Budget 2024 Expectations: Here's what agriculture sector expects this year (2024)

Since 2024 is an election year, with Lok Sabha Elections expected in April-May, the finance minister will present an Interim Budget or a Vote on Account in February, rather than a comprehensive annual budget. After the formation of the new government, the new full Budget is expected in July this year.

As a a Vote on Account is merely an interim authorisation to spend money, as opposed to a full Budget that includes details of expenditures and receipts, including tax changes and government policies, this time significant tax and policy changes are unlikely.

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This budget typically outlines estimates for revenue, expenditure, financial performance, fiscal deficit, and projections. Industry expects believe that anticipations are high that the government will increase welfare spending and potentially aim to decrease the fiscal deficit to 4.5 per cent of the gross domestic product (GDP) by FY26.

‘’The current budgeting exercise is also confronted by economic headwinds such as the deceleration in the global economy, pressures in the agriculture sector, and strains on the rural economy,'' said analytics firm CareEdge.

Coming to sector-specific changes, industry experts say that the agriculture sector has grappled with immediate challenges such as adverse weather conditions, the impact of climate change, and inflationary pressures.

In the Union Budget for 2023-24, the finance minister allocated ₹1.25 lakh crore to Ministry of Agriculture and Farmers' Welfare, including Agricultural Education and Research. The allocation was increased manifold from ₹27,662.67 crore in 2013-14.

Experts broadly anticipate tax relief measures and announcements to support agriculture and the rural sector while maintaining a focus on the capex push. In this regard, here's what leading industry leaders expect from the upcoming Interim Budget 2024 in order to strengthen India's agriculture sector:

1.Agri-credit target

The government is likely to announce a substantial increase in the agricultural credit target to ₹22-25 lakh crore for the next fiscal and ensure every eligible farmer has access to institutional credit. The government's agri-credit target is ₹20 lakh crore for the ongoing fiscal.

Also Read: Budget 2024 Expectations: From capex target to fiscal deficit, CareEdge predicts these changes for India's economy

In the current fiscal, about 82 per cent of the agri-credit target of ₹20 lakh crore has been achieved till December 2023. Director General of industry body CII Chandrajit Banerjee said agriculture and rural segments should be a key priority to drive inclusive growth in the interim Budget.

"In agriculture, warehousing must be promoted to reduce wastage. Coverage of electronic Negotiable Warehouse Receipts (eNWRs) must be increased, and we have recommended allowing them to be used to access finance, trading, and settlement of trade," he said.

2. Fertiliser Subsidy

CII has also suggested that the food and fertiliser subsidies, which constitute the bulk of the subsidies, should be rationalised by better targeting and efficient utilisation without impacting the deserving beneficiaries.

Currently, the food subsidy programme is based on the data available from the 'Household Consumer Expenditure Survey 2011-12', the industry body said, adding that with economic growth and declining poverty, it is important to use more current data for better targeting.

For the upcoming fiscal year, India is considering allocating approximately ₹4 trillion for food and fertilizer subsidies. The Ministry of Consumer Affairs, Food, and Public Distribution has forecasted a food subsidy expenditure of $26.52 billion for FY25, indicating a 10 per cent rise from the anticipated allocation of nearly $24.11 billion in FY24.

‘’Signs suggest a potential surge of more than 15 per cent in funding for affordable housing, reaching ₹1 trillion for the fiscal year 2024-2025. The divestment target is set at ₹510 billion,'' said Gurmeet Singh Chawla, Director, Master Capital Services Ltd.

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3.Inclusion of agri residues in priority lending

Ashvin Patil, Founder and Director of Biofuels Junction believes that the inclusion and recognition of those working with agri-residues as feedstock for biofuels in the priority sector lending mandate in the budget can help open up significant financing opportunities for smaller players in the industry and rural entrepreneurs.

Currently, aspects like tractor financing are part of priority sector lending, which benefits from lower interest rates. ‘’It would not only provide financial impetus to emerging sectors within agriculture but also align with broader goals of sustainability and innovation in agricultural practices. It will also encourage farmers to refrain from stubble burning and contribute to the growing biofuel industry, creating a sustainable cycle of waste-to-wealth,'' added Patil.

4.Tax rebate for R&D spends

Previously, there was a 200 per cent tax rebate for in-house R&D spends, which meant that businesses had the incentive to dedicate more of their funds on research which is vital in the introduction of more resilient varieties to farmers. As of 2016-17, this has been reduced to 100 per cent.

‘’For the Union Budget 2024-25, we would like to see the 200 per cent tax deduction reinstated. It would also be beneficial to have GST for seeds normalized across states which today has differing implementation at the cost of the farmers,'' said Gurmukh Roopra, CEO, Namdhari's Group.

Efforts towards strengthening the Farmer Producer Organizations (FPO) movement are also welcome. Doing so will encourage more farmers to collaborate together, aggregate produce and production, and access the market with a corporate structure. This also reduces the risks involved for small-scale farmers such as transport and storage losses, according to Roopra.

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Published: 24 Jan 2024, 07:53 PM IST