Fine Balance Of Prudence And Populism

IT’S IMPORTANT TO TAKE A TELESCOPIC view of the 2019-20 interim Union Budget delivered with some panache by Finance Minister Piyush Goyal on February 1, 2019.

Goyal achieved a fine balance between fiscal prudence and pre-election populism. A long view unpeels both intent and outcome of the Budget’s proposals. Start with farmers. The Opposition has claimed that the income support of Rs 6,000 per year given to farmers with holdings of less than two hectares is, as Congress president Rahul Gandhi put it, “an insult”.

Is it? At Rs 500 per month, the amount is modest but it is a top-up to all the other benefits farmers already receive: fertiliser subsidies, crop insurance, loan waivers and minimum support price (MSP). Indian farm productivity is low. The long-term answer to alleviating farmer distress lies in introducing GM crops that boost yield per acre as well as providing low-cost finance for drip irrigation technology to tide over bad monsoons.

The Budget moves away, in policy intent, from loan waivers and subsidies to direct cash transfers (like Telangana and Odisha) so that farmers can invest in new crop and irrigation technology. That alone can create a healthy farm sector on which 50 per cent of Indians live but which contributes only 14 per cent to India’s GDP. This mismatch lies at the heart of farmers’ distress. Increasing direct income support from Rs 6,000 a year to Rs 12,000 a year (which will cost the exchequer Rs 1.50 lakh crore annually, double the Budget’s allocation) is the only realistic way to help farmers invest in new technology. That will create the foundation for a sustainable solution to India’s chronic agricultural crisis.