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The Union Budget 2024-25 increased the allocation of agriculture by 4.6%, i.e., Rs 1,32,469.9 crore from Rs 1,26,665.6 crore in the Revised Estimates (RE) of 2023-24. However, if we include allocation for the allied sector as well, the total allocation becomes Rs 1,39,607.5 crore. 

Agriculture is considered backbone of the economy, with a little over 18% share in current GDP, but employing over 42% workforce. In this scenario, the allied sector’s contribution is more promising and on the rise amidst the buoyant performance of the overall agriculture. Among livestock sector, dairy is one of the proficient areas that needs critical focus. Though India is having highest production of milk, milk yield per animal and quality of milk continued to be a concern.

The Budget 2024-25 has been proven beneficial for the allied activities. The government has allocated a budget of Rs. 4521.2 crores for Department of Animal Husbandry and Dairying (DAHD) whereas, for Department of Fisheries (DoF), the budget allocation is Rs. 2616.4 crores. A remarkable rise of around 15.5% (compared to 20223-24 RE) in the budget allocation can be witnessed for DAHD. Similarly, DoF has also been able to get more funds for its development by quite a high margin of 53.8% (compared to 2023-24 RE). Overall, percentage change for this Ministry in terms of increment in the budget allocation has been observed to be 27.12% compared to 2023-24 RE.

From the Expenditure Profile of DAHD, it is inferred that the Government is aiming towards giving more importance to the Institutions as they play a vital role in advancing dairy production, animal health, and related activities. Moreover, sectoral competitiveness can be achieved only through the supply of skilled workforce as a critical success factor and also for creating social impact.  From the data, we can observe that there has been a significant increase in the budget allocation for Institutes by 9.8% compared to 2023-24 RE. What is noteworthy is that the Government is in cognizance of the fact that for growth of the economy, providing employment opportunities is of utmost importance and this sector is fully capable of employing people with certain qualifications, and skills. Therefore, by investing in these Institutes, it is ultimately supporting enterprise activities and paving the way for a seamless adoption of technologies which is yet to unleash the full potential of this sector. 

For the schemes, the government has been repeatedly increasing the budget allocation YoY. If we compare the data, we can witness that there was a massive increase by about 112.3% in the budget allocation for Central Sector Schemes (CSS)/projects from RE 2023-24 to BE 2024-25, which is a huge jump from 77.4% recorded in the past year.

Remarkable changes can be observed for Dairy Development and Rashtriya Gokul Mission as after a couple of years, the Centre has allocated a sum of Rs. 371 crores and Rs. 700 crores each under CSS. Prior to FY2024-25, they were being provided funds under CSS. Dairy Development Project serves an imperative role in enhancing the milk quality and production. It concentrates on building and enhancing the infrastructure for high-quality milk testing equipment and promote dairy cooperatives. This also aids in encouraging more rural women to form SHGs and enter this sector as Dairy Entrepreneurs and thereby empower women.

The Rashtriya Gokul Mission Scheme holds similar significance in the preservation of India’s native bovine breed. By funding this program, they hope to increase the productivity of the cows by introducing cutting-edge technologies and cutting-edge scientific techniques like artificial insemination. If this plan is successful, dairy technology will see a technological advancement. This would encourage more skilled professionals to join, particularly women, and contribute to the growth of the cattle industry, which would help small and marginal farmers.

Despite being the world’s largest producer of milk, India accounts for only o.25% of the world’s total dairy exports, amounting to just $272.65 million with Germany leading the trade by a humongous margin (Eximpedia, 2024). One of the prime reasons being the unused potential of the bovine population. A latent prospect lies in the field of technology and science which can boost the productivity and increase the milk yield. The key is to provide training and knowledge dissemination among the workers to encourage innovation in milking techniques. This would encourage cost-efficiency and prove to be lucrative from the trade aspect.

The dairy industry’s success and sustainability are of utmost importance, and this budget could turn out to be a foothold in this direction by investing and strengthening the existing institutions and further promoting skilling among the workers that could generate performance-driven effort to redefine the sector and establish new benchmarks.

