Union Budget 2016-17 Rural Revolution with Bharat Budget

The Union Budget 2016-17 focuses on rural economy with 110 % hike for agriculture sector. Several key reform measures with potential to change the game have been announced
Union Budget 2016-17 Rural Revolution with Bharat Budget

If it is an exaggeration what eminent agriculture expert and father of green revolution MS Swaminathan said about the Union Budget 2016-17, then it is an exaggeration of a vital truth. Swaminathan said,“ On the whole Budget 2016 has tried to be as pro-farmer as possible. Seeds have been sown for agricultural transformation and for a new farming era.”

Budget 2016-17 has certainly created a ground for rural revolution with its focus on farm sector and adequate allocations have made for all related schemes such as irrigation, crop insurance, farm credit, soil health and others. To supplement the farm sector, rural development , as a whole, has got highest ever allocation.

It was widely expected from Narendra Modi led NDA government, facing criticism of being ‘ Suit-boot ki Sarkar’ ( Pro urban government) that it would focus on farm and rural development sectors to shift its image from pro- urban to pro-poor. Two successive droughts have resulted in demand slow down and rural economy is really under severe stress. It was certainly high time for the Centre to come up key reforms to push rural economy to ease stress. Union Finance Minister Arun Jaitley rose to the occasion and presented the Union Budget 2016-17 with major focus on agriculture, farmers’ welfare and rural development.

Nine Pillars

The Finance Minister says the agenda for the next year will be to ‘Transform India.’ He highlights that the budget proposals are built on this transformative agenda with nine distinct pillars which include: Agriculture and Farmers’ Welfare; Rural Sector; Social Sector including Healthcare; Education, Skills and Job Creation; Infrastructure and Investment; Financial Sector Reforms; Governance and Ease of Doing Business; Fiscal Discipline and Tax Reforms.

“The nine pillars of Union Budget are inspiring and will not only fuel economic growth but increase India’s competitveness, says Mahesh Gupta, President, PHD Chambers.

“Focus on rural India would go a long way to generate demand in the economy and give a push to overall growth and development of the country,” he adds.


Creation of a dedicated Long Term Irrigation Fund (LTIF) in NABARD with an initial corpus of about Rs. 20,000 crore is yet another ‘Transformative’ measure. The LTIF is meant for implementing 89 major/medium irrigation projects covering a command area of over 8 million hectares.

The Budget has also increased allocation to the Pradhan Mantri Krishi Sinchai Yojana, which focuses mainly on micro-irrigation and boosting water-use efficiency at farm level, from Rs 5,300 crore to Rs 5,840 crore.

The Government has paid adequate attention on this and a major programme for sustainable management of ground water resources has been prepared with an estimated cost of Rs. 6,000 crore.

Farm Credit & Insurance

In the budget special focus has been given to ensure adequate and timely flow of credit to the farmers. Against the target of Rs. 8.5 lakh crore in 2015-16, the target for agricultural credit in 2016-17 will be an all-time high of Rs. 9 lakh crore. To reduce the burden of loan repayment on farmers, a provision of Rs. 15,000 crore has been made in the BE 2016-17 towards interest subvention.

For effective implementation of Prime Minister Fasal Bima Yojana, Rs. 5,500 crore have been provided in the Budget 2016-17. Jaitley says to make dairying more remunerative to the farmers, four new projects will be taken up: These projects will be implemented at a cost of Rs. 850 crores over the next few years.

Shilpa Divekar Nirula, CEO – Monsanto India Region says, “ Irrigation and crop insurance are two of the key inputs that will help improve farm productivity in India. The attempt to bring 28.5 lakh hectares under the “Pradhan Mantri Krishi Sinchai Yojana”, a dedicated irrigation fund along with a sharp focus on providing farmers access to crop insurance under the “Pradhan Mantri Fasal Bima Yojana” are admirable first steps”.

Doubling Income of Farmers

The Government intends to double the farmers’ income by 2022. Budget allocates Rs. 35,984 crore for agriculture and farmers’ welfare. Jaitley says that his government intends to address issues of optimal utilization of water resources, create new infrastructure for irrigation, conserve soil fertility with balanced use of fertilizer and provide connectivity from farm to market.

“By committing itself to doubling farmer’s income in five years, the government has ensured that all steps will be taken that would fortify the viability of the agriculture sector in the coming years,” says Harshavardhan Neotia, President, FICCI. “Creation of a Long Term Irrigation Fund, a further push to the Soil Health Card Scheme, incentivising production of pulses, implementation of a Unified Agriculture Marketing Scheme and bringing on board more states to reform the APMC Act are encouraging initiatives,” he adds.

