- The document discusses key trends and challenges in Indian agriculture, including declining private investment and dependence on rainfall. It outlines government schemes aimed at doubling farmer incomes by 2022 through increasing productivity, risk mitigation, and diversifying incomes. - The 2018-19 budget prioritizes agriculture, rural development, and infrastructure spending. It focuses on interest subsidy, crop insurance, irrigation, and electrification schemes. - Issues remain around monitoring scheme usage, expanding price support beyond a few crops, and improving access to credit and markets for small farmers. Infrastructure spending targets roads, housing, and rural digital connectivity to link farms to markets.

1. Union Budget 2018-19
5-Institute Budget Seminar
New Delhi, 10 February, 2018
Shekhar Shah
NCAER
1

2. Agriculture
2

3. Key Trends in Agriculture
3
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
GVA Agriculture
Growth in GVA in Agriculture & Allied
Sector at 2011-12 prices (in %)
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
0.0
2.0
4.0
6.0
8.0
10.0
Gross Capital Formation
Growth in GCF in Agriculture & Allied
Sector relative to GVA (in %)
2013-14
2014-15
2015-16
2016-17
2017-18
50% of Agriculture in India is still
dependent on rainfall
Decline can be attributed to
reduction in private investment
Source: Central Statistics Office

4. Key Challenges in Agriculture
4
Majority of farmers dependent on
rainfall and even with good
harvest, farmers don’t get
sufficient price to cover full cost
expenses
Price Fluctuations
Lack of connectivity and transport
systems, food processing units,
reliable power, cold storage.
Limited access to financial
services, credit, support
expertise, education services or
irrigation.
Lack of Infrastructure
Less than 20% of the farmers are
currently covered under crop
insurance
Crop Insurance
Poor access to market,
information on weather forecasts,
price and yield at time of sowing.
Lack of Technology
Increase farmers’ capacity to
absorb technology and adopt risk-
mitigating measures.
Lack of Education

5. Key Objectives in Agriculture
5
High-budget Government Schemes
Diversify Farmer
Incomes
Mitigate Risk
Improve
Productivity
Interest Subsidy for Short Term Credit to Farmers √ √
Green Revolution √ √
Crop Insurance Scheme √
Pradhan Mantri Krishi Sinchai Yojna √ √ √
Deen Dayal Upadhyaya Gram Jyoti Yojna √ √ √
White Revolution √ √
Price Stabilisation Fund √ √
Diversify Farmers’ Income: Facilitate the development of agricultural sub-sectors
like livestock and fisheries, to encourage a move from crop to non-crop sectors
Mitigate Risk: Make farming a sustainable and profitable economic activity
Improve Productivity: Focus on critical inputs such as irrigation, seeds, fertilizers,
and mechanization.

6. • First budget pillar -
Agriculture and Farmers’
Welfare: 2X farm income by
2022-23 (base year 2015-16)
• Second budget pillar - Rural
Sector: boost infrastructure &
employment
• Rural expenditure boost - in
absolute and percentage
terms of the Budget
6
50,814 56,589 63,836
113877
135604
138097
2016 - 17* 2017 - 18** 2018 - 19***
TOTAL BUDGET ALLOCATION TO
MOA & MORD (CRORES)
Agriculture Rural Development
Key Budget Focus - Powering the Rural
Economy

7. Ag. Schemes with Highest Expenditure Shares
planned for 2018-19
7
Interest Subsidy for Short Term
Credit to Farmers
24%
Green Revolution
23%
Crop Insurance Scheme
21%
Pradhan Mantri
Krishi Sinchai Yojna
15%
Deen Dayal
Upadhyaya Gram Jyoti
Yojna
6%
White Revolution
4%
Price Stabilisation
Fund
3%
Others
4%

8. • Interest subsidy continues to
remain largest share in total
expenditure, Rs 15,000 cr.
• Scheme reported to be misused
by large farmers who borrow at
subsidized rates to invest in
higher return schemes, or lend
to unbanked farmers
• No clear framework to monitor
and evaluate who avails scheme
and how it is used, or how it
should be modified based on
experience
8
2016-17 2017-18 (BE) 2017-18 (RE) 2018-19 (BE)
Interest Subsidy for Short Term
Credit to Farmers (Amount in
Rs. Crores)
13397 15000 14750 15000
12500
13000
13500
14000
14500
15000
15500
Interest Subsidy for Short Term Credit to Farmers
(Amount in Rs. Crores)
Interest Subsidy on Short-term Credit