Saurabh Bandyopadhyay is Senior Fellow, Jigisha Sharma is Research Intern and Shalini Aggarwal is Executive(Research Projects) at NCAER. Views are personal.

A more equitable and sustainable strategy is needed – one that recognises the interconnected nature of climate, development, and consumption.

India, the world’s third-largest emitter of greenhouse gases, finds itself at the crossroads of development and environmental sustainability. The global approach to climate change, heavily focused on reducing carbon emissions through renewable energy adoption, overlooks India’s unique socio-economic and geographical challenges. This one-size-fits-all strategy is fundamentally flawed and could undermine the effectiveness of India’s climate efforts, as argued in the Economic Survey 2023-24.

The global strategy to combat climate change revolves around climate adaptation and mitigation, with an emphasis on renewable energy, energy efficiency, and cutting methane emissions. While these goals are attainable for developed countries, they are far more challenging for India. The country’s population exceeds 1.4 billion, and the demand for energy to fuel its development is immense. Despite this, India’s per capita emissions remain at around 2.8 tons of CO2 equivalent per year, compared to 8 tons in the EU and 16 tons in the US.

Renewable energy sources such as solar and wind are often seen as the ultimate solution to climate change. However, the transition to renewables is not without significant challenges. For instance, the production of solar panels and wind turbines requires substantial amounts of rare earth metals like lithium, cobalt, and nickel. These materials are primarily extracted from countries with poor labor and environmental standards. The extraction process is energy-intensive and environmentally destructive, leading to a paradox where the pursuit of clean energy contributes to environmental degradation.

Moreover, renewable energy sources are intermittent. Solar and wind power generation depends on weather conditions, necessitating substantial storage capacities to ensure a stable power supply. This storage requirement further exacerbates the environmental impact, as battery production involves additional mining and resource extraction.

India faces a unique set of challenges in its quest to reduce carbon emissions. The country’s heavy reliance on coal for industrial processes, power generation, and transportation makes transitioning to cleaner energy sources particularly difficult. Approximately 70% of India’s electricity comes from coal, highlighting the scale of the challenge.

The financial burden of this transition is another major hurdle. Developing countries like India require approximately $6 trillion by 2030 to meet their climate targets. However, only $100 billion was pledged by developed nations till 2020, with an actual provision of just $83.3 billion. This financing gap makes it nearly impossible for India to make the necessary investments in clean energy infrastructure and technology.

A critical flaw in the current climate strategy is its failure to address overconsumption in developed countries. High-income nations are responsible for the majority of global emissions, with the top 10% of emitters averaging 22 tons of CO2 per year, over 200 times the emissions of the bottom 10%. Despite this, the focus remains on technological solutions rather than addressing the root cause of the problem: excessive consumption.

For instance, the average American consumes 12,700 kWh of electricity annually, compared to just 185 kWh in Africa. This disparity underscores the need for a more holistic approach to climate action that includes lifestyle changes and reduced consumption in developed countries, alongside technological advancements.

India must advocate for a climate strategy that reflects its developmental needs and capabilities. This involves investing in clean energy technologies that are suited to its unique context, such as small-scale solar and wind projects, improving energy efficiency in industries, and promoting sustainable agricultural practices. Additionally, India should leverage its position as a leader in the Global South to push for more equitable climate policies that hold developed nations accountable for their historical emissions and current consumption patterns.

To truly address the climate crisis, the global community must adopt a more nuanced and equitable approach. This includes recognising the historical emissions of developed countries and providing adequate financial and technological support to developing nations. It also means shifting the focus from merely substituting fossil fuels with renewables to promoting sustainable consumption and lifestyle changes.

The current global approach to climate change is fundamentally flawed and insufficient to address the unique challenges faced by India. A more equitable and sustainable strategy is needed – one that recognises the interconnected nature of climate, development, and consumption and provides the necessary support for all nations to achieve their climate goals. India’s climate strategy must be rethought to ensure that it is not only effective but also just and inclusive, allowing the country to continue its development while contributing to global climate efforts.

