Press Release
Anulya Parameswaran
On July 27, 2024, the IMPRI Impact and Policy Research Institute, New Delhi, and the IMPRI Center for the Study of Finance and Economics (CSFE) organized a stimulating panel discussion titled “Rural Realities and Union Budget 2024-25 . It is part of the IMPRI’s 5th Annual Series of Thematic Deliberations and Analysis of the Union Budget for 2024-25.
Dr. J. Dennis Rajakumar, began the panel discussion with his opening remarks. He emphasized that despite two decades of urbanization, India’s growth remains closely linked to the rural sector. He pointed out that understanding rural realities is essential to grasp the budget’s impact on rural economic activities. He shared key insights on the agricultural sector, noting it was expected to grow at 4.7% in 2022-2023, lower than the overall economic growth of 6.7%. Provisional estimates for 2023-2024 indicate a significant decline to 1.4%, the lowest in seven years, compared to an overall growth rate of 7.2%.
Regarding the non-farm sector, Dr. Rajakumar cited data from the Annual Survey of Industries, which showed an increase in rural industrial output from 49% in 2017- 2018 to 52% in 2021-2022. This growth, while positive, also highlighted potential distress in rural manufacturing. Reference to the Periodic Labour Force Survey, showing an increase in rural labor force participation from 37% in 2017-2018 to 43.4% in 2022-2023, with unemployment decreasing from 5.3% to 2.4%.
However, he noted that over 60% of the rural labor force is still in the primary sector, indicating little structural change in employment. He also discussed rural wage rates, noting increases in agricultural and non-agricultural occupations by 6.2% and 6.6%, respectively, from June 2022 to June 2023. However, this increase was nullified by a 6.2% rise in rural inflation, meaning rural workers saw no real financial gain. In conclusion, he stressed the need to address economic disparities in the rural sector, questioning if budget allocations for rural development are sufficient.
Professor R. Deshpande provided compelling insights into the current state of India’s rural economy and its interplay with the Union Budget 2024-25. He emphasized the critical issues facing rural areas, underscoring the urgent need for targeted reforms and investments. Professor Deshpande highlighted the widening gap between the growth rates of agricultural product prices and the factors used in agriculture. This disparity results in decreasing take-home income for farmers, posing a significant challenge for the rural economy. He also noted the rapid commercialization of agriculture, with an increasing number of farmers engaging in commercial crops like soybeans. While he praised the budget for supporting supply chain management for vegetables and fruits, he stressed that these measures primarily benefit urban consumers.
Professor Deshpande stressed the need for prioritized attention to rural roads and infrastructure. He pointed out that small and marginal farmers often have to travel hours to reach markets, highlighting the lack of market density and the need for comprehensive market reforms. Citing longstanding issues with the reliability of rural wage data, he noted that the current data often excludes wage earners who move frequently. He also raised concerns about labor shortages in rural areas, exacerbated by the appeal of urban jobs and government schemes like MGNREGA.
Addressing significant urban expansion drawing rural labor to construction work in cities, he noted this contributed to a decline in the number of cultivators. Professor Deshpande called for attention to historical agricultural reforms that remain unimplemented and emphasized the need for a decentralized public distribution system.
While the budget shows an 8% increase in agricultural allocation and 11% in rural development, the overall percentage of the total budget for these sectors remains low. He called for a closer examination of real-term budget allocations to ensure they adequately support rural development. Concluded the discussion by advocating for focused attention on addressing the deep-rooted issues in rural India.
Professor Shekhar CSC highlighted that “Not only is there a lack of vision for agriculture, but there is also an absence of a holistic approach to rural development,” He emphasized the inconsistency in budget allocations over recent years, noting that the abrupt increase of the Price Stabilization Fund to ₹10,000 crores this year, up from almost nothing last year, lacks a clear rationale. Professor Shekhar highlighted that agriculture remains central to the rural development process, as emphasized by fellow panelist Dr. Rajkumar. The rural economy consists of two main components: agriculture and rural industrialization, alongside social development sectors like health and education.
He criticized the National Rural Livelihood Mission (NRLM) for its ineffective coordination between agriculture and rural development ministries, questioning why economic activities are not linked to local agricultural products. For instance, if pulses are cultivated, why not establish dal mills involving women’s self-help groups? Additionally, he noted the significant gap between budgetary estimates and revised estimates in agriculture, indicating inefficiencies. The focus on research and development was deemed too narrow, with a need for broader extension services. Professor Shekhar concluded that the current budget fails to adequately address the needs of the rural sector, calling for targeted programs and consistent funding.
