A Comprehensive Look at the 2023 Union Budget’s Impact on Agriculture

The Union Budget 2023-24 was presented on February 01, 2023, by the Union Finance Minister, Smt. Nirmala Sitharaman. The Budget aims to build upon the foundation laid by the previous budget and create a blueprint for India’s future growth. This is the final Budget of the Modi 2.0 government before the Next General Elections in 2024, and also the first budget of the “Amrit Kaal”.

The Union Budget 2023-24 has three main objectives: to offer ample opportunities to citizens, provide a strong boost to growth and job creation, and enhance macroeconomic stability.

Problems for Agriculture Sector

The agriculture sector is currently viewed as economically unsustainable. Despite a significant portion of the population relying on agriculture as a source of livelihood, it continues to face challenges of low efficiency and limited income generation. In recent years, the allocation towards agriculture in the national budget has been limited. The budget announcements for the sector in the previous fiscal year were widely criticized for lacking substantial financial commitments, and instead focusing primarily on policy declarations.

Solutions via the Budget

In the past decade, from fiscal year 2013 to fiscal year 2023, the overall budget has demonstrated a compound annual growth rate (CAGR) of 11%. In particular, the allocation towards the agriculture sector and rural development has displayed a CAGR of approximately 12%. This indicates a significant increase in investment towards these important areas, highlighting the government’s commitment to promoting the growth and development of the agriculture sector and improving the standard of living in rural areas.

The government has announced plans to raise the agriculture credit target to 20 lakh crore rupees, with a focus on the development of the animal husbandry, dairy, and fisheries sectors. This increase in credit will serve as a means of providing greater financial support to these industries, thereby promoting their growth and sustainability. By focusing on the development of animal husbandry, dairy, and fisheries, the government aims to diversify the agriculture sector and create new opportunities for farmers and rural communities. The increased credit target is expected to help address some of the challenges faced by these industries, such as limited access to funding and lack of investment, and will play a critical role in driving their development and growth.

Some of other insights on initiatives mentioned in the budget 2023:

• A subsidiary initiative of the Pradhan Mantri Matsya Sampada Yojana will be instituted, with a specified investment of 6,000 crore rupees, with the objective of promoting the endeavors of fisherman, fish vendors, and micro and small enterprises, enhancing the efficacy of the value chain, and increasing market outreach
• It is planned that over a period of three years, assistance will be provided to one crore farmers to adopt natural farming methods. Additionally, 10,000 bio input resource centers will be established
• The government intends to promote the establishment of mangrove plantations along the coastal regions through the implementation of the MISHTI scheme. The aim of this initiative is to encourage the growth of mangrove trees, which play an important role in preserving the ecosystem and protecting against natural disasters. By implementing the MISHTI scheme, the government intends to support the preservation and conservation of the coastal environment.
• The government intends to implement a cluster-based approach and encourage cooperation between farmers, the state, and industry in order to facilitate the supply of inputs, provide extension services, and establish market connections. This collaborative approach is seen as a means of promoting sustainable growth and development in the agriculture sector. By working together, farmers, the state, and industry can collectively address challenges and create opportunities for improvement in the sector.
• The government has created the Agriculture Accelerator Fund to support young professionals in launching agriculture startups that provide affordable solutions to farmers’ challenges and increase productivity and profitability with modern technology.
• The government has launched the Atmanirbhar Clean Plant Programme, with a budget of 2,200 crore rupees, in order to enhance the availability of disease-free, high-quality planting materials for horticultural crops of high value. This initiative is aimed at improving the overall quality of these crops and contributing to the growth and development of the horticulture industry. By providing access to disease-free planting materials, the government hopes to increase the productivity and competitiveness of the horticulture sector. The Atmanirbhar Clean Plant Programme is an important step towards building a self-reliant horticulture industry in the country.

Stocks to benefit

It is anticipated that the stocks of commodity-based companies may experience positive impacts from the budget announcements made in 2023. In the medium to long-term, companies such as ITC, Britannia, Godrej Agrovet, and Tata Consumer are expected to reap the benefits of the budget’s focus on the agriculture sector. 

The measures announced in the 2023-24 Union Budget aimed at increasing farm income are seen as a positive development for the farm mechanization sector. It is believed that companies such as Mahindra & Mahindra and Escorts, operating in the tractor industry, will be among the key beneficiaries of these measures.

The budget has proposed an increase in the fertiliser subsidy from Rs 105,222 crore in FY23 to Rs 2,25,000 crore. This move is expected to benefit companies such as Gujarat Narmada Valley Fertilizers & Chemicals Limited, Rashtriya Chemical and Fertilizers, National Fertilisers, Madras Fertilisers, Chambal Fertilisers, and Deepak Fertilisers.

It is anticipated that the tobacco company, ITC, may experience some level of benefit from the budget proposals. Additionally, the share performance of ITC appears to be positive based on chart patterns and reports indicate that the shares have performed well in today’s market.

Also read: Renewable Energy Rises as Champion of Sustainable & Green Growth: Budget 2023

Way Forward

Despite efforts to address the issues facing the agriculture sector, many persistent problems remain. One of the key concerns is the government’s control over critical aspects of the sector, such as input-output, marketing, and distribution.

According to experts, there is a pressing need to create employment opportunities in the sector and promote commercialization and diversification. Additionally, the implementation of modern land record systems is considered essential for effectively carrying out agricultural reforms. By addressing these issues, the agriculture sector has the potential to become more sustainable and contribute to economic growth and development.