Budget 2019 Expectations: SBI recommends these 5 measures to improve Indian agriculture sector, double farm income

Budget 2019 Expectations: The State Bank of India (SBI) has recommended five measures to  Finance Minister Nirmala Sitharaman that will help Modi 2.0 Government to improve the Indian agriculture sector. The measures include market support to the farmers from cultivation to sale, capital formation in the Indian agriculture, trend reversal in crop insurance, increase in income support to the farmers, etc. the largest Indian public sector bank is of the opinion that if these measures are implemented, it would help Narendra Modi to achieve its goal to double the Indian farmer's income by 2022.

Speaking on the recommendations Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, "The coming budget could have a plethora of measures for the agriculture sector. We believe that measures like market support to the farmers and steps towards capital formation into the Indian agriculture sector would help the government double the farm income." Dr. Ghosh of SBI went on to add that trend reversal in the crop insurance and adding all types of crops in it should be the top priority of the government and it could be emulated for the long term benefits for the sector."

Asked about the measures that can become a trend reversal into the Indian agriculture sector, Dr Ghosh gave the following five measures which he has recommended to the Modi 2.0 Government:

1] Financial institutions and Government can lend their helping hands to the farmers by providing market support starting from cultivation to sales. In this context, the Supplyco model as currently prevalent in Kerala could be effectively remodeled so as to transfer maximum benefits to consumers and farmers in the entire crop to cash cycle.

2] Capital formation in agriculture has significantly stagnated. A trend reversal will achieve the objective of doubling farm income by 2022. This can be achieved by providing an incentive to agri term loans for investment purpose through an enabling mechanism of either interest subvention or a credit guarantee fund.

3] Fasal Bima Yojana /PMFBY currently cover mainly cover 3 types of crops, namely food crops (cereals, Millets, & Pulses), Oilseeds, annual commercial or horticulture crops. These crops cover only 30% of the total crop loans given by banks. The government should cover all types of crops under PMFBY, which will help banks to manage the risks.

4] The Government must make a statement of intent in the budget to increase the income support from Rs 6000 to Rs 8000 over a period of 5 years. This will provide a feel-good factor and boost consumer sentiments. Our calculations suggest that even if we progressively increase the income support from, say, Rs 6,000 to Rs 8,000 in the terminal year (inflation indexed) and reduce the fiscal deficit to 3 per cent in 2024, the additional cost for 14-crore farmers over the baseline estimates could be Rs 12,000 crore per annum, same as the revised estimates if only Rs 6,000 was provided to all 14 crore during the next five years. In our estimates, as growth comes back to the system, the fiscal deficit could actually reduce to 3 per cent of GDP in FY24!

5] A strong push to Farmer Producer Organisations to reward the farmers in terms of an adequate remuneration for their produce!