Professor Narasimha Reddy Donthi highlighted that a significant portion of the budget is dedicated to interest payments, ₹11.62 lakh crores (24%), with rural development receiving a mere 5.6%. He raised concerns over the government’s rising debt of ₹154.79 lakh crores and the lack of transparency in capital formation. Dr. Reddy also criticized the inadequate focus on climate resilience, noting the absence of financial provisions for communities affected by climate crises like heatwaves.
Prof. Sekhar C.S.C. emphasized the disconnect between the budget’s priorities and the actual needs of rural areas. He pointed out that the largest budget allocations are for defense and railways, overshadowing essential rural development initiatives. Prof. Sekhar called for a more equitable distribution of resources to support sustainable rural growth. Dr Reddy also echoed these concerns, stressing the need for reforms in budget allocation to ensure transparency and accountability. He criticized the ‘challenge mode’ allocation for research, suggesting it may lead to the privatization of public resources, detracting from critical rural and climate-focused research.
Dr. Javit Alam pointed out significant concerns about India’s budgeting process, particularly its lack of alignment with rural needs. He criticized the reliance on incremental budgeting, stating that it fails to address real challenges faced by rural communities, where only 4% of GDP is allocated to agriculture. Dr. Alam also emphasized the stagnation in budgetary allocations for rural development, which remained at just 6% of GDP in 2022-2023. He urged policymakers to shift their focus from merely increasing budget figures to implementing thorough needs assessments and effective planning to address pressing rural issues, such as malnutrition and inadequate infrastructure.
The panelists also pointed out the inefficacy of major schemes like MGNREGA, citing issues like wage delays and insufficient allocations. They called for a comprehensive, outcome-oriented budgeting approach that prioritizes the effective utilization of funds to uplift rural communities.As India approaches its 2047 goals, the need for reform in budgeting processes is crucial to ensure that resources are allocated effectively and that rural challenges are adequately addressed.
In the following discussion, there highlighted critical concerns regarding food and nutrition security in rural India, emphasizing the need for increased budget allocations to support marginalized communities. Dr. Srii pointed out that many essential state support programs are vital for the well-being of these communities, and any reductions in funding could severely impact their food security.
The speakers underscored that India spends only about 0.4% of its agricultural GDP on research and development, significantly lower than countries like China and Brazil. This lack of investment leads to low agricultural productivity, which is further exacerbated by the effects of climate change on wages and employment. Dr. Srii noted a troubling decline in food subsidy allocations, from 7.79% in 2015 to just 4.26% in 2024-25, as well as cuts to crucial social welfare programs.
Dr. Dhand emphasized the importance of focusing on farmer incomes, suggesting that agricultural growth alone does not guarantee an increase in earnings for farmers. The panelists urged the government to explore alternative income-generation methods beyond the Minimum Support Price (MSP) scheme. The discussion also addressed the alarming rates of malnutrition among marginalized communities, particularly children from scheduled tribes, where 36% are stunted and 32% are underweight.
Dr. Srii highlighted a significant cut in the Anganwadi program budget, which could jeopardize the government’s goal of zero hunger by 2030.In response to these challenges, the experts called for a more regional approach to policy-making that takes into account the diverse needs of various states and communities. They urged for better utilization of funds allocated to these programs, addressing bureaucratic inefficiencies and ensuring that basic facilities in Anganwadi centers are improved. As the nation moves towards its vision for 2047, the speakers collectively voiced a warning: without significant intervention and support for rural economies, the goals of food and nutrition security may remain unachievable.
In conclusion, the panel emphasized the urgent need for reforms in budget allocation
and implementation strategies to ensure the welfare of rural communities. A cohesive
and comprehensive approach is essential to address the disparities and challenges
faced by the rural sector. Without adequate investment and targeted policies, the
aspirations for rural development and food security in India may remain unfulfilled.
IMPRI’s 5th Annual Series of Thematic Deliberations and Analysis of Union Budget 2024-25
IMPRI’s 5th Annual Series of Thematic Deliberations and Analysis of Union Budget 2024-25
Watch the event at IMPRI #Web Policy Talk
Rural Realities and Union Budget 2024-25
Acknowledgement- The article is written by Anulya Parameswaran, Research Intern at IMPRI.
