India Allocates $40 Billion to Boost Farm Output, Rural Incomes

(Bloomberg) -- India plans to spend 2.83 trillion rupees ($40 billion) next year to boost agricultural production and develop rural areas, Finance Minister Nirmala Sitharaman said in her budget speech on Saturday.

The country needs enough warehouses and cold storage facilities, the minister said in parliament, adding that the government will help in setting up efficient warehouses and implement a village-level storage program. In addition, refrigerated coaches in passenger and freight trains will be added, while efforts will be made to transport farm goods by air.

The measures assume significance in a country where about a quarter of farmers live below the official poverty line, while 52% of farming households are indebted. About 800 million of the 1.3 billion population depends directly or indirectly on agriculture, which accounts for 16% of the country’s $2.6 trillion economy.

“Our government is committed to the goal of doubling farmers’ incomes by 2022,” Sitharaman said. Farm markets should be liberalized, distortions in farm and livestock markets need to be removed and the sector requires investments, she said.


Lack of water for irrigation is a serious concern across the country, the minister said, adding that the government was planning comprehensive measures for 100 water-stressed districts.

India is heavily dependent on rain for irrigation. The June-September monsoon season waters more than half of the country’s total farmland and is critical to agriculture because it affects not only the summer crop but also influences winter harvests.

With a view to improving incomes of people living in rural areas, the government will help two million farmers to set up solar water pumps. A program to enable farmers to set up small solar plants on their fallow or barren lands and sell electricity to power grids will be started, she said.

Promotion of solar energy and the linkage to power grids will augment energy sources as well as provide an additional source of income to farmers, said Sanjay Kaul, chairman of National Collateral Management Services.

India also plans to encourage balanced use of fertilizers, which is necessary to change the current incentive regime that encourages excessive use of chemical fertilizers.

The South Asian nation seeks to increase its food subsidy budget by 6.3% to 1.15 trillion rupees in 2020-21, according to budget documents. The government purchases cereals such as rice and wheat at guaranteed prices from farmers and sells to the poor at subsidized rates through a chain of fair-price shops across the country.

©2020 Bloomberg L.P.

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