India to Focus on Capital Investment in Agriculture to Boost Farm Incomes

The Budget-eve Economic Survey tabled by finance minister Nirmala Sitharaman in Parliament on Monday has called for a “focused and targeted approach” towards capital investment in the agriculture sector to boost farm incomes, flagging swinging levels of private investment as a concern.

“There is a direct correlation between capital investments in agriculture and its growth rate,” the survey states. According to the annual report card on the economy, the farm sector has witnessed “wide fluctuations in private investment in agriculture”, while public investment has remained stable between 2-3%.

Private corporate investments need to be crowded in by offering an appropriate policy framework, the Survey said.

In December 2021, the Union government in a rare climb-down struck down three farm-sector legislation after nearly 13 months of protests by tens of thousands farmers in key states, such as Punjab, Uttar Pradesh, Rajasthan and Haryana.

The three laws were the cornerstone of the Modi government’s reforms in the farm sector, which employs nearly half the population. The scrapped laws designed to free up restrictions in farm trade and allow traders to stockpile large quantities of farm produce for future trade. They also sought to lay down a national framework for contract farming.

Farmers are still demanding a legal guarantee for minimum support prices for a string of commodities.

The agricultural sector has been least impacted by the pandemic and is expected to grow a robust 3.9% in 2021-22 after growing 3.6% in the previous year.

Recognising that there exists a direct correlation between capital investments in agriculture and its growth rate, the Survey called for higher public and private investment in the farm sector.

“Higher access to concessional institutional credit to farmers and greater participation of private corporate sector, whose investment rates are currently as low as 2 to 3 per cent in agriculture, may help in improving private investment in agriculture.”

The share of the agriculture in total gross value added or GVA of the economy has for long been around 18%. The share of the agriculture and allied sector in total GVA, however, improved to 20.2% in the year 2020-21 and 18.8% in 2021-22.

According to the fourth advance estimates for 2020-21, the country’s total food grain output is estimated to be a record 308.65 million tonnes, or 11.15 million tonnes higher than 2019-20. The production of rice, wheat and coarse cereals has increased at compound annual growth rates of 2.7%, 2.9% and 4.8% respectively during 2015-16 to 2020-21, or last six years.

India has the fiscal legroom to boost spending to achieve record growth, likely wresting the title of the world’s fasted growing economy from China, the Budget-eve Economic Survey said.

Overall, the economy will expand 8%-8.5% in the year starting April after likely growing 9.2% in the current fiscal year, the annual economic document said.

The document, unveiled a day ahead of the presentation of the Union Budget, said the government had the fiscal legroom to boost investment and spending. Growth will be propelled by “widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.”

Source: https://www.hindustantimes.com/india-news/private-investment-critical-for-agriculture-states-economic-survey-101643634510973-amp.html