Budget FY25: Does it have for rural-agri space?

This brief discusses that the budget for the rural-agrarian sector is heavily skewed towards welfare measures and raises questions whether this is the most effective use of these funds. Despite union government’s focus on rural areas through various schemes to build toilets, and houses, and provide drinking water, rural roads, electricity supply, and free rations, rural incomes are not improving at a rate that can create significant demand for non-agri products at a scale.

Therefore, augmenting rural incomes should be the main concern. To improve rural incomes, there is a need to shift to higher productivity, non-farm jobs. This could involve building rural infrastructure or urban development, requiring massive investments in skill development for higher productivity jobs. Industry participation is crucial for training people for meaningful employment. Within agriculture (engaging 45.8% of the workforce in 2022-23, PLFS), the focus should move from basic staples, like rice, to high-value agriculture such as poultry, fishery, dairy, and fruits and vegetables.

With the rise in climate crisis-induced extreme weather events, India needs to invest in agriculture research and development (agri-R&D) and agri-extension towards climate-smart agriculture. The focus on welfare measures, which comprise the bulk of the budget for the rural-agrarian sector, requires immediate rationalisation. Re-aligning schemes such as food and fertiliser subsidies could enhance their effectiveness, yield savings, and improve their overall impact, thereby providing more funds for a shift from doles to development. Based on our research, it is obvious that unless bold reforms are undertaken, the income levels of majority of people in the rural-agri space will remain low.

This paper can be accessed here.

This paper is authored by Purvi Thangaraj and Ashok Gulati, ICRIER.