 1 crore farmers to adopt natural farming. For this, 10,000 Bio-Input Resource Centres will be set-up, creating a national-level distributed micro-fertilizer and pesticide manufacturing network.

Allocated Expenditure: Analysis

  • The total expenditure in the budget 2023-24 is estimated at INR 4503097 crore; out of this, the total expenditure of agriculture and allied activities (including PM-KISAN) has been estimated at 144214 crore.
  • Agriculture and allied activities (including PM-KISAN) have been allocated 3.20 percent of the total allocation in the Union Budget 2023-24; this is almost similar to the revised estimates of 2022-23 wherein agriculture and allied activities constituted 3.25 percent of the budget. This is a decrease from the budget estimates of 2022-23, wherein agriculture and allied activities constituted 3.8 percent of the budget.
  • The Ministry of Agriculture and Farmers Welfare has been allocated 2.8 percent of the total expenditure in the Union Budget 2023-24; this marks a decrease from 3.3 percent of the total expenditure in the Union Budget 2022-23. Over the last 2 decades, the allocation to the Ministry of Agriculture and Farmers Welfare has remained below 5 percent; maximum being in 2019-20, after which the allocation has fallen as a proportion of totl expenditure to all ministries (see Figure 1)

Figure 1: Proportion of Total Expenditure Allocated to Ministry of Agriculture and Farmers Welfare (%), 2004-05 to 2023-24

Note: Budget Estimates for all years have been considered.

Source: Expenditure Profile, Union Budgets 2004-05 to 2023-24

  • PM-KISAN constitutes 60.61 percent of the allocation to central sector schemes/projects within the Department of Agriculture and Farmers Welfare, and 52 percent of the total expenditure of the  Department of Agriculture and Farmers Welfare. In 2022-23 BE it constituted 55 percent of the total expenditure. The scheme has been allocated the same amount as the 2022-23 revised estimates; 60000 crore; this marks a decrease of 11.76 from the budgeted allocation in 2022-23 (68000 crore)

Figure 2: Budget Estimates for Expenditure on Major Items, 2023-24 in Comparison with Revised Estimates, 2022-23

Source: Expenditure Profile, Union Budget 2023-24

  • PM-KISAN constitutes 48 percent of the expenditure of the Ministry; this is almost equal to the expenditure as per the revised estimates in 2022-23 (50 percent) (see Figure 3 for trends since 2014-15)

Figure 3: Expenditure of the Ministry (Total and PM-KISAN)

Source: Expenditure Profile, Union Budget 2014-15-2023-24

  • Within the 2 departments of the Ministry, Department of Agriculture and Farmers Welfare has been allocated 92.4 percent of the allocation to the Ministry in 2023-24, while the Department of Agricultural Research and Education has received 7.6 percent of the allocation.
  • The Department of Agriculture and Farmers Welfare has been allocated 115531.79 crores, marking an increase of 4.8 percent from the budget allocation in 2022-23, and a decrease of 6.8 percent from the revised estimates of 2022-23.
  • In the Department of Agriculture and Farmers Welfare, there has been no change in the allocation to central sector schemes/ projects in comparison to the budget estimates of 2022-23; the allocation still remains 85 percent. 
  • Percent of the Ministry’s budget is spent on three schemes under the Department of Agriculture and Farmers Welfare;

Source: Expenditure Budget, Union Budget 2023-24

  • The Department of Agricultural Research and Education has been allocated 9504 crores in the Union budget 2023-24, marking an increase of 11.62 percent from the budget estimates in 2022-23, and an increase of 9.76 percent from the revised estimates of 2022-23.
  • In the Department of Agricultural Research and Education, there is an increased allocation to central sector schemes/ projects by 3 percent, as compared to the budget estimates 2022-23.

