Union Budget 2017-18 A Game Changer for Rural Economy

The government moves on with a clear intention and agenda for the next financial year. If the spirit of change continues, a Transform, Energise and Clean India (TEC India), with focus on rural, would certainly be in making, BK Jha analyses the implications of Union Budget 2017-18 on rural economy
Union Budget 2017-18 A Game Changer for Rural Economy

Continuing its focus on Agriculture and rural sector, Finance Minister Arun Jaitley presented yet another pro farmer Budget and a clear agenda indicates that the Union Budget 2017-18 is going to be a game changer. The Budget has accorded priority to rural infrastructure, irrigation, farm credit and other segments which impact the rural people.

The Agenda

The Finance Minister moves ahead with a holy statement of Mahatma Gandhi: "A right cause never fails" and set Budget agenda that is- Transform, Energise and Clean India (TEC India). With announcement of TEC India, he proceeds to focus on Agriculture and rural sectors. “Focus will be on rural economy and poverty alleviation,” he said.

In all, allocation for rural, agriculture and allied industry is at Rs 1.87 lakh crore, up 24 percent year-on-year.

Focus on Farm Credit

The Budget has addressed the main pain point of the Indian Farm sector. Farm credit remains a major challenge and the government knows, in no uncertain term, that the target of doubling farmers’ income would not be possible, if farmers were not provided cheap and timely credit. In pursuance of that the Finance Minister raised raised farm credit to farmers to a record Rs 10 lakh crore. This is against the government’s agriculture credit target of Rs 9 lakh crore for the ongoing financial year. Hence, a hike of Rs one lakh crore would certainly going to help the farmers in the country. Moreover, farmers will also benefit from 60 days’ interest waiver announced on December 31, 2016 by the government.

"The government will take special efforts to ensure adequate credit flow to underserved areas — the eastern states and Jammu and Kashmir,” Jaitley said.

The government provides short-term crop loans up to Rs 3 lakh at subsidised interest rate of 7 per cent per annum. An additional incentive of 3 per cent is provided to farmers for prompt repayment of loans within due date, making an effective interest rate for them at 4 per cent.

Agriculture Growth

The Finance Minister noted that the agriculture sector is expected to grow at 4.1 per cent during the current financial year on good monsoon. Sowing of both kharif and rabi crops has been higher.

Jaitley said the allocation for new crop insurance scheme ‘Pradhan Mantri Fasal Bima Yojana’, which was launched in 2016, has been increased to Rs 13,240 crore this financial year from budgeted Rs 5,500 crore. The allocation for the next financial year has been earmarked at Rs 9,000 crore. With this move, the coverage of this scheme is expected to increase from 30 per cent of the cropped area in 2016-17 to 40 per cent in 2017-18 to 50 per cent in 2018-19.

The proposal to create a Rs 5,000 crore dedicated micro-irrigation fund at NABARD was also very promising. This would help in reducing an another major pain point of the farmers. The government’s priority to irrigation was very clear and that was reflected in creation of a long term irrigation fund again at NABARD with a Rs 40,000 crore corpus.

The Finance Minister also assured that the government will prepare a model law on contract farming which will be circulated to state governments.

Dairy sector, an important source of additional income for farmers, has also got a boost from the Budget as the government has decided to set up a dairy processing fund of Rs 8,000 crore over three years with initial corpus of Rs 2,000 crore.

The decisions, pertaining to agriculture sector, are expected to increase farm activities which will be good for seeds, fertilisers and pesticides companies. A slew of measures, announced by the Finance Minister, would increase contribution of agro economy to the overall GDP.

Rural Sector

Apart from agriculture, the Budget also provides much needed momentum to rural activities for holistic development. Rural roads, electrification, infrastructure and the job scheme, all have got higher allocations compared to last year. For MGNREGS, the flagship scheme of the UPA, the government has allotted Rs 38,500 crore last year but spent Rs 47,000 crore. Next year, the Centre targets to spend Rs 48,000 crore and this would be the highest ever. The government has earmarked Rs 19,000 crore in the next fiscal for Pradhan Mantri Grameen Sadak Yojna and overall spends in the Yojna would be Rs 27, 000 crore including the States’ share.

The Union Budget clearly manifests that the government’s rural focus continues. It is widely agreed that if rural expenditure is up by a quarter, the rise in demand would transform rural economy. The budgetary suggest a 24 percent hike in rural expenditure from Rs 1,87,223 crore. Hence, rural economy has many reasons to cheer with the latest Budget announcements.

                                                          Union Budget 2017-18 for Rural: Highlights

  • Union Budget Focuses on spending more on rural areas, infrastructure and poverty alleviation with fiscal prudence
  • Agriculture sector is expected to grow at 4.6%, agriculture expenditure targeted at Rs 10 lakh crore
  • The target for agricultural credit in 2017-18 has been fixed at a record level of Rs 10 lakh crore
  •  New crop insurance scheme ‘Pradhan Mantri Fasal Bima Yojana’ to get Rs 9,000 crore
  • Allocation under MNREGA increased to 48,000 crore from Rs 38,500 crore. This is highest ever allocation
  • Total allocation for rural, agricultural and allied sectors for 2017-18 is Rs 187223 crore, which is 24% higher
  • One crore houses for poor by 2019
  • Safe drinking water to cover 28,000 arsenic and Fluoride-affected habitations in the next four years
  • 133-km road per day constructed under Pradhan Mantri Gram Sadak Yojana(PMGSY) as against 73-km in 2011-14
  • Rs 19,000 crore allocated for PMGSY for 2017-18. A total of Rs 27,000 crore will be spent with States’ share
  • Rs 10,000 crore for BharatNet project, More than 1,50,000 gram panchayats will benefit with this in next year
The Changing Face of Rural India