Prof Meenakshi Rajeev
The Indian economy has shown a deceleration of growth during recent quarters where the data on GDP at constant prices shows growth rates falling from 6.7% in Q1 of 2042-25 to 5.4% during quarter two and consequently a need has been felt to boost the economy in terms of income and growth. If we look at the percentage contribution of private final consumption expenditure (PFCE), its share has fallen from 58 percent to 55.6 percent which calls for an expansion of consumption demand. Growth of PFCE has also fallen considerably to a level of 3 percent. In that regard,the rural economy assumes considerable importance as it can boost growth through rural demand generation. As per recent employment data, about 60 percent of people depend on agriculture and allied activities while the share of manufacturing has fallen from 12.1 percent to 11 percent in 2024. The agriculture sector in India however, was showing a meagre growth of 1.7% during Q2 of 2023-24..percent which only recentlyimproved to 3.5 percent during Q2 of 2024-25.Given this scenario boosting agriculture becomes a critical strategy and the budget of 2025-26 has rightly placed considerable emphasis on this sector. Needless to say, the sector assumes significance for the state of J & K which is highly dependent on agriculture and can benefit from these initiatives.
Amongst various measures suggested by the honorable Finance Minister in the budget 2025-26, Prime Minister Dhan-Dhaanya Krishi Yojana,aprogramme that will be initiated in partnership with states, whereby there is a plan to Develop Agri-based Districts is noteworthy. The programme is envisaged to cover 100 districts that are characterized by low agricultural productivity, and credit off-take. This is a programme where the state of J & K can take part to improve agricultural productivity for certain low-performing districts. In addition, joining hands with the local governance system, a rural prosperity and development scheme has been planned for skilling the rural youths and ensuring technological innovation and usage within the rural area itself so that rural-urban migration is curtailed. The state of J & K has already planned a skilling programme under mission YUVA and a synergy can be built with this newly announced progamme. Given our urban-centricdevelopment, there has been a large rural-urban migration in the hope of getting jobs in the urban areas However, youths often moving to the urban areas are engaged in informal jobs and subsistent self-employment, a scenario which needs to be changed.
Domestic demand for nutritious food has been increasing over the years in India, includingfor pulses as well as fruits and vegetables which resulted in a demand-supply mismatch for some of these crops leading to food price inflation. Data reveals that food price inflation is at 8.37 percent (in Dec 2024, MOSPI source) which is beyond the RBI’s tolerance band. Such inflationary pressure in turn leads to contractionary monetary policy measures thereby dampening investment and lowering GDP growth. To be atmanirbhar in pulses,the mission for pulses is introduced in the budget, and procurement by the Government is planned. Similarly, there will be a comprehensive programme for fruits and vegetables as well. High-yielding variety seeds will also be introduced through R&D efforts so that productivity enhancement can take place. Under the mission for cotton, measures to improve productivity are announced which can boost the labor-intensive textile industry. These measures are expected to boost the rural sector in general and agriculture in particular.
Even with various measures to improve the performance of the agriculture sector, earnings of the farmers in India are still not encouraging and there is scope for improvement. The recent round of NSSO data on situation assessment survey of farmer households (77th round NSSO)reveals that the average monthly income of an agriculture household on an average is around Rs 10,218. This is partly because a large percentage of farmers are marginal with very small holdings leading to subsistence farming. This results in minimal savings and and regular need for credit to meet the working capital needs. To facilitate farmers to get loansKisan credit cards (KCC) have been introduced and there are about 7.7 crore farmers, fishermen, and dairy farmers benefitted from KCC. Loan under the KCC gets interest subsidy under the interest subvention scheme up to Rs 3 lakhs. This limit is now enhanced in the budget of 2025-2026 to Rs 5 lakhs for loans taken through the KCC. Though it is encouraging to see that agriculture credit has been increasing over the years there is disproportionate access by farmers of different land holdings. For example,the recent round of NSSO data on the situation assessment survey of farmer households reveals that about 20 percent of loans are from informal money lenders, but it is as high as 56 percent for the farmers with the smallest land holding of 0.01 hectare.
Thus there is a need to ensure access to credit,especially for the landless, tenant as well as small and marginal farmers who often face problems due to a lack of land records as mutation at times does not take place automatically.
Climate change has also madeagriculture much more vulnerable asthe variability of extreme climate keeps changing over the years. In this regard,crop insurance is an important instrument for risk mitigation, but the Prime Minister’s Fasal Bima Yojana saw limited success with less than 25% of cultivated land being covered. There is a need to make this scheme attractive by introducing technologies for better assessment of crop loss by farmers and other measures. If we look at the allocation for crop insurance (Pradhan Mantri Fasal Bima Yojana) in this budget, it is at Rs 12242 crore, which was Rs 15864 crore during 2024-25, thus showing a decline.
Looking at the rural livelihood options in general, one observes that farming offers only limited returns. With work as an agricultural labourer being seasonal, the rural non-farm sector has the potential to play a vital role in generating year-round employment opportunities. As per recent data, the non-farm sector accounted for around 40 percent of total employment in rural areas. While this is an encouraging trend, examining the recent NSSO 73rd (2015) round data, one observes that as high as 91 percent of rural non-farm enterprises are own-account enterprises, meaning that they employ only household members (no hired labour) with a rather low level of value addition per worker (Rs 55,495 annually). Of the rural non-farm enterprises, only 35 percent are engaged in manufacturing, and the rest are in services out of which 33 percent are in trading, and around 31 percent in other services. In the category of trading, 88 percent are again own-account enterprises, implying that most rural trading establishments are probably petty shops, which may barely support the livelihood of one family. There is a need to develop this sector through knowledge dissemination, skilling, and credit delivery. We hope that some of the measures taken in this budget to develop the MSME sector will help to boost the rural non-farm sector as well to improve the livelihood of the rural populace.
(The Writer is Professor, IIT Jammu)