India Budget 2008-09: Good but not good enough!

The Indian Finance Minister, P. Chidambaram, tabled the central government’s budget for the financial year 2008-2009 in the Lower House of Parliament yesterday (February 29,2008). You can read about the highlights of the budget on this link and download the full text of the Finance Minister’s speech in pdf format from this link. This post will concentrate mainly on the impact on the agriculture sector apart from a few other important features.

Agriculture

The most important feature of the budget was a Rs.60,000 crore (600 billion INR/10 billion EUR/15 billion USD) debt-relief package for farmers. You can find the details on the two links given above. While this is a welcome step and was greeted with jubilation by farmers across the country, let us find out if this would be enough to tide over the agrarian crisis and pull agriculture from the brink of disaster.

Agrarian crisis

It is a well known fact that India is in the grip of a severe agrarian crisis that has led to farmers (mainly those cultivating cash crops) committing suicide in droves across the country. Unable to cope with rising input costs, erratic monsoons (seasonal winds that bring adequate rain – much of Indian agriculture depends on the two monsoons: the South-West Monsoon and the North-East Monsoon), ridiculously low minimum support price for certain crops, a falling water table that means increased fuel and sometimes electricity charges to draw groundwater, shortage of good quality fertilisers, pests that develop resistance to pesticides, generally disastrous trials with genetically modified crops, lack of agricultural credit and crop insurance, natural disasters like floods, changing weather patterns due to global warming, lack of modern techniques in agriculture, lack of access to the market, exploitation by middlemen and above all a total neglect of agriculture and rural areas by successive governments, farmers in different parts of the country are driven to the edge of the  cliff.

They are forced to borrow money from moneylenders at shockingly usurious rates of interest (the moneylenders sometimes confiscate the land of farmers if they fail to pay up). To compound the problem, health-care is almost non-existent in the rural areas and the state sponsored health-care system is on the verge of collapse in the urban areas. So farmers are also forced to cough up massive amounts of money for medical care in private hospitals. The poor farmers have no hope left and they consume the pesticides that have become useless against the pests but are sufficiently toxic to claim a human life.

The Magsaysay award winner and Rural Affairs Editor of The Hindu – a respected English language broadsheet, P. Sainath, has covered the agrarian crisis in his series of articles in The Hindu and its sister magazine The Frontline (a fortnightly) and also in his book Everybody loves a good drought.

The Finance Minister seems to have taken a cue from the move of the government of his home state (Tamil Nadu). As soon as it came to power, the state government waived farm loans to the tune of Rs.6680 crore (66.8 billion INR/1.1 billion EUR/1.67 billion USD) taken from co-operative banks across the state of Tamil Nadu. This was a part of fulfilling poll promises made by the ruling party before the state election. The ruling Democratic Progressive Alliance (DPA) in the state of TN is a part of the ruling coalition at the centre-the United Progressive Alliance (UPA). The move of the state government was widely welcomed by farmers at the time just as the present move of the central government has been welcomed by farmers across the country. But is this the solution to the agrarian crisis that seems to be getting worse by the day?

The farm loan waiver comes at a time when farmers are in distress across the country. It should therefore be welcomed by all. But one should also spare a thought for the farmers who have taken loans from the usurious moneylenders as they were not entitled to loans from banks because of their poor loan repayment record. These farmers are the ones who are on the verge of committing suicide. While any relief for the beleaguered agriculture sector is welcome, I hope the governments across the country concentrate on striking at the root cause of the problem rather than finding stop-gap solutions, however welcome they may be at the moment. It is about time that the country concentrates on making the agriculture and allied sectors profitable, especially for small and marginal farmers as that alone would be the solution to most of the problems that India is facing at the moment. Struggling India should be turned into Shining India. There simply can be no other way forward.

Income tax benefits

The Finance Minister has also raised the exemption limit for income tax across the board – for men to Rs.1.50 lakh p.a.(150,000 INR/2470 EUR/3750 USD), for women to Rs.1.80 lakh p.a.(180,000 INR/2960 EUR/4500 USD) and for senior citizens to Rs.2.25 lakh p.a.(225,000 INR/3700 EUR/5620 USD). There are also some other benefits that are sure to be welcomed by the middle classes.

So, is this budget a preparation for an early general election? Or is it a late fulfillment of promises made to the common man before the last one? Only time will tell!