Source: Expenditure Budget, Union Budget 2023-24

Table 1: Key Schemes -A Comparison of BE 2022-23, RE 2022-23 and BE 2023-24

Central Sector Schemes/Projects
Department of Agriculture and Farmers WelfareName of SchemeBudget Estimates 2022-23Revised Estimates 2022-23Budget Estimates 2023-24% Change in Allocation from Revised Estimates 2022-23
Pradhan Mantri Fasal Bima Yojana  15500.00  12375.76  13625.00  10.10
Distribution of Pulses to State / Union Territories for Welfare Schemes  9166.21  800.00  381.31
Pradhan Mantri Kisan Samman Nidhi (PM-Kisan)  68000.00  60000.00  60000.00  No change
Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)  500.00  955.00  955.00  No change
Agriculture Infrastructure Fund (AIF)  500.00  150.00  500.00  233.33
 Market Intervention Scheme and Price Support Scheme (MIS-PSS)  1500.00  1500.00  0.01  -99
 Pradhan Mantri Annadata Aay Sanrakshan Yojna (PM-AASHA)1.00–0.01–
Department of Agricultural Research and EducationAgricultural Extension  243.72  243.72  327.00  34.56
Management of Natural Resources*  185.77  185.77  240.00  29.19
 Agricultural Education1995.83  1995.61  2423.41  21.87

Source: Expenditure Budget, Union Budget 2023-24

Note:  Management of Natural Resources includes Natural Resource Management Institutes including Agro Forestry Research and the Climate Resilient Agriculture Initiative. The Climate Resilient Agriculture Initiative will be merged with the Natural Resource Management Institutes including Agro Forestry Research scheme with effect from financial year 2023-24.

  • Observations: Under the Market Intervention Scheme and Price Support Scheme (MIS-PSS), NAFED, Central Warehousing Corporation, National Consumer Cooperative Federation of India and Small Farmers Agro Business Consortium have been designated as Central agencies to undertake procurement of Oilseed and Pulses under price support scheme and also work to provide remunerative prices to farmers for their produce. Pradhan Mantri Annadata Aay Sanrakshan Abhiyaan (PM-AASHA) is a scheme to ensure minimum support price to farmers comprising of Price Support Scheme (PSS), oilseeds and copra. The allocations for these have been slashed considerably.
Centrally Sponsored Schemes
Department of Agriculture and Farmers WelfareName of SchemeBudget Estimates 2022-23Revised Estimates 2022-23Budget Estimates 2023-24% Change in Allocation from Revised Estimates 2022-23
Rashtriya Krishi Vikas Yojna  10433.00  7000.00  7150.35  2.14
Krishionnati Yojana  7183.00  5000.00  7066.47  41.32

Source: Expenditure Budget, Union Budget 2023-24

Featured

Case study: Sahyadri Farms

There has been lots of discussion about farm, farmers and their income. Here, we bring a case of Sahyadri farms which proves the power of cooperation, market linkages and technology to empower farmers. This is exceptional story of an enterprise which shows the way forward for small holder agriculture.

One can access the case from the following link  

https://cases.iima.ac.in/index.php/sahyadri-farms-a-21st-century-farmers-enterprise.html

#sahyadrifarms #agriculture #farmerproducercompany #agriculturetechnology #agriculturemarkets #farmincomes #FPO #IndianAgriculture

Collaborative blogs: Export Potential of Sericulture in India

-By Kirti Singh, Richa Mishra, Ajith Narayanan (PGP-FABM batch of 2023, IIM Ahmedabad)

Introduction

Silk exports from India have increased after hitting a six-year low in 2021-22, with an increasing demand for silk carpets and garments in the USA and Europe. India is the only country in the world that produces all five varieties of commercial silk, i.e., Mulberry, Tropical Tussar, Oak Tussar, Eri, and Muga with a combined global market value of $16.86 Bn.

Problem

India, despite being the second-largest producer of silk (~35,000 MT), is ranked as the number one importer of raw silk, whereas it is the 9th largest exporter of raw silk in the world. India is the second-largest producer of raw silk as well as the largest consumer of raw silk and fabric. The unfulfilled demand is dependent on imports from China, Vietnam, Uzbekistan, Brazil, and the United Arab Emirates.

