Union Budget 2023-24: What it brings for rural livelihoods?

Sambodhi > Blog > Governance > Union Budget 2023-24: What it brings for rural livelihoods?
Posted by: Deepti Narsawat
Category: Governance
Union Budget 2023-24: What it brings for rural livelihoods?

The Union Budget has always been an awaited document for Indian citizens. It is not merely a financial accounting document but rather a blueprint of the government’s investment for the growth and welfare of its population. The expectations were set high because the Economic Survey of India 2022-23 (ES 2022-23) highlighted that the country has moved on from the economic challenges induced by the global pandemic.

The budget was expected to represent the Indian government’s plan to make India one of the fastest-growing economies at 6.5-7.0 percent in FY23. The presidency of the 17th G20 summit allows India to highlight itself in the global economic space. The budget thus prioritized the seven central pillars aligning with the G20 summit theme, ‘Vasudaiva Kutumbakam, ’ highlighting inclusion and growth for all. The overarching objective is to achieve incremental growth by 2047 when India completes 100 years of independence. The tenure is critical and aims to attain infrastructural, manufacturing, social, and digital development, which is why analyzing this year’s Budget and what it brings for rural livelihoods becomes crucial.

Initial Reactions to the Union Budget for FY-23

The 2023 budget received mixed opinions, with experts lauding the Finance Minister’s decision to increase capital expenditure by 37.4%. The decision indicates a high growth in Indian infrastructure and assets, but when viewed from a social lens, it focuses less on the economically vulnerable sections of rural India.

The budget has created job opportunities through adequate resources for tourism and education, but the resources could have also focused on generating rural employment.

Source: Demand for Grant Analysis and www.indiabudget.gov.in

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

The budget saw a decrease for the government’s flagship program MGNREGA which invited criticism. However, the government claimed that the scheme is demand-driven and can always be allocated economic resources when required.

This decrease has been attributed to the decreasing demand for unskilled employment across rural India as per ES 2022-23. This decrease is due to the normalization of the rural economy and the population shifting back to agriculture. The low wages and seasonal employment offered by MGNREGA are potential reasons for the program not being the first choice of the rural population. Therefore, agriculture and allied activities are the next likely sector for generating rural employment.

Ministry of Agriculture and Farmer’s Welfare (MoA&FW)

The budgetary allocation for the MoA&FW has increased in absolute terms. Although the absolute numbers have increased to INR 1,25,036 crores in 2023-24, which is 5% greater than the revised estimates for 2022-23, the proportion of budget allocated to agriculture and farmer’s welfare sector as a percentage of the total budget is lower than what it was in FY-22 (3.84% (BE 2022) to 3.20% (BE 2023)).

The increase is aligned with the ES 2022-23, which claims that the Indian agriculture sector has grown at an average annual growth rate of 4.6 percent during the last six years. The Indian government has introduced interventions to empower agri-tech start-ups, which would help promote advanced agricultural inputs, technologies, smart irrigation, etc.

Promoting Sustainable Agriculture

Natural farming has been another critical practice where the budget has focused on promoting and incentivizing farmers for organic farming practices. Public policy experts have also opposed the cut in fertilization subsidies. But no direct conclusion can be drawn if the government’s decision has unfairly cut the subsidies since the budget has incentivized using green fertilizers through natural farming. Moreover, the PRANAM program would promote the use of bio-manure. National Innovations in Climate Resilient Agriculture (NICRA) has been merged with the Natural Resource Management Institutes with an overall allocation to Natural Resources Management of INR 240 crore in 2023-24, indicating an increase of 29%.

Access to credit made easy, but a few challenges left unaddressed

The PM-KISAN scheme lost the limelight in FY-23, but the Modified Interest Subvention Scheme (MISS) allocation has been increased to INR 23,000 crore for 2023-24 from Rs 19,500 crore in 2022-23. Under MISS, farmers are provided short-term crop loans up to INR 3 lakh at an effective interest rate of 4 percent per annum. The decision indicates the government’s shift from bearing the complete burden of funds to making the small and marginal land farmers self-sufficient through access to credit and agricultural inputs.

Further, Market Intervention Scheme and Price Support (MIS-PSS) has observed a decrease from INR 1,500 crores to INR 1 lakh, which might lead to unfair prices for the farmers.

The major problems faced by the Indian agriculture sector are unfair prices, poor market linkage, low access to credit and advanced agriculture inputs, and the absence of climate-resilient technology. Research studies emphasize that a critical gap exists between advanced technology and its adoption by small landholders due to several reasons. Also, the small and marginal land farmers require enough economic resources to invest in the services of tech startups. Small and marginal farmers with less than two hectares of land account for 86.2% of all farmers in India, owning 47.3% of the crop area. The budget might need to be more adequate to serve their needs.

DAY-NRLM: A Ray of Hope for Rural Livelihoods

The government intervention’s objectives are to diversify the livelihood sector, build the capacities of rural communities, and increase awareness and uptake of government schemes. The reluctance to adopt advanced technology and enroll in various methods can be reduced through programs such as DAY-NRLM. It is one of the major flagship programs of the MoRD, which has been allocated an amount of INR 14,129 crores compared to INR 13,336 crores in FY-22, but the NRLM program component[1] has been allocated INR 9,494 crore, which is 18% lower than the allocation in FY-22.

Hit or Miss?

For India, an agrarian economy with a significant population residing in the rural landscape, the budget could have focused on easing the process of accessing agricultural inputs, especially for the small and marginal land farmers deprived of economic resources and prone to default loans. Further climate resilient research has observed investment worth INR 240 crores, but promoting the farmers to adopt advanced technology remains a concern. The low wages and seasonal employment offered by MGNREGA are potential reasons for the program not being the first choice of the rural population. Moreover, livelihood interventions aim to provide permanent employment against guaranteed employment.

The budget cannot be necessarily considered an anti-farmer or anti-social budget. Still, a significant portion of the rural population, including landless laborers and small landholders, still needs to be addressed in the budget due to the decrease in MGNREGA and DAY-NRLM program components.

The Union Budget 2023 has indeed focused on generating employment opportunities through dedicated investment in the tourism industry, boosting self-employment and skill development of youth. The Pradhan Mantri Kaushal Vikas Yojana (PMKSVY 4.0) has been introduced, but no budget has been allocated.  Therefore, with a lesser focus on supply-side interventions, infrastructural issues, and capacity building in rural India, the funding might not be adequate to serve the needs of an economically vulnerable population of rural India in terms of employment.

Deepti Narsawat – Deputy Research Manager, Sambodhi

Author: Deepti Narsawat