India Region

Budget 2024-25: What’s in It for Rural India?

01 August 2024, New Delhi: The Union Budget for FY25, unveiled in July 2024, highlights the government’s continued focus on the rural-agrarian sector, allocating Rs. 6.2 trillion, which constitutes 13 percent of the total Rs. 48.2 trillion budget. This policy brief by Purvi Thangaraj and Ashok Gulati from ICRIER critically examines these allocations, questioning their effectiveness in addressing the persistent challenges faced by rural India and its agrarian economy.

Welfare vs. Development: The Budgetary Dilemma

The budget’s allocations are heavily skewed towards welfare measures such as food and fertilizer subsidies, and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA). These measures, while providing immediate relief, may not contribute significantly to long-term rural income growth. Agriculture’s contribution to GDP stands at 18 percent for 2023-24, yet the sector receives only 13 percent of the budgetary allocation.

Significant allocations include Rs. 600 billion for PM-KISAN, Rs. 205.25 billion for food subsidies, Rs. 164 billion for fertilizer subsidies, and Rs. 146 billion for PM-Fasal Bima Yojana. These schemes, while essential, are primarily focused on income support and subsidies rather than development-oriented investments like agricultural research and development (agri-R&D), rural infrastructure, and skill development.

The Need for Structural Reforms

For India to achieve its vision of ‘Viksit Bharat@2047,’ bold reforms are necessary. The goal of doubling farmers’ incomes by 2022-23 remains unfulfilled, highlighting the need for a strategic shift from welfare to development. Investments in agri-R&D and extension services, irrigation, and rural infrastructure are crucial to increasing productivity and rural incomes.

Reallocating funds from subsidies to development expenditures can create a more sustainable and profitable agricultural sector. High-value agriculture, such as poultry, dairy, fishery, and horticulture, needs to be promoted along with efficient logistics and marketing strategies. The success of models like AMUL in the dairy sector could be replicated in other areas to boost rural incomes.

The Importance of Agri-R&D and Climate-Smart Agriculture

With the increasing frequency of climate change-induced extreme weather events, investments in climate-smart agriculture are imperative. The current budgetary allocations, however, fall short in this area. Agri-R&D and extension services need more attention to develop resilient agricultural practices that can withstand climate variabilities.

Skill Development and Non-Farm Employment

Improving rural incomes also requires a shift towards higher productivity in non-farm jobs. Massive investments in rural infrastructure and skill development are essential. Industry participation in training and employment can help bridge the gap between rural and urban incomes. This shift is vital for creating sustainable jobs and stimulating demand for non-agricultural products, thereby supporting a manufacturing revolution.

Need Focus on Development-Oriented Investments

The Union Budget FY25, while continuing to support the rural-agrarian sector through substantial welfare allocations, must pivot towards more development-oriented investments to truly transform the sector. Without bold reforms, the vision of a developed India by 2047 may remain elusive. It is essential to rationalize subsidies and reallocate funds towards initiatives that can significantly increase rural incomes and productivity, setting the foundation for a prosperous and sustainable agrarian economy.

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