In the Budget, there has been a clear thrust on empowering rural economy by supporting agriculture and boosting infrastructure, social sectors. Reduced tax burden for senior citizens has been a matter of cheer. Populist demand of tax benefits to individual taxpayers has been given a miss. Seems, like that fund may have been used for offering tax rate reduction to the SME sector, which could help generate employment. Conditions regarding tax incentives associated with new employment have been further liberalized, Reports Amit Bhanot in the Cover Story of Governance Democracy & Politics (GDP), February Issue
Simply put, the Indian Union Budget 2018-19 has reaffirmed Narendra Modi government’s inclusive growth philosophy. There is no denying the fact that for business leaders, this budget has opened up enormous opportunities for participation in different creative ways. Ease of Doing Business and Ease of Living are the two key aspects of this budget. Sustaining the agenda of the fundamental structural reforms for the consecutive fourth budget is one of the achievements of the current government.
The emphasis of the budget is on strengthening the backbone sectors of the economy like Agriculture, MSMEs, Infrastructure, and Manufacturing. This is the right time for domestic and foreign players to align their business goals with the spirit of the ‘New India.’
Agriculture to Agri-business To Boost New India Evolution
If experts opinion are anything to go by, the Agriculture is the driving force of the ‘New India.’ The focus of the budget is on Agribusiness and Agro Value Addition. Finance Minister Mr. Arun Jaitely has mentioned in his budget speech that “we consider agriculture as an enterprise and want to help farmers produce more from the same land parcel at a lesser cost and simultaneously realize higher prices for their produce.” This new approach toward agriculture sector will yield remarkable results in the future. To achieve the target of doubling farmer’s income by 2022 and for transforming Indian agriculture sector into a profitable enterprise, the government has announced a number of initiatives in the union budget:
- In terms of figures, government has allocated Rs. 14.5 lakh crores for the rural development and agriculture sector. Finance Minister has announced that government has decided to keep MSP for all unannounced kharif crops at least at one and half times of their production cost after declaring the same for the majority of rabi crops.
- –In April 2016, the government has launched Electronic National Agricultural Market (e-NAM), an online platform to integrate 585 wholesale markets across India. At this point of time, 470 APMCs have been linked to the e-NAM network and the rest are targeted to get connected by March 2018. This year, for those farmers who are not in a position to directly transact at APMCs and other wholesale markets, the government has decided to develop and upgrade existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs). These GrAMs will be electronically linked to e-NAM to provide the farmers a facility to sell their produce directly to the consumers. An Agri-Market Infrastructure Fund with a corpus of 2000 crore will be set up for this purpose.
- In order to address the challenge of price volatility of perishable agricultural commodities finance minister has proposed to launch a scheme called “Operation Greens.” This scheme will go a long way in making sure that farmers come closer to the marketplace through better logistics, processing facilities, and professional management, a sum of Rs. 500 crore is allocated for this purpose. The Farmer Producer Organizations (FPO) will play a crucial role in the success of operation greens. The FPOs (similar to cooperative societies) provide assistance for the procurement of seeds, fertilizers, machinery, market linkages, training, networking, financial and technical advice to the farmers. To support FPOs government has announced that the FPOs having annual turnover of Rs. 100 crore will get 100% income tax exemption for the next five years. The Farmer Producer Organizations (FPOs), Village Producers Organizations (VPOs) and Women Self Help Groups (SHGs) will be encouraged to promote cluster-based organic farming too. Apart from this to support the organized cultivation of medicinal and aromatic plants and associated industries government has allocated Rs. 200 crore in the budget. The allocation for Food Processing sector is being doubled from Rs. 715 crore in 2017-18 to Rs. 1400 crore in the current fiscal year. The state-of-the-art testing facilities will be set up in all Mega Food Parks of the country.
- With regard to promoting the bamboo sector, Finance Minister has proposed to launch a re-structured ‘National Bamboo Mission’ with an outlay of Rs. 1290 crore. India’s northeast region has a rich diversity of Bamboo cultivation and farmers of Northeast India will get a huge benefit from this step. In some states, Indian Farmers are installing solar water pumps to irrigate their fields, this helps them to not only irrigate their fields for free but also help them to earn some extra income by selling the surplus solar power produced to the electricity grid. One such model is being implemented successfully in the Gujarat where the solar irrigation pumps installed in the farmer’s fields are connected to the power grid of Madhya Gujarat Vij Company Limited (MGVCL), which allows the farmers to sell back the surplus energy. The government has decided to put in place a structured mechanism for this model which will encourage the state governments and distribution companies to cooperate efficiently.
- Finance Minister has announced about setting up a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF) for financing infrastructure requirement of animal husbandry sector. A total Corpus of these two new Funds would be 10,000 crores.
- The volume of institutional credit for agriculture sector has increased from 10 lakh crore in 2017-18 to 11 lakh crore for the year 2018-19. To help lessee cultivators to avail crop loans without compromising the rights of the landowners, NITI Aayog will design a suitable mechanism too. The facility of Kisan Credit Cards is extended to include fisheries and animal husbandry farmers to help them meet their working capital needs. The small and marginal farmers will get more benefits too.
- To launch PM Krishi Sinchai Yojna in 96 irrigation deprived districts government has allocated Rs. 2600 crore. For building rural infrastructure Rs. 14.34 lakh crore is being allocated, including extra-budgetary and non-budgetary resources of Rs. 11.98 lakh crore. This fund will be used in developing 3.17 lakh kilometers of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and to provide 1.75 crore new household electric connections.
MSMEs and STARTUPs
When it comes to addressing the financing needs of MSMEs and Startups a number of measures have been announced in the budget i.e. government has proposed to onboard public sector banks and corporate on Trade Receivable Discounting System (TReDS) platform and link this with GSTN. The TReDS is an online platform which was launched last year to facilitate the financing of trade receivables of MSMEs. The government has provided Rs. 3794 crore for giving credit support, capital and interest subsidy to MSMEs. The government will take some additional measures for addressing the non-performing assets and stressed accounts of MSMEs too.
The target of lending under MUDRA Yojana has been extended to 3 lakh crore. From this year, NBFCs (Non-Banking Finance Companies) will also facilitate MUDRA loans for MSMEs. The government has launched the MUDRA scheme to provide easy finance to entrepreneurs from rural and remote areas. Since its launch in 2015, over 90 million loans worth 4.28 trillion rupees have been sanctioned to entrepreneurs from remote and rural areas of the country, out of which a majority of entrepreneurs are women. To strengthen the Startup India and Pradhan Mantri Kaushal Kendra kind of initiatives government has decided to take additional measures during 2018-19.
Defense Budget Up By 7.81%
The Indigenous Defense manufacturing is one of the key focus areas of the ‘Make in India.’ A few days back, Indian MoD has launched a Defense Investor cell to promote Indian defense startups and industry. According to the official press release Rs 2, 95, 511. 41 crore has been allocated for the defense sector. There is a growth of 7.81 percent from the last year’s defense budget. Out of Rs. 2,95,511.41 crore, Rs. 1,95,947.55 crore has been allocated for Revenue expenditure and Rs. 99,563.86 crore for Capital expenditure for the Defence Services and the Organizations/ Departments under MoD, it includes modernization related expenditure too. A few days back Department of Defense Production has launched a task force to explore the potential use of Artificial Intelligence for the defense capabilities.
Two important measures announced in the budget are:
–Development of the two Defence Industrial Corridors in the country. The first Defence Production Corridor is planned to be established in Tamil Nadu and the second one will be announced soon.
–Launching industry-friendly Defence Production Policy 2018 to promote indigenous defense production and MSMEs.