9. • Scheme focuses on critical
inputs: irrigation, seeds,
fertilizers & mechanization
• Potential to raise productivity
up to 30 % and reduce cost of
cultivation up to 20 %
• Raise productivity of small
farm holdings
9
10105
13741
11185
13909
2016 - 17 2017 - 18 (BE ) 2017 - 18 (RE ) 2018 - 19 (BE )
GREEN REVOLUTION (AMOUNT IN RS.
CRORES)
Green Revolution Scheme - Boost Ag.
Productivity

10. Persistent focus on Crop Insurance Scheme
Justification & Implementation Risks
Crop insurance plays a major role in stabilizing farmer incomes -
this is keeping in line with Doubling Farmer Income plan of the
government
Risks are highly correlated in agriculture: insurance
works best when they are not & probability of loss
is low (but high at 14-20%)
Currently, this only reaches about 20% of the farmers, but over
the years the number has increased – As of 2016-17, there was
an 18.3% increase in farmer applications, 10.8% increase in area
insured and 76% increase in sum insured under the scheme
Moral hazard: Subsidising premiums will encourage
risk-taking, especially for MSP crops, where this is
already suboptimal
10
2016-17 2017-18 (BE) 2017-18 (RE) 2018-19 (BE)
Crop Insurance Scheme (Amount
in Rs. Crore)
11052 9000 10698 13000
0
2000
4000
6000
8000
10000
12000
14000
Crop Insurance Scheme (Rs. Crore)
Pradhan Mantri Fasal
Bima Yojana -
continues to remain
high priority scheme
44% increase in
Budget allocation

11. Increase in MSP
11
Complementary Doubling Farmer’s Income recommendations not implemented
• Mechanisms for data collection on FHP at more disaggregated level needed
• Expanding the MSP to private sector participation
• Offer special status to start-ups and other enterprises that purchase directly from
farmers
Both Rabi and Kharif crops Gov. to intervene if market price < MSP
Proposal – Farmers should realize at least 50% more than the cost of their produce
Issues
Farm harvest price (FHP) available only at the state or district level with a certain time lag
Reach of FCI is limited to a few states and to a few crops. All states won’t benefit from this policy
Uses the “A2 + FL” (paid out input costs + imputed value of family labor), instead of
comprehensive “C2” (A2+FL+imputed rent on owned land + interest on capital)

12. Electronic National Agriculture Market
(eNAM)
12
While FM has proposed to liberalize export of agri-commodities but stability of trade policy
in respect of agri-commodity is required
Earlier, a more “consumer-centric” approach was adopted to deal with the price hike
situations –– DFI Committee feels that a more “farmer centric” approach is required to give
farmers the advantage of good domestic and foreign prices
22,000 Rural Haats
Gramin Agri Markets
1. Benefitting more than 86% small and marginal farmers
Issues
Harmonization of the various product standards and grading parameters adopted by different
agencies (BIS, APEDA, FSSAI, Agmark, etc.) - pre-requisite to creation of a NAM which works on
the online platform
Benefits
2. Electronically linked to e-NAM and exempt from
regulations of APMCs
3. Agri-Market Infrastructure Fund with a corpus of Rs
2,000 crore will be setup for developing and upgrading
agricultural marketing infrastructure

13. Prime Minister’s Krishi Sinchai Yojna
13
0.0
2000.0
4000.0
6000.0
8000.0
10000.0
Allocation to Krishi Sinchai Yojna 2013-19
2013-14
2014-15
2015-16
2016-17
2017-18 BE
2017-19 RE
2018-19 BE
Targeted – 96 districts
Installation of Solar
Pumps for irrigation
PMKSY – one of the key schemes aimed at Doubling Farmer Income by 2022
PMKSY launched in 2015 to massively boost the coverage of irrigated area

