To craft a pro farmer image, government increases funding for rural and agriculture sector by 24 percent for the fiscal budget 2017-18 

Nirmesh Singh

In the backdrop of rise in farmer suicides, dipping farm incomes and being continuously labelled as anti farmer government, this time Modi’s government has attempted to create a pro farmer image for itself with this budget.  Presenting budget, Union Finance Minister Arun Jaitley said “This year farmers have shown their resilience and agriculture growth is expected at 4.1%.” He announced several schemes and measures to give a big push to farm sector. Finance Minister also said funding for the rural and agriculture sector would be increased by 24% in fiscal 2017-18 to Rs 1.87 lakh cr. Government also underlined the target of doubling the farmers’ income in next five years.


Radha Mohan Singh, Union Minister for Agriculture and Farmers Welfare, said, ” Government is committed to double the income of farmers in next five years. In this budget, holistic development of agriculture is the main focus in which to provide credit to farmers on affordable rates, assured supply of seeds and fertilizers, increase in irrigation facilities, increase in productivity through soil health cards, through e- Nam assured market and providing profitable price has been emphasized. As compared to last year’s budget, the fund for rural, agriculture and allied sectors in 2017-18 has been increased by 24% to Rs. 1,87,223 crore. In the next financial year, it is estimated that the progress rate of agriculture sector will be 4.1%”.

Crop Insurance and Loan

The budget 2017-18 has voiced for more reforms in agriculture marketing and increased funds for insurance and irrigation schemes. To tackle distress among farmers and weather related risks, it has increased funding for crop insurance and has set a higher target for farm credit. To provide farmers with adequate and timely credit, the budget has raised the target of agricultural loans to Rs 10 lakh cr in 2017-18, up from a targeted Rs 9 lakh cr in the previous year. Allocation for Pradhan Mantri Fasal Bima Yojana (PMFBY), the flagship crop insurance scheme has been increased to Rs 9000 cr from Rs 5,500 crore in 2016-17 with a target to bring 40% of cropped area under insurance cover and it would raised to 50% in next fiscal year. According to revised estimate, Government is likely to incur a cost of Rs 13, 240 crore for the PMFBY in 2016-17 which is higher than the allocation of Rs 9000 cr for 2017-18.

Irrigation and Dairy Development

The budget has entrusted National Bank for Agriculture and Rural Development (NABARD) with implementation of schemes to improve access to irrigation and develop the dairy sector. NABARD has been allocated an additional Rs 20, 000 c for the long-term irrigation fund that was set up last year. This fiscal, government has announced creating a dedicated micro-irrigation fund of Rs 5, 000 cr under NABARD.  NABARD is also tasked with a dairy development fund of Rs 8, 000 cr to diversify farm incomes, and Rs 1900 cr for a special scheme to bring cooperative banks under the core banking system. The objective is to ensure seamless flow of credit to small and marginal farmers.

Connecting Farmers and Markets

Expecting good crop production and agriculture growth, government wants to connect more farmers to the market through agri marketing reforms. Finance Minister has stated that more mandis would be brought on e- NAM (electronic National Agriculture Market) platform this fiscal. In addition, the budget has also proposed to set up a committee to suggest commodity market reforms to benefit farmers. It would also be integrated with e-NAM. Government will create a model law on contract farming with the aim to integrate farmers with agro-processing units for better price realization and reduction of post-harvest losses.

On Model Law of Contract Farming, Devinder Sharma, a noted agriculture and food policy expert, said, “When Arun Jaitley said that a model law on contract farming will be circulated among states, and backed it up with a series of marketing reforms including de-listing of perishables like fruits and vegetables from Agriculture Produce Marketing Committee (APMC) to enable farmers to realize a better price, he spelled out a strategy to usher in Corporate Agriculture. Read it in conjunction with the policy framework earlier laid out by the National Skill Development Council (NCDC) which aims to reduce the farming population from the existing 58 per cent to 38 per cent by the year 2022, the shift to Corporate farming become obvious.”

