India budget 2018 may spend more money on farmers

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January 21, 2018: Indian farmer Neeraj Singh walks through his mustard field on the outskirts of Amritsar on the eve of Basant Panchmi, a festival that celebrates the onset of spring.

New Delhi is likely to focus attention on rural areas in its upcoming annual budget, set for release on February 1, in an attempt to shore up political support there.

Large swaths of the farming community — who make up the bulk of India’s population — are growing disillusioned with Prime Minister Narendra Modi’s Bharatiya Janata Party, as reflected by December’s Gujarat state election. Although the BJP secured a narrow victory in the bellwether state, rural residents there overwhelmingly voted for the opposition Congress party, which aggressively painted Modi as anti-poor and anti-farmer.

Those results have the BJP worried. Four other states with big agrarian populations — Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka — are scheduled to hold elections this year, and the BJP may not be as lucky in those areas.

Malaise among farmers runs deep, said Kunal Kundu, an economist at Societe Generale. Two years of drought have bitten into profits, which are believed to have fallen further last year despite a normal monsoon. Protests among farmers have risen sharply nationwide, Kundu explained.

To offset this discontent, Finance Minister Arun Jaitley is widely expected to promote initiatives aimed at boosting rural growth when he announces the federal budget next month.

Syed Zafar Islam, the BJP’s national spokesperson for political and economic affairs, told CNBC that he did not wish to speculate on New Delhi’s upcoming budget. But he noted that farmers’ wages have improved since Modi came to power and that the government was committed to addressing concerns of the rural community.

“Fifty percent of the population stays in rural areas, so this is a huge priority for the government to improve the economic well being of farmers and masses through more rural roads, irrigation projects, rural housing, and better price realization for farmers,” Islam said.