14. Implementation Failure
• Need to build system to allow farmers to access credit –liberalise to allow farmers to access short-
medium-long term credit
• Small and marginal farmers will benefit from efficient marketing only if they have holding capacity
through pledge finance (post-harvest loans against produce as collateral). DFI recommendation not
implemented
Conclusions
16
Broadly follows the Policy Recommendations of DFI Committee
Key
Emphasis
Crop
Diversification
Animal
Husbandry
High Value Crop Fishing
Incentives for production beyond crop agriculture: Extending the facility of Kisan
credit to fisheries and animal husbandry farmers

15. Infrastructure
17

16. Infra. Schemes with Highest Expenditure
Shares planned for 2018-19
18
National Highways
Authority of India
including Road Works
39%
Pradhan Mantri Awas
Yojna(PMAY)
15%
Pradhan Mantri Gram Sadak
Yojna
10%
Metro Projects &
MRTS
8%
Urban Rejuvenation
Mission: AMRUT and
Smart Cities Mission
7%
Bharatnet
6%
Integrated Power
Development Scheme
3%
Police Infrastructure
3%
Others
3%
Infrastructure a major growth
driver of the economy
Infrastructure allocation:
2018-19 - Rs.5.97 lakh crore
2017-18 – Rs.4.94 lakh crore

17. Key Trends in Infrastructure
19
CAPEX for NEW PROJECT declining
precipitously during quarters of 2017-18
STALLED PROJECTS shows much
variation during quarters of 2017-18.
Source: CMIE, Economic Outlook.
4.03
2.12
1.21 0.88
0
1
2
3
4
5
March_2017 June_2017 Sep_2017 Dec_2017
New Projects (Rs. trillion)
New projects
0.74
2.67
0.67
0.93
0
0.5
1
1.5
2
2.5
3
March_2017 June_2017 Sep_2017 Dec_2017
Stalled projects (Rs.
trillion)

18. Boosting Rural Infrastructure
30% increase in rural infrastructure
spending as compared to previous year to
Rs. 14.34 lakh crore (employment – 321 cr
person days; rural roads- 3.17 lakh kms;
toilets – 1.88 cr; Electric connections –
1.75 cr)
Connect agriculture markets, food parks,
ground water development, electricity for
all
Under PMGSY, close to 57,000 km roads
will be built with a total cost of Rs. 19,000
crore
Rural housing catalytic to reviving
industries in the infrastructure segment
Construction of 51 lakh rural houses in
2017-18 and another 51 lakh rural houses
2018-19 - huge boost for the construction
sector
Five lakh Wi-fi hotspots to provide broad
band access to 50 million rural citizens
RURAL SPENDING GRAM SADAK YOJANA
AWAS YOJANA DIGITAL INFRASTRUCTURE

19. Convergence of Rural and Urban Infra.
21
Major push to develop rural infrastructure – Improve the physical and
digital connectivity between rural and urban areas
Schemes Description
Budget
Allocation
2017-18 2018-19
National Highways Authority of India
including Road Works
Promote economic and social well-being to improve quality of life
through seamless road networks
64483 70544
Shyama Prasad Mukherjee Rurban
Mission
Aimed at stimulating local economic development, enhancing basic
services and creating well planned rurban cluster
1000 1200
Regional Connectivity Scheme Seeks to air connect India’s small towns at affordable prices 0 1014
Sagarmala
Enabler of other government initiatives such as Dedicated Freight
Corridor, UDAN-RCS. Improves Rurban infrastructure through road,
rail and inland
600 600
Promotion of Digital payment
Govt’s push towards Digital Technologies to bring the unbanked
adults inside the regulated financial system
0 596

20. Push towards DIGITAL infrastructure
22
• Flagship Govt. Initiatives : Start Up
India, Make In India, digitally
integrated now, through use of
Machine Learning, Artificial
Intelligence, Internet of Things, 3D
Printing.
• Increase Digital footprint in
Education: Upgrade Skills of Teachers
using digital portal (DIKSHA), From
“black board” to “digital board” in
classrooms
• Push towards promotion of Digital
Payments 0
100
200
300
400
500
600
700
2016-17 2017-18 (BE) 2017-18 (RE) 2018-19 (BE)
Promotion of Digital payment
( in Rs. Crores)