Agri Budget Snapshot

1. New Model Law on contract farming

2. 9000 cr allocated for Pradhan Mantri Fasal Bima Yojana

3. Rs 10 lakh cr target for agriculture loans

4. NABARD gets Rs 20, 000 cr for long term irrigation fund, Rs 5000 cr for micro irrigation fund.

5. 8000 cr allocated for dairy development sector

6.  Soil Testing labs to be set up in all 648 Krishi Vigyan Kendras (KVK)

7. The budget allocated for Agri Research and Education is meagre Rs 6,800 crore, which is less than one per cent of the Agri GDP.


Piyush Goyal, MoS (Independent Charge) for Power, Coal, New and Renewable Energy & Mines said, “While keeping inflation down, our effort is to enable drought proofing of agriculture and to provide low cost finance as well as a robust crop insurance system to farmers. A robust insurance system will ensure 100% payment to the farmers in the event of any loss of production. The road map will empower them to double their income and not depend only on doles”.

Doubling Farmers’ Income

Despite highlighting the government’s aim of doubling farm incomes within five years, the finance minister has not come up with any plan to achieve the target by 2022. Absence of current estimate of farmers’ incomes means there is no base income to set the figure for double income. So, there is an urgent need for survey for farmers’ income every year. The latest available survey from the National Sample Survey Office (NSSO) is for 2012-13 and it shows an average monthly income as Rs 3, 856 (from both farming and non farm income). As per Economic Survey 2016, the average income of farming household is in 17 states is meagre Rs 20,000 a year. If these are base incomes then doubling it to either Rs 7,712 per month in 2022 or to Rs 40,000 per year will have no meaning. Any increase in income is possible only if farmers get higher returns for their produce.

Reacting to the Budget, Professor M. S. Swaminathan, founder of the M.S. Swaminathan Research Foundation said that it was high time that the recommendations of the National Commission on Farmers – to provide the minimum price of the total cost of production plus 50% – are implemented.

Monitoring Soil Health

Government will set up mini labs for soil testing in all 648 Krishi Vigyan Kendras (KVK) across India and for issuing soil health cards. Assisted by government, these mini labs will be operated by rural entrepreneurs.

Government did not make any announcement related to promoting organic farming.  Going organic will reduce high input costs of fertilizers that have burdened farmers with debts.

Farmers’ Reaction

Swaraj Abhiyan’s Jai Kisan Andolan & Farmers’ Organizations

 What’s missing in Agri Budget

 Income Security: Farmers wanted an Income Guarantee system to assure sustainable income level for all farming households. They demanded RUPYA (Remunerative Universal Price and Yield Assurance). Finance Minister talked about Income Security for farmers last year, but no action on it once again.

Relief from Debt Trap: Farmers wanted a big path-breaking measure, which would lift them out of the debt trap. Not a single step in this direction. No measures to help small, marginal and tenant farmers who are trapped in private loans with little access to institutional finance.

Support for Disaster-affected Farmers: Farmers affected by 2 consecutive droughts, and other calamities like floods were hoping for a big revival package. Government gave nothing but PMFBY which has already failed to help them this year.

Corporate’s Reaction

Smir Sah, MD & CEO, NCDEX

The target for agriculture credit has been increased to Rs 10 lakh crore. Agriculture needs investments and farming households are its biggest investors. The more the credit is available to them, greater will be the investments in agriculture production and infrastructure. The computerisation and integration of all 63,000 functional Primary Agriculture Credit Societies with the Core Banking System will help ease the flow of credit to small farmers and boost rural investments.

Dr Krishnamurthy Subramanian, Associate Professor of Finance, Indian School of Business, Hyderabad

The world is going to be more insular. What India needs to do is develop the domestic market for domestic consumption. The emphasis has to be on Bharat as against India.

Suresh Panwar, Vice-president, Union National Bank

It is definitely growth-oriented – rural development and employment generation being the main highlights. Making more people tax compliant will be a game changer and that is the biggest take away from the Jaitley’s budget.