Someone rightly described the recently announced budget not merely a Vote-on-account budget, but an accounting-for-votes one. The pitch was brilliant – both as a political and social document. The measures to alleviate farm distress, especially for small farmers is one of the cornerstones of this budget. So are the sops to the middle class. But there are some niggling doubts.
First, there is constant talk about doubling farm incomes. Just look at the latest Nabard report (see table). The average monthly farm income for agricultural households was just around Rs.3,140. Do bear in mind that this is just the average. On the lower side, farm incomes are much less than Rs.1,000. Doubling them would get them only Rs.2,000 at best.
That is where the minimum guaranteed income of Rs.6,000 per farmer is a good idea. But that too works out to just Rs.500 per month. Moreover, it is not clear if this is only for landholders of less than 2 hectares of land (the Telangana model) or for landless labourers and sharecroppers as well (the Odisha model). Even so, the money is too low for decent sustenance.
The farmer needs another model. One of them that this author recommends is guaranteeing them at least 50% of the market price for agri produce. This was what Dr Verghese Kurien of Amul fame did. It is sad that government after government has ignored this time-tested model (http://www.asiaconverge.com/2018/08/farmers-in-india-dont-earn-much-many-are-terribly-exploited/).
Take the other issue of fiscal consolidation. That is a good idea. But as a recent CARE Rating report showed, the government has kept its debt down because it has resorted to extensive off-budget borrowing and funding. The chart alongside shows how off-budget financing has reached an all-time high.
There is nothing illegal about this. But when money is taken by the government from central public undertakings and other such bodies (it wants to do this from the Reserve Bank of India too), it leaves such organisations with less money to plan their own expansion and their own funding needs. Thus, at the cost of maintaining a budget deficit ratios, the government will end up weakening such undertakings to that extent. This needs to be watched very carefully.
The budget makes all the right sounds. But as it is only an interim budget, it has not talked about the source of funds for some of its plans. There are other gaps as well. But those shall be dealt with later.