A significant portion of India’s agriculture budget, approximately 73%, is allocated towards welfare schemes and subsidies, according to a report by the Indian Council for Research on International Economic Relations (ICRIER). These initiatives, including the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and subsidies for food and fertilizers, account for a substantial US$ 54.34 billion (Rs. 4.55 trillion).
The report, authored by agriculture economists Mr. Ashok Gulati and Ms. Purvi Thangraj, highlights that food and fertilizer subsidies comprised over 50% of the Union Budget for the rural and agrarian sectors in FY25. With the central government allocating US$ 74.05 billion (Rs. 6.2 trillion) to the agriculture sector, which constitutes 13% of the overall budget of US$ 575.66 billion (Rs. 48.2 trillion), it is noted that agriculture contributes 18% to GDP.
Despite these significant allocations, the welfare initiatives have not effectively addressed the issue of low rural incomes, with the average income for a rural family being less than US$ 238.86 (Rs. 20,000) per month.
Low incomes in agricultural households impact demand for non-agricultural goods and limit manufacturing sector growth. He emphasizes that investments in agricultural research and development, irrigation, and skill development yield better returns than traditional welfare schemes.
The household consumption survey by the Ministry of Statistics and Programme Implementation’s (MOSPI’s) National Sample Survey Office (NSSO) revealed that rural individuals spent US$ 45.06 (Rs. 3,773) monthly on average in 2022-23, compared to US$ 77.14 (Rs. 6,459) for urban individuals. Rural demand is marginally improving, dependent on erratic monsoons, higher inflation, and unseasonal rains.
He suggests rationalizing expenditure on subsidies and investing in developmental expenditures, which could also lead to adopting climate-smart practices and improved crop yields. In Budget 2024, Union Minister for Finance and Corporate Affairs Ms. Nirmala Sitharaman proposed measures to boost the agriculture sector, including new high-yield variety seeds, natural farming provisions, promoting self-sufficiency for oil seeds and pulses, and digital public infrastructure for farmers.
