With its focus primarily on the farmers and the agricultural sector, the BJP government’s ‘Vikas ka Budget’ reaches out to the rural as it shifts its focus from the rich to the poor. The ‘suit-boot ki sarkar’ focuses on irrigation in its 2016-17 Union Budget as Finance Minister Arun Jaitley proposed creation of a dedicated Long Term Irrigation Fund for implementing 89 major/medium irrigation projects covering a command area of over 8 million hectares.
The Budget has increased allocation to the Pradhan Mantri Krishi Sinchai Yojana, which focuses mainly on micro-irrigation and boosting water-use efficiency at farm level, from £530 million to £584 million. It also stresses on rural roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY), a programme that was introduced during the tenure of the NDA government to provide all-weather road connectivity to all rural habitations with a minimum population of 500 in the plains and 250-plus in hill states, tribal districts and desert areas. A total of £1.90 billion is provided for PMGSY. The third pro-rural initiative that found place in the Budget is the Pradhan Mantri Fasal Bima Yojana (PMFBY) for which £550 million has been allocated. Modi made the PMFBY one of the government’s flagship schemes. It enables farmers to insure their crops at low premiums of 1.5 to 5 per cent, with policy claims covering the full value of produce linked to minimum support prices and average threshold yields.
The Budget has also enhanced the provision for interest subsidy on short-term crop credit to farmers to £1.50 billion, from the £1.30 billion in 2015-16 and £600 million the year before. The Budget support for MGNREGA has been increased to £3.85 billion, from £3.57 billion in the revised estimates for 2015-16. Even the latter figure is, in fact, higher than the £3.37 billion that was originally provided. Jaitley stressed on wooing the poor class as his speech revolved around what he himself called a “transformative agenda” with the farm and non-farm rural sectors getting pride of place, followed by job creation, infrastructure and the social sector. While financial sector reforms, ease of doing business, fiscal discipline and tax reforms were on the list, they ranked low.
“We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden,” Jaitley said. He elaborated that the government wanted to spread the benefits of growth more widely among India’s 1.3 billion people, but gave an assurance that it could do so without increasing borrowing. He described his three priorities as: strengthening India’s firewalls by ensuring macroeconomic stability and prudent fiscal management; driving growth through domestic demand; and reforms to boost economic opportunity.
Applauding the Budget, Prime Minister Narendra Modi said, “Substantial resources have been allocated to create infrastructure across India. The common man’s life will change. I want to congratulate the finance minister on the Budget, which is focused on development of agriculture, farmers, women and rural areas... The Budget is about the dreams of the people.”
He said that the Budget will give a new direction and life to the rural economy, bringing big change to the life of the common man. “By 2018, every village will have electrification, rural economy will get a boost, common man’s life will change. For us, primary education is very important. A qualitative transformation of the education sector is our focus. We want to stand shoulder to shoulder with people in times of illness.” He stated that the Budget will help strengthen the housing sector and boost the government’s dream of ‘Housing for All’.
A key measure in the Budget relates to providing a legal framework for the Aadhaar platform, which will help to ensure that subsidies are directed to the needy. More than £4 billion of subsidies are provided for fertilisers. Similarly, another £4 billion subsidies are provided in the electricity sector. Fertiliser and electricity subsidies together amount to 1.6 per cent of the GDP, much of which leaks abroad or to non-agricultural uses, or goes to inefficient producers, or to firms given the exclusive privilege to import. But precisely for these reasons it has proved politically impossible to close the inefficient firms or eliminate the canalisation of imports. By providing a legal framework for the Aadhaar platform, the “JAM trinity” of Jan Dhan, Aadhaar and Mobile would be strengthened considerably. This will help to rationalise the regime of subsidies and lead to better targeting. Again, better targeting of subsidies to deserving beneficiaries would help to foster domestic demand, particularly in the rural sector.
