Forbes India 15th Anniversary Special

Rural economy gets its due

FM focuses on both long- and short-term solutions

Published: Feb 29, 2016 11:31:09 AM IST
Updated: Feb 29, 2016 03:35:56 PM IST
Rural economy gets its due
Image: Danish Siddiqui / Reuters

Rural India has been reeling under the effect of poor monsoon, with 302 of the 640 districts in the country receiving deficit rainfall. The short fall in precipitation has been 13 percent over the two past years. It was expected that the Union Budget 2016 would have a lot of measures to help this sector, and Minister of Finance Arun Jaitley did not disappoint. In fact, agriculture and farmer welfare was the first of the “nine pillars” on which his budget speech was anchored.

Jaitley announced an allocation of Rs 35,984 crore for agriculture and farmers’ welfare, with the money going towards a whole lot of initiatives that will (hopefully) double farmers’ incomes by 2022.

Irrigation forms the main part of this focus. Under the Pradhan Mantri Krishi Sinchai Yojana, 28.5 lakh hectares will be brought under irrigation, along with long-pending irrigation projects being fast-tracked. To fund all these, a dedicated long-term irrigation fund will be created in Nabard, with an initial corpus of Rs 20,000 crore. The budget also stressed on soil health card, balanced use of fertilisers, better ground water management and increasing crop yield.

Allocations under the Prime Minister’s rural road scheme have been increased by Rs 19,000 crore to build rural roads and make markets more accessible to farmers.

The recently launched crop insurance scheme got an allocation of Rs 5,500 crore. Another Rs 15,000 crore has been provided for interest subvention. The latter, said Jaitely, is to reduce the burden of loan repayment on the farmer.

That’s not it. Jaitley has chosen to leave lot of money in the hands of rural India: The overall rural sector allocation is Rs 87,765 crore, including Rs 38,500 crore under MGNREGA and Rs 8,500 crore for rural electrification. Jaitely announced that India will be 100 percent electrified by May 1, 2018.

Panchayats and municipalities will get Rs 2.87 lakh crore (an increase of 228 percent), as per the recommendations of the 14th Finance Commission.

These measures should provide some relief to the rural sector. In 2014-15 the agricultural growth rate was just 0.2 percent. Agriculture growth needs to be more than 3 percent for the overall GDP growth to exceed 7.5 percent. Experts say Jaitely has focussed rightly on boosting irrigation, improving crop yields and supporting the crop insurance scheme. As a short-term measure he has increased the MGNREGA allocation.