Agriculture expert Devindra Sharma says, “ Why should farmers wait for 5 years to double their income? At present, farmers have income from farming in 17 States is just Rs 1700 per month.” 

Krishi Kalyan Cess

Jaitley proposes Krishi Kalyan Cess at 0.5 percent on all taxable services. Its proceeds would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. It will come into effect from 1st June, 2016.

Rural Sector

Rural development follows farm sector in priorities of the government. Allocation of over Rs. 87,000 crore for rural development is encouraging as it will increase farmers’ income in the coming times and fuel rural demand which is the need of the hour. Allocation of Rs. 38,500 crore for MGNREGA will facilitate employment generation in rural areas and will facilitate all-inclusive growth in the economy.

A sum of Rs. 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities. It will translate to an average assistance of over Rs. 80 lakh per Gram Panchayat. Every block under drought and rural distress will be taken up as an Intensive Block under the Deen Dayal Antyodaya Mission. Moreover, 300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission. Swachh Bharat Mission with Rs. 9,000 crore allocation, new Digital Literacy Mission Scheme for rural India and yet another scheme namely ‘Rashtriya Gram Swaraj Abhiyan” with Rs. 655 crore would provide much needed boost to rural development across the country. For rural development as a whole, Rs. 87,765 crore have been allocated.

Sunil Kanoria, President, Assocham says “The government has rightly realised that a sustainable and equitable growth model cannot be built as long as the rural economy is in distress.”

The government also allocates Rs 368 crore for setting up Self-Help Groups (SHGs) for rural development.

The other big focus in the Budget is rural roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY). The 2016-17 Budget provides Rs 19,000 crore for PMGSY, which is above the revised estimate of Rs 18,291 crore for this fiscal. “We have managed to revive the programme. This year, we will build 37,000 km of rural roads and our target for 2016-17 is 45,000 km. Since states will also be pitching in their 40 per cent share, the total spending under PMGSY will cross Rs 27,300 crore this year,” says Jaitley.


The budget support for MGNREGA, though, has been increased somewhat to Rs 38,500 crore, from Rs 35,766.75 crore in the revised estimates for 2015-16. Even the latter figure is, in fact, higher than the Rs 33,713 crore that was originally provided. It only points to the political sensitivities attached to the programme, which Modi himself had last year dubbed as a “living monument of your (Congress’s) failure to tackle poverty in 60 years”.

The government has also built on the UPA’s other big idea — Aadhaar, with Jaitley stating in the Budget that it would get statutory backing. Aadhaar, backed by law, will facilitate direct benefit transfer of all subsidies.

Health Sector : Under-Funding

The allocation for healthcare sector increases by nearly 22 percent over the previous year’s budget estimate to Rs. 39,533 crores. In the last budget the allocations for health were substantially reduced. From this point of view, the hike in health sector allocation is a promising step. However, the health sector feels despite the increase in budgetary allocations this year, the under-funding of health by government remains a concern.

The healthcare sector was expecting a higher allocation-2.5 percent of GDP. But that has not happened. Indian Medical Association (IMA) sounds disappointed. Dr SS Agarwal, National President IMA says that their main demand of allocating 2.5 percent of GDP to health sector has not been addressed. 

A New Health Protection Scheme to provide health cover up to Rs.1 lakh per family has been announced and a National Dialysis Services Programme would be launched. Further 3000 Stores would be opened under Prime Minister’s Jan Aushadhi Yojana during 2016-17 for better access and affordability to quality medicines. availability

“We will reinvigorate the supply of generic drugs. 3,000 stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17”, says Jaitley.

Anjan Bose, Secretary General, NATHEALTH says, “The implementation process for such a large project such as health insurance has to be very efficient and there exits potential opportunity for PPP in this area.”

However, the health care industry is concerned since the Government has not addressed the issue of recent increase in import duty on medical equipment and devices. “The medical technology sector is in an infancy stage with manufacturing limited to less complex devices. More than 75 percentof medical equipment / devices is still imported and hence the duty increase will result in increase in healthcare cost,” adds Bose.

The Way Forward

The whopping 110 percent hike for the farm sector with key reforms measures aims to put rural economy on fast-track mode. Will that happen ? And shall we get ready for a rural revolution now with a ‘ Bharat Budget’?

Answers to the above questions lies in effective implementation of schemes and initiatives. The government needs to create a forward looking policy environment which is in the best interest of the Indian farmers. Ensuring that no one is left behind would be big challenge, going forward. If the Centre implements its schemes efficiently and effectively and the States follow the same with vigour, no doubt rural economy will boom and consequently India will successfully become mid-income nation by 2025.  

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