Budget 2020 was the first budget of the decade and came during the crucial time of economic slowdown when unemployment is at a record high and inflation is also on the rise. As such, a lot of stimuli were expected from this budget and it was thought that the government will make this a “spending” budget to give the necessary boost to the economy. The government did focus on areas like infrastructure and investment making this budget “investment” friendly and “agriculture-oriented”. However, the middle class Indian has been handed over another empty box of chocolates!
Positives in the economy listed by the FM Nirmala Sitharaman in the budget:
- The FM mentioned that Inflation has been well contained in India averaging around 4.5% during 2014-2019 with a robust growth rate of 7.4% over the period. However, the FM failed to mention the recently fallen GDP growth rate at 5%.
- · Central Government’s debt has reduced to 48.7% of GDP as of March,2019 from 52.2% of GDP earlier in March,2014 with India being the 5th largest economy of the world
- · Insolvency and Bankruptcy Code, 2016 has helped in recovering the economy from NPA crisis and banks have been cleaned up and re-capitalized.
- · GST has helped in increasing the efficiency of the logistics sector as the turnaround time of trucks decreases by 20% due to less documentation requirements.
- · In the last 2 years, 60 lakh new taxpayers have come into existence due to GST with 40 crore returns filed and 800 crore invoices uploaded.
- · 271 million people have been raised above poverty over the period of 2006-2016 while FDI being elevated to $284 Billion during 2014-2019 from the US $190 Billion during 2009-14.
The FM explained the budget tied across 3 themes and we will do the same. This article focuses on the 1st theme.
The government still believes that they can double the farmer’s income by 2022. The FM proudly stated that 6.11 crore farmers have been covered under Fasal Bima Yojana. Pradhan Mantri Graam sadak Yojana is doing well and more jobs are expected to be generated in the construction industry. As per the FM PM-Kisan Yojana is also doing well.
The FM proposed liberalizing the agricultural sector and provide integrated solutions with the allied activities as well. However, the issue is that Agriculture is a state subject and the steps taken by the union government may not be readily accepted by the state governments bringing out no impact at all. An ideal suggestion would be to move Agriculture from state list to union list to get integrated benefits.
Government has come up with 16 Action Points. The FM has stated that they will incentivize the states accepting and implementing 3 Model Laws i.e. Land Leasing Act 2016, Livestock 2017 and Contract Farming in Livestock 2018.
The FM stated that PM Kusum Scheme will encourage farmers to use solar energy more which is a noble idea in itself. However, the low target of only 20 lakh farmers makes one sceptical about its overall impact!
FM also talked about changing the incentive scheme to encourage usage of traditional methods of farming as against chemical fertilizers. But the government needs to keep in mind that Indian farmers have largely fragmented landholdings and departing from chemical fertilizers may adversely affect the yield of the land.
Good Initiatives proposed by the Government for Agriculture and allied sector
- NABARD to map and geo-tag warehouses. The government will implement VGF (Viability Gap Funding) in PPP model wherein government will provide financial support to private partners for setting up warehouses till the project becomes sustainable.
- KISAN Rail- A Cold Supply chain for perishables is an innovative idea along with Krishi UDAN.
- FM proposed supporting state with “One District, One Product” scheme to bring economies of scale in production of specific products in specific districts.
- Negotiable Warehousing receipts will now be integrated with e-NAM allowing farmers to take loans against warehouse receipts to finance further crops rather than going for forced sale of crops.
- NABARD’s re-finance scheme has been expanded to 15 lakh crore in FY21.
Fund Allocation: INR 2.83 lakh crores (1.6 to agri and allied activities and 1.2 to irrigation and rural development)
- FM stated of overcoming unemployment issues in coastal areas by hiring just 3000 Sagar Mitras . She also stated that 500 Fish Farmer Producer Organizations will be set up. Earlier set up Farmer Producer Organizations are not profitable. How will Fish Farmer Producer Organizations change the scenario is difficult to understand
- Also, the government’s target of doubling farmer’s income has been stated without any math behind it. Where will the expenditure be made? How will the revenue be earned to meet that expenditure?
Aspirational India-Education and Skills
- India is expected to have the largest working population by FY2030. As such, the FM emphasized on invoking “entrepreneurial spirits”. She also stated that Pradhan Mantri Gram Sadak Yojana is doing well and more jobs are coming up in construction sector.
- The FM proposed more FDI in the education sector which will mean privatization of the sector which again makes one sceptical of the proposal.
- The FM stated that students not pursuing specialization courses like Engineering will be made a part of the apprenticeship scheme to develop their skills along with vocational trainings.
- FM proposed 1 year internship of engineering students with Municipal bodies. This will definitely benefit the Municipal bodies as they will get qualified individuals to work on their issues. However, it is still unknown if the internship will be paid or not!
- A radical and, in my opinion, a great proposal made by the FM states providing full-fledged degree to students attending online education programs by top institutes in NIRF.
- IndSAT- an exam proposed to be qualified by Asians and Africans who want to study in India.
- District hospitals will be incentivized to get attached to medical colleges which is partially in existence already.
Fund Allocation: 99,300 Crore for Education and just 3000 Crore for Skill Development. India certainly needs to spend more in these sectors to improve its manpower!
- PM Jan Aarogya Yojana has 20000+ private hospitals integrated with Ayushman Bharat. Ayushman Bharat is doing well and has been able to attract private hospitals. FM proposes Ayushman Bharat integrated hospital in every district.
- AI and Machine Learning will also be integrated in Ayushman Bharat.
- The FM stated that Jan Jivan Mission (providing water to stressed districts) has been successful. However, she didn’t give any numbers.
Fund Allocation: 69000 Crore (a dismal 1.2% of GDP) It is a missed opportunity as the government itself is targeting at 2.5% of GDP by FY 2025.
Overall, the government has brought a mixed budget with good new initiatives being proposed but no bing-bang announcement to boost the agriculture sector.
To read the second part of the Union Budget 2020 analysis, where I discuss the impact on the business world, click here!
To know what happens to the trade of India and what do you get as an Indian Consumer, read the third part of the analysis!
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