According to the Economic Survey 2023-24 presented in Parliament on Monday, credit to agriculture and allied activities will be in double digits during FY24.
Union Finance Minister Nirmala Sitharaman on Monday tabled the Economic Survey 2023-24 along with Statistical Appendix in Parliament ahead of Budget 2024-25 to be presented on Tuesday.
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According to the survey, agricultural credit will grow almost 1.5 times from Rs 13.3 lakh crore in FY21 to Rs 20.7 lakh crore in FY24.
The survey highlighted the role of the Kisan Credit Card (KCC) scheme in providing timely and hassle-free credit to farmers, under which there will be over 7.4 crore active KCC accounts by the end of 2023. It further said that the growth in credit disbursal to the agriculture sector continued in April and May 2024 and bank credit to agriculture and allied sectors grew by 19.7 per cent and 21.6 per cent, respectively.
The survey said gross value added (GVA) in the agriculture sector grew at a “slow pace” and added that overall production was affected due to “erratic weather patterns” during the year and uneven spatial distribution of monsoon in 2023.
“The share of agriculture, industry, and services sectors in overall GVA at current prices stood at 17.7 per cent, 27.6 per cent, and 54.7 per cent, respectively, in FY24,” it said.
According to the third advance estimate of foodgrain production released by the Ministry of Agriculture and Farmers Welfare, the impact on GVA growth was reflected in a marginal decline of 0.3 per cent in total foodgrain production in FY24.
The review highlighted the initiatives taken by the Government to address concerns related to crop insurance, including the Yes-Tech Manual, WINDS Portal, enrolment app AIDE/Sahayak for assessing crop damage through advanced satellite-based technologies, and door-to-door enrolment initiatives to make the cover more accessible.
Indicating the likely increase in agricultural premiums from the year 2024, the survey mentions an average real premium increase of 2.5 per cent over the medium term, supported by improvements in insurance infrastructure such as mobile applications and remote sensing for monitoring crop losses.
It said that growth in agricultural insurance is estimated to remain stable in FY23 due to a sharp decline in premium rates in the Kharif crop season. This decline was offset by an increase in land area insured and farmer enrolment during the season.
The survey said, “The agriculture sector was affected by extreme weather events, low reservoir levels, and damaged crops in FY23 and 2024, which adversely affected agricultural production and food prices. Hence, food inflation based on the Consumer Food Price Index (CFPI) increased from 3.8 per cent in FY22 to 6.6 per cent in FY23 and 7.5 per cent in FY24.”
In a growing economy, the share of agriculture declines over time. This is normal. It is considered progress. As households increase their incomes, they do not consume proportionately more food. The share of food in their consumption expenditure decreases, a phenomenon known as Engel's Law.
The Economic Survey highlighted the government's efforts to facilitate farmers by providing subsidies on water, electricity and fertilizers.
“In the first two, farmers get loans almost for free. Their income is not taxed. The government provides them minimum support price (MSP) for 23 selected commodities. Monthly cash assistance is given to farmers through the PM-Kisan Yojana. Governments of India – national and sub-national – waive their loans,” the survey said.
The survey says that in the earlier development model, economies started with agriculture, moved towards industrialisation and then value-added services. The survey says that technological advancement and geopolitics are challenging this conventional wisdom.
Endorsing a “return to the roots” model in terms of agricultural practices and policy making, the Review said this could lead to higher value addition from agriculture, increase farmers' incomes, create opportunities for food processing and exports, and make agriculture fashionable and productive for India's urban youth.
It says, “Trade protectionism, hoarding of resources, excess capacity and dumping, restricting production, and the advent of AI are reducing the scope for countries to squeeze growth from manufacturing and services.” It further says that when addressed, the problem areas described above that the current policy configuration has created over the last few years can become sources of strength for India and a model for the rest of the world – developing and developed.
“Therefore, governments in India spend substantial resources to ensure that farmers are well taken care of. Nevertheless, it can be argued that they could be better served with some redirection of existing and new policies. If we untangle the knots that have crippled agricultural sector policies, the benefits would be enormous. Above all, it would restore faith in the state's confidence and ability to lead the nation to a better future, apart from providing socio-economic benefits,” it added.