Souryabrata Mohapatra is an associate fellow at NCAER in New Delhi.

In September this year, India will complete 8 years since it implemented Inflation Targeting (IT). Consistent with the experience of other countries, in India too, IT has been credited with improved outcomes: gentler and less volatile headline inflation; anchored inflationary expectations; improved communication and transparency; enhanced transmission of monetary policy; greater independence of the central bank; better coordination with the fiscal authorities; and smooth conduct of exchange rate and reserve management policies in response to external shocks.

The RBI has remained as committed to a ‘multiple indicators’ approach as it was before the formal adoption of IT. A text analysis of its statements shows that the monetary policy committee considers a range of factors before arriving at a decision, such as drivers of inflation, dynamics of food and core inflation, liquidity situation, global economic environment and risk appetite, output gap, capacity utilization, inflationary expectations, exchange rate, employment, and fiscal deficit.

Despite this apparent successful run, there are periodic calls to make changes in the IT framework. One such proposal is that instead of CPI headline which includes demand- induced volatile food prices, core inflation or WPI inflation should be targeted. In the most direct official statement to this effect, the latest Economic Survey has proposed that “India’s inflation targeting framework should consider targeting core inflation, excluding food”.

The arguments in favour are that monetary policy is ineffective in combating supply- driven food inflation; food inflation is higher than the core inflation resulting in tighter monetary policy; and that food prices are volatile necessitating frequent policy changes.

The counter-arguments are the following. First, food inflation impacts both core inflation and overall inflationary expectations. Ignoring it can unanchor inflationary expectations and undo the past successes of IT.

Second, WPI is a poor substitute. It consists of wholesale prices, not retail prices; and of only manufacturing (64 percent weight) and commodities, while excluding services altogether.

Third, food price inflation has not been higher than core inflation. While it has been more volatile than core inflation, but less volatile than WPI inflation.

Table 1: Comparing Average Level and Volatility of
Different Inflation Series during September 2016 – June 2024

Finally, defying some of the earlier scepticism, IT has not made the RBI overly hawkish or reactive to every small deviation in inflation rate from its target of 4 percent or to every spike in food inflation.

Since September 2016, the RBI has changed the key policy rate 17 times, majority of them during two turbulent years. The first time in 2019-20 when the policy rate was eased five times by a cumulative 185 basis points in order to respond to a sharp growth slowdown. And again in 2022-23 when the policy rate was increased six times by a cumulative 210 basis points in response to accelerated inflation emanating from global shocks. During the remaining 6 years, the policy rate was changed only six times, about once every year.

But what if food prices become even more volatile during the coming years, due to climate change- induced heat waves and erratic rain patterns?

The answer lies in updating the CPI headline basket. The current basket accords a weight of 45.8 percent to food. The basket was calculated in 2011-12 and has not been revised since then, even though per capita incomes have nearly doubled meanwhile.

In order to project the correct weight of food in India’s consumption basket, we estimated the relationship between the share of food and per capita income across countries; and a similar relationship for the Indian states. The estimates robustly confirm that the share of food in consumption declines as income levels increase. While a Bangladeshi spends 45 percent on food, a Vietnamese spends 33 percent; a Brazilian 24 percent; and a South Korean only 14 percent.  Similar dispersion is seen across Indian states (as of 2011-12).

The estimated weight of food for India at today’s per capita income would be less than 40 percent instead of the current 45.8 percent; and would decline to below 30 percent in a decade from now. This correction itself should ameliorate the concerns on account of food inflation being a part of the inflation target.

Does it mean that India needs no review or revision of its IT framework at all?

Not really. In fact, it would be useful to conduct an independent review around issues such as: Is a 4 percent target inflation still appropriate? Should India make its tolerance band of 2-6 percent narrower? Or should it move from targeting an inflation level within a band, to just targeting a narrower band of say 4-6 percent, with no explicit point target?

The writer is director general of National Council of Applied Economic Research. Views are personal.