People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 10

March 10, 2013


Budgetary Allocations Open Rural Economy to Corporate Capital



Archana Prasad


IN his budget speech, the finance minister laid out his priorities when he stated, “our goal is higher growth leading to inclusive and sustainable development. That is the mool mantra.” He argued that the Indian growth story was on track and that the nation had coped with the global crisis rather well by performing better than most of the developing countries.




In the process of lauding the performance of the economy, however, the minister refused to acknowledge the severe crisis in rural India. Since the advent of reforms, agriculture, on which 580 million farmers and many more from the non-farm sector are dependent, is in deep crisis.


The economic survey of 2012-13 acknowledges that the growth of the agricultural sector has been lower than the expected four per cent per annum and reflected the growing unemployment in the sector where employment fell by about 3.7 per cent for men and 2.8 per cent for women in 2009-10. At the same time the number of reported farmer suicides has been increasing both amongst landholding peasants as well as the rural farm workers. About 2.5 lakh farmers have committed suicides in the last five years alone, thus reflecting on the state of the Indian farmer.


The budget proposals of 2013-14 need to be seen in this very larger context, as it seems that the pathway charted out by UPA-2 as reflected in the finance ministers vision has little space for poor farmers and rural workers. In the light of this it also unlikely to solve the problems of the Indian farmers and rural workers whose crisis of livelihood results from the neo-liberal policies that this budget seeks to further.




The two ministries responsible for acting as nodal points for creation of employment and agricultural development are the Ministry of Agriculture and the Ministry of Rural Development. In his budget speech the finance minister claims that these ministries have been given enhanced allocations over the last year’s revised budget. Thus he calculates that the Ministry of Agriculture has been allocated 22 per cent more than last year whereas the Ministry of Rural Development has been allocated 46 per cent more than the amount they spent in the last year.


However, this increase is merely notional if the allocated estimates of these ministries are to be compared with the budgetary allocations last year where there had been an increase of 6.7 per cent for the Ministry of Agriculture and a mere five per cent increase for the Ministry of Rural Development. Such an increase is not even enough to take care of the rise in annual inflation that the country has been witnessing.


Thus in real terms there has been a reduction in allocation rather than an increase, as projected by the finance minister. This is evident from the fact that the spending on agriculture continues to remain at 4.8 per cent of the entire planned expenditure and 1.6 per cent of the total expenditure. For the Ministry of Rural Development, the scenario is even more abysmal where the proportion of allocation has declined from 14.6 to 14.4 per cent in case of total planned expenditure and 5.1 to 4.8 per cent as a proportion of the total budget expenditure. This is further evident from the fact that the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme remains the same at Rs 33,000 crore and the allocation for the National Rural Livelihood Mission has increased by a mere 96 crore rupees or by 2.6 per cent over the last year. This in itself shows that the government is not serious about solving the problem of employment creation; rather it is keener to open up the rural economy to the private sector.




The finance minister has allocated Rs 2025 crore (a mere 14 per cent increase over the last year’s allocation) to the National Food Security Mission which is responsible for augmenting the production of rice, wheat and pulses. Yet the achievement of food security depends not merely on the increase in productivity but also on the distribution and cheap availability of foodgrains.


The allocations for food subsidies have to be seen in this light. The non-plan food subsidy has remained static at Rs 80,000 crore and has fallen from 5.3 to 4.8 per cent of the budgetary expenditure. If the Rs 10,000 crore announced for the initiation of the National Food Security Bill are added to this subsidy, it then amounts to 5.4 per cent of the total budgetary expenditure.


But all the estimates for the implementation of the food security bill suggest that these allocations are grossly inadequate even for one year. This shows that the government is not interested in universalising the public distribution system (PDS) and that the announcement of the National Food Security Act is a political tactic for the 2014 elections.


Similarly, the fertiliser subsidy has also remains static at 2.6 per cent of the entire spending. Further, many schemes for the promotion of plant protection, seed propagation and other extension services have suffered cuts in this budget. This needs to be contrasted with the situation in China where the farm subsidies have gone up by 40 per cent in the last six years in order to boost agricultural growth.




This increasing role of the Chinese state to combat its rural crisis needs to be contrasted with the Indian situation where the budget of 2013-14 makes important concessions to agri-business and private companies.


Two of the main beneficiaries in the budget are the insurance and banking sectors. The finance minister has increased the farm credit target from Rs 575,000 crore to Rs 700,000 crore in the current year. Under this scheme the farmers who repay loans on time can get credit at a simple interest rate of four per cent. While announcing increased budgetary support for the flawed business correspondent model for public sector banks, the government has also given permission to private banks to provide credit facilities to farmers. While rich farmers’ federations have welcomed this step, it is the distressed farmers who will be the greatest sufferers. The organisations representing such farmers have already voiced their concern by saying that only rich farmers with corporate tie-ups can afford timely loan repayments in an open market system. The lack of a debt relief measures in the budget and rehabilitation support for family of farmers who have committed suicide will further accentuate the agrarian distress.




The focus on extending the links between farmers and the open market with corporate players may also be seen in the announcement of incentives to form farmers’ producer companies. The finance minister has announced a contribution of Rs 50 crore to provide for an equity fund for such companies and Rs 100 crore for the Small Farmers Agri-business Consortium (SFAC) which has been the nodal body for such companies. Such companies are meant to be formed to increase the bargaining power of the farmers vis-a-vis other corporate players. However, this purpose can only be met if the farmers are backed up by state farm support as well as market protection. In the absence of this, the farmers’ producer companies may become the middlemen for larger agri-businesses as seen with the experience of the SFAC. In this situation the budgetary provisions announced this year may only end up subsidising the corporate penetration of the agrarian sector.




Finally, the budget has announced its intention to push for high value agriculture and crop diversification that is crucial to corporatisation of agriculture. It has announced a new pilot scheme for nutri-farms which will give a boost to big micro-nutrient companies and retail giants. It has also given an additional push to state initiatives in this direction by increasing the allocation for the Rashtriya Krishi Vikas Yojana (RKVY) by 8.3 per cent. Hence the centre has formulated and incentivised a policy that the state governments of non-green revolution states would be encouraged to follow if they are to receive additional assistance for their agricultural development.


This overall direction is fully in keeping with the recently revised guidelines for the RKVY scheme that allow the corporates to determine the cropping pattern and to organise small farmers in the public-private partnership mode. But since this path will increase the risk of farmers and make them more vulnerable these new allocations are a sure recipe for further aggravation of the crisis facing the rural economy.


Seen in the context of pre-budget policy changes in the agricultural and rural development sectors, the budget of 2013-2014 has only laid the foundations of the greater penetration of corporate capital into the agrarian economy. In this sense, far from solving the crisis of the Indian farmer and rural workers, it is only likely to accentuate this crisis by integrating them with global capitalism.