Observations

The Indian supply chain sector of silk is a highly unorganised and decentralised chain of activities. Activities are scattered cluster-based and community-based, and it has impacted the quality and quantity of export. India is mired by domestic challenges like use of outdated manufacturing technology, primitive and unscientific “reeling” and “weaving” techniques, use of poor-quality seeds, low production of bivoltine seeds, use of nongraded and diseased seeds, poor knowledge of farm disease amongst farmers, poor supply chain management, highly unorganized and decentralized sector, high production cost, and recurring droughts.

Analysis

As per the data collected through primary and secondary research, silk has high export demand, and India generates around 200 million USD annually by exporting silk and silk products. Mainly exported items include readymade garments, followed by silk fabrics, silk waste, silk carpets etc. There is a decrease in the value of silk exported from India. The reasons can be attributed to intense competition from China as less production of quality silk from India.

To analyse the productivity factors and the impact of varied factors on the export potential, the production data was taken for the last five years for all the states under silk production. Assuming silk production depends on the GDP of the state, the change in GSDP for that period, the wage rate of farmers, no. of silk farmers & reelers in the state and the fund allocated by the Govt. for silk development, data analysis was performed.

Silk production= f (GSDP, % change in GSDP, Wage rate, % of silk farmers, % of reelers, Govt. investment)

The correlation analysis shows that an increase in wage rate has a strong negative correlation with production, i.e., an increase in wage rate decreases production. An increase in GSDP has increased production, but after a certain time, it has a negative effect. It might happen due to alternative livelihood practices adopted by the silk farmers.

As per regression analysis, production is mostly affected by the wage rate. An increase in wage rate decreases production. Reeling has no significant effect on production, which shows that the processing & production of silk are not integrated. It is an identified gap in the silk value chain. The correlation analysis also shows a negative effect of public investment on silk production. This may be the result of leakage in the chain or diversion of the fund towards personal use by the farmers.

According to the silk demand and production trend, it is fairly observed that there is a gap in domestic silk production. For example, in 2021-22, India imported 1377 MT of raw silk. The trend analysis of silk production across various states shows a decline in production except in some north-eastern states like Assam, Meghalaya etc.

Fig: The trend of decreasing value of silk export from India since 2015 (in US Million Dollars) Source: Indian Silk Export Promotion Council

As per the data of the global market, there is a huge opportunity for export into Canada, Turkey, Vietnam, Japan, EU etc. The market demand is more than the total supply of silk. In Malaysia, the trade barriers are quite low, which allows India to make Malaysia as a major importer of Indian silk. Though global market shows attractive prospects for export, Indian reelers are unable to capitalize on the opportunity due to importing countries’ quality requirements and domestic problems like lack of transport & storage facilities, poor information on market trends, and lack of finance.

Recommendations

To combat domestic challenges and export quality silk, India has to increase public investment in the sector, renovate existing infrastructure, infuse networking services to quash information asymmetry, increase collectivization and farmers clusters pan India, primary processing near production facilities, ensure uniform quality by setting a rigid homogenous standard under “Silk Mark” through quality control, testing, & certification, and finally engage in “Make in India” branding. The government must raise the customs tax up from 20% and strictly condemn dumping of cheap silks to India to protect the indigenous reelers.

The existing policies & initiatives like FCA, RKVY, STEP, SRC, SAMARTH, TSP, SILKS Portal, e-Cocoon, SILK Mark must be revitalized in favour of the sericulture industry after understanding the nuances at a microscopic lens. Only if there is an overall development in the sector, there would be less attrition due to wage rate increase as the sector can attract and retain labour.

Collaborative Blogs: Adoption of Micro-irrigation

-By Jayant Singh, (PGP-FABM batch of 2023, IIM Ahmedabad)

In the few thousand years that homo sapiens have existed, we have learnt to do and established our control over many great things, invention of the wheel, discovery of fire, the industrial revolution is certainly the most talked about milestones in human history. But perhaps the most important feature enabling the success of our species is the ability to produce food, having learnt a skill that we now call agriculture.

