Event Report
Sana Ansari
The event “Rural Realities and Union Budget 2024-25,” held on July 27, 2024, was part of IMPRI’s 5th Annual Series of Thematic Deliberations and Analysis of the Union Budget 2024-2025. Organised by the Centre for Habitat, Urban and Regional Studies (CHURS) at IMPRI Impact and Policy Research Institute, New Delhi, the discussion aimed to provide a comprehensive analysis of the Union Budget’s impact on rural realities.
The session was introduced by Ms Tripta, a researcher at IMPRI, who set the stage for the discussion and introduced the panel of experts. The chair of the discussion was Dr. J Dennis Rajakumar. The distinguished panel included: Prof. CSC Sekhar, Dr. Donthi Narasimha Reddy, Prof. Gummadi Sridevi, Dr. Jawed Alam Khan, Prof. R.S. Deshpande, Mr. V.R. Raman and Dr. G.V. Ramanjaneyulu. It was followed by a short presentation by Dhruv Tapadia, a researcher at IMPRI.
Economic Growth and Rural Sector:
Dr. J. Dennis Rajakumar ji emphasised that India’s growth prospects are closely tied to the rural sector, despite urbanisation over the past two decades. To understand the Union Budget’s impact on the rural sector, one must grasp rural realities. The presentation highlighted that agricultural growth for 2022-23 was projected at 4.7%, lower than the overall economic growth rate of 6.7%. For 2023-24, agricultural growth is expected to be only 1.4%, the lowest in the past seven years, compared to an overall growth rate of 7.2%.
Non-farm Sector:
In non-farm sectors, rural industrial output has increased from 49% in 2017 to 52% in 2022. However, distress in manufacturing affects the rural sector as well. The shift in industrial output indicates that industries are relocating to rural areas, or the urban sector is losing out to rural areas. The speaker mentioned that labour force participation rate in rural areas rose from 37% in 2017 to 43.3% in 2022-23, while the unemployment rate dropped from 5.3% to 2.4%. Despite this, more than 60% of the rural labour force is still absorbed by the primary sector, indicating a lack of structural transformation. Further, wage rates for certain non-agricultural occupations have risen, but when adjusted for rural inflation (6.2% rise from June 2022-23), the real increase in wages is negligible. Rural inflation compared to urban inflation shows that rural areas are not better off.
Key Insights from Experts:
Prof. R.S. Deshpande ji highlighted that the gap between the growth rates of agricultural product prices and factor product prices has widened, reducing agriculturalists’ take-home income. This growing gap clearly indicates that farmers’ incomes are decreasing over time. Talking about commercial agriculture, the speaker mentioned more farmers are shifting to commercial crops like soybeans. The budget supports supply chain management for vegetables and fruits, benefiting urban consumers more than rural ones. This commercialization trend means that rural consumers are often left behind in policy considerations. Rural roads and infrastructure need prioritisation. Market density is low, with farmers often travelling several hours to reach markets. In some cases, it can take up to eight hours for farmers to reach the nearest market, highlighting the need for better market accessibility. The speaker highlighted that cooperatives have not been successful. Agricultural research should focus on farmers’ needs, such as climate-resilient agriculture. The current research is largely supply-driven rather than demand-driven, which fails to address the actual needs of farmers.
Prof. C.S.C. Sekhar ji pointed out that the budget lacks a holistic approach to agriculture and rural development. Programs often see large, unexplained fluctuations in allocations. For example, there is a sudden allocation of ₹10,000 crore for the price stabilisation fund, with no explanation from the finance minister. It was emphasised that more focus is needed on extending research findings to farms. The budget should support natural farming and digitization initiatives. Natural farming requires more substantial financial backing to support the transition of farmers.
Dr. Donthi Narasimha Reddy ji observed that the largest budget allocation is for interest payments, not rural development. Vulnerable communities and climate change mitigation are ignored. The budget’s priorities appear misaligned with the needs of rural areas and vulnerable populations. While talking about the contradiction in the survey, the speaker said while the survey claims good agricultural performance, it also calls for reforms, creating confusion. If agriculture is performing well, the need for reforms should be clearly justified. The budget’s focus on skilling youth lacks incentives to protect existing rural livelihoods. There is an allocation of ₹10,000 crore for employment schemes, but it does not address the protection of current rural employment.
Dr. Jawed Alam Khan ji pointed out that budgets are based on incremental increases without proper assessment and planning. This approach often fails to address the real needs and challenges of the rural sector. More focus is needed on Panchayati Raj institutions. Effective implementation and utilisation of funds are crucial. The mechanisms for implementing budget allocations need to be examined and improved. While talking about Pradhan Mantri Gram Awas Yojana and MGNREGA, the speaker highlighted that these schemes could help mitigate rural problems, but they face issues like delayed wage payments and inadequate wage rates. Addressing these problems is essential for the schemes to be effective.
Dr. G.V. Ramanjaneyulu ji noted that the budget allocation for natural farming is insufficient for meaningful transition support. With only ₹356 crore allocated, the per-farmer support is minimal, making it challenging for farmers to adopt natural farming practices. Research should be accountable and focused on farmers’ needs. Support for end-to-end agricultural enterprises is lacking. The current research efforts do not align well with what farmers need, such as climate-resilient crop varieties. Several programs exist, but without end-to-end support, they are unlikely to succeed. Comprehensive support is needed to help farmers and rural youth enter new enterprises and markets.
Prof. Gummadi Sridevi ji mentioned that budget cuts in schemes like PM Poshan (midday meals) affect food security. Female labour force participation has increased, indicating the need for more rural opportunities. The reduction in social funding impacts overall well-being. Further, it was discussed that funding for social services and education has dropped, impacting overall well-being. The budget allocation for anganwadi centres has also decreased, which can negatively affect child nutrition and development.
Conclusion
The panel highlighted the need for a more integrated and farmer-centric approach in the budget, focusing on increasing farmers’ income and addressing rural challenges comprehensively. Key suggestions included democratising budget formulation, enhancing research and development, and improving market access and rural infrastructure. There is a significant need for a budget that is responsive to the actual needs of rural areas, ensuring that policies and programs truly benefit the rural population and contribute to sustainable development.
Acknowledgement: Sana Ansari, a researcher at IMPRI, pursuing a Master’s in Public Policy at St. Xavier’s College, Mumbai.
