Any step announced by the government in the upcoming Vote on Account aimed at supporting the incomes of farmers would be better done as a centrally sponsored scheme rather than a debt waiver, India Ratings and Research said on Tuesday.
“The roll-out of income support as a core centrally sponsored scheme is a better option than as a debt waiver,” Ind-Ra said in a report. “There is a likelihood that the Union government may announce a relief package for farmers while presenting the Vote on Account for 2019-20 in line with the Rythu Bandhu scheme of the government of Telangana,” it said in a report.
It added that governments in the past have taken several different steps to help the farmers, including increasing public spending in rural areas, increasing minimum support prices (MSP), enhancing agricultural credit, launching the rural employment guarantee scheme, waiving farm loans, and providing direct income support.
“In case the FY20 interim budget announces an income support of ₹8,000 per acre per annum for marginal and small farmers, a marginal farmer and a small farmer would receive ₹7,515 and ₹27,942 per annum on average, respectively,” the report said.
This, the report said, is significantly lower than the amount conceptualised under the universal basic income scheme for the poor proposed in the Economic Survey 2016-17 and would cost the central government about ₹1.47 lakh crore or 0.70% of GDP.
“If it is rolled out as a core centrally sponsored scheme, the cost to the government exchequer would be 0.43% of GDP, while the cost to the combined state government exchequer would be 0.27% of GDP,” according to the report.
Even this route is not painless, Ind-Ra said, adding that only Chhattisgarh and Jharkhand have some fiscal space to accommodate such expenditure.
“Besides the union government, the states whose finances will come under pressure if it is rolled out as a core centrally sponsored scheme are Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Telangana, and Uttar Pradesh,” the report said.
“In addition to the fiscal challenge, Ind-Ra believes that the implementation of such a scheme will depend on a proper land record,” it added. “The government of Telangana was able to successfully implement the Rythu Bandhu scheme because the State had such records.”