To master this skill and control the process, humans slowly began to understand and control the factors of production. Early humans understood well that water is the most important factor in production and thus emerged the idea of irrigation. The earliest form of irrigation probably involved people carrying buckets of water from wells or rivers to pour on their crops. As better techniques developed, societies-built irrigation canals, dams, dikes, water storage facilities drippers and sprinklers.

In India, the area under irrigation saw a major jump during the 1960’s. Primarily fuelled by public sector projects building dams and canals in combination with numerous wells and tube wells dug privately around the same time. Micro-irrigation till date accounts for 20% of the total irrigated area in the country.

Source: https://iasscore.in/data-story/irrigation-in-india

Multiple studies have discussed the state-to-state disparity in the development of micro-irrigation, financial viability, and challenges in adaptation of micro-irrigation systems. While researchers have extensively worked on the factors influencing micro irrigation adaptation, the focus has mostly been on terrain, ecosystem or cropping pattern related variables. Our study is unique in attempting to find correlation between adaptation of micro-irrigation to variables that capture the development on agricultural markets and demographics of the region along with other traditional variables such as annual rainfall or groundwater levels.The case in point studies the adaptation of micro-irrigation across the districts of Gujarat.

Methodology

The adaptation of Micro-irrigation across district was defined numerically as below:

With a level of significance (Alpha) of 0.10 simple linear regression was performed between the dependent variable (MI adaptation index) and 8 different independent variables.

Table: 1 Summary of the linear regression model
  
Dependent variableIndependent variables
MI adaptation indexAvg. annual rainfall (mm)
 Avg. groundwater level (mbgl)
 % Literacy
 Sex ration (females per 1000 males)
 Ag. Market infrastructure (proxy: # of functional APMCs)
 Per capita milch animal population
 No. of electrified ag. Wells per village
 % of villages with regional water supply
  
Level of significance0.90 of 90%

Results
Of all the 8 independent variables assumed to have a significant relationship influencing the adaptation of micro irrigation, only two hold a statistically significant relationship. The quality and strength of market infrastructure (# of functional APMCs) in the district and the coverage of regional water supply across villages of the district have the most significant influence of the rate of micro irrigation adaptation in the district.   Graphs 1 shows the scatterplot and regression derived trendline equation relating market development and MI adoption index.

 
The results emerging above once again highlight the importance of an efficient and functioning market for agriculture produce. The R-sq value of 0.26 indicates that as much as 26% of the variation in adaptation of MI across different districts in Gujarat is explained just by the level of market development. The negative correlation between the variables indicate that MI adaptation is higher where markets are underdeveloped. In fact, In districts with less than 0.01 functional APMCs per village the adaptation of micro irrigation is as high as 5 times the identified potential for the district.
This indicates that most of the current MI adoption in the state is not driven by production improvement effort, but it is rather a stress induced forced adoption by farmers in order to sustain the system of production.
This stress or market forced adoption of MI is a major reason for poor financials returns on such systems for farmers across the country. Further, since these forced adopters of technology are unable to set an attractive precedent in most cases, other farmers do not buy the idea, which in turns limits the adoption of micro-irrigation systems in areas where it can be most profitable not just financially but also ecologically.
Believe it or not every small investment decision the farmer makes is strongly linked to the market for his/her produce. It is important to appreciate the strong link the markets hold with almost all factors of production. The need of the hour is for policy makers (and other stakeholders) to appreciate this interlinked system and fine-tune technology adoption incentives accordingly.

Note: This write up is based on a project done by Jayant and team under Prof. Vidya Vemireddy’s guidance.

Case study: agricultural finance and blockchain technology

Read our latest case study on how warehouse receipt financing works in Indian agriculture. We demonstrate how blockchain technology can enable agricultural financing through a case study on WHRRL. We capture the process in great detail. You can download the case study through IIM Ahmedabad’s case centre’s website: WHRRL: Facilitating Agricultural Finance through Block-Chain Technology (iima.ac.in)

#agtech #fintech #blockchain #loans #agriculture #India #farmer #warehouse #agriculturalfinance