29 Jan, 2024
The budget for 2024-25 is around the corner and the entire nation has set its eyes on 1st February 2024 as Finance Minister Nirmala Sitharaman will present the 2024 Interim budget on this date. India is an agriculture-dominated nation and every budget gives substantial attention to this sector.
Let’s anticipate what the 2024 budget might offer to this sector.
According to the experts, the government might increase the agri credit target in the upcoming budget 2024. The expected amount is somewhere near Rs. 22 - 25 Lakh crore. The government will take measures to ensure that eligible farmers will have access to this credit for sure.
Presently, 82% of the agri-credit target of Rs 20 Lakh crore is already achieved by the end of December 2023. Director General of the industry body, CII Chandrajit Banerjee, also thinks that the agriculture and rural segment will remain the priority in this interim budget 2024.
According to CII, the current subsidies on food and fertilizers need to be more rationalized.
Presently, the food subsidy program of India is based on the Household Consumer Expenditure Survey 2011-12 data. This is an outdated database to form such a crucial subsidy scheme. Hence, the Indian government should come up with a plan to bring recent data into action.
The expected fertilizer subsidy for the upcoming fiscal year is Rs.4 trillion. If we go by the forecasting of the Ministry of Consumer Affairs, Food, and Public Distribution, the food subsidy expenditure is likely to be $26.52 billion for FY25, which is nearly 10% more than the $24.11 billion allocation in FY24.
To promote agricultural advancements, the government is also offering a 200% tax rebate on R&D spending. Gurmukh Roopra, CEO of Namdhari's Group, says that this tax rebate should carry forward in the upcoming 2024 budget as well. This will encourage tractor manufacturers and other farm mechanization businesses to give constant focus on research.
Even though India is an agricultural nation, it lacks farm mechanization up to a great extent. Only 40% of the agricultural sector is mechanized, which is way less than Brazil (75%) and China (57%).
It's the opportune time for the Indian government to shift its focus on farm mechanization because the workforce in the agricultural sector is likely to reduce in the coming time. Over the course of 60 years, agricultural employment has gone through critical changes.
For instance, 72% of the Indian population was part of the agricultural domain in 1980 which came down to 60% in 2000.
In 2022, a total of 43% of the Indian population was employed in the agricultural sector. Market studies have revealed that this workforce percentage will decline further and can down to 25% in the future. This constant drop in the farming workforce put much emphasis on farm mechanization as it can deal with labor shortages.
Besides, farm mechanization is the need of the hour because of the reduced productivity of India. As compared to China, where agricultural productivity per hectare is 6.7 tons for rice and 5 tons for wheat, India lags. India’s agricultural productivity is only 2.4 tons of rice and 3 tons of wheat per hectare.
Mechanization of farming and offering subsidies on implements are two measures that hold the potential to augment overall productivity.
Mr. Narinder Mittal, Country Manager & Managing Director, Agriculture Business – CNH India & SAARC, sees a great opportunity in this sector. According to him, “We anticipate a forward-looking Union Budget this year as well, as the government has made the agriculture sector one of its main priorities. To prepare the agricultural sector for the future, we hope to see measures that can further aid in the adoption of innovation and technology to improve agri-mechanization in our country. Initiatives to improve farmers' skills and understanding of modern farming methods, financial literacy, and other relevant aspects will be crucial for the industry in the long run."
Tractor Gyan’s CEO, Mr. Shivankur Gupta, also has some useful insights to share - “Farm mechanization is the backbone of the agricultural industry and we all know it. A great percentage of Indian farmers already own tractors according to their needs and budget. However, it's time that farm implements should also take center stage. The agricultural workforce shortage is a real concern for the government. This opens the doors for subsidies on implements. This will have a direct impact on farm mechanization and increase farm production. Implements like harvesters, mulchers, rice planters, rotavators, and many more are here to empower farmers. All these implements automate a wide range of farming activities and won’t let labor shortage issues bother farmers. They make farming quick and less strenuous”.
Every budget tried its best to address the challenges of the farming sector and provide substantial financial support to the key stakeholders of this industry and the farmers. The upcoming budget is an interim budget 2024 and the full 2024 budget is due in July 2024, after the Lok Sabha elections.
Despite that, this 2024 budget is likely to contribute greatly towards the growth of agriculture sectors with predicted tax rebates, high agri-credit, and fertilizer subsidies. Industry experts suggest the government take a paradigm shift toward subsidies on implements and mechanization of farming.
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