What does the Budget 2018 have for the rural sector - Motilal Oswal
What does the Budget 2018 have for the rural sector - Motilal Oswal

What does the Budget 2018 have for the rural sector

After the elections in Gujarat, the budget was always expected to have a rural twist. After all, in Gujarat the BJP victory was largely driven by the urban voters while rural voters voted in favour of the Congress. The message for the government was quite clear that they will have to focus substantially on the rural segment. Also there are key state elections coming up this year and the all-important central elections coming up in 2019. And the Union Budget did have a very sharp rural twist. On the positive side, most of the rural allocations were structural issues related rather than focusing on freebies. Here are some of the key takeaways for the rural sector from the Union Budget 2018..

A key structural shift in wooing the rural sector
From rural infrastructure to farm distress to rural incomes, the budget did travel a very long way. Here is what the budget focused on for the rural population..

The MSP (Minimum Support Price) for Kharif  crops has been fixed at 1.5 times the cost of production. This offers a scientific formula for Kharif pricing rather than following a random approach each year. Also, this should incentivize farmers to produce more and keep inflation in check.

The budget has announced a massive plan to connect 470 APMCs through the electronic National Agricultural Market (eNAM). Currently, farmers do not get a good price for their output as they are at the mercy of mandi brokers. By implementing the eNAM, not only do farmers get a better price but they are also able to hedge their price risk through the use of futures.

As part of our budget expectations we had discussed about the need for a quantum shift in the nature of the Green Revolution to increase the farm incomes by 100% by the year 2022. The budget has spoken about a Green Focus but the budget of Rs.500 crore does look to be quite inadequate considering the size of the task.

There is an Rs.16,000 crore allocation to provide power to nearly 4 crore households. This will be a huge improvement in the standard living and quality of life in rural areas leading to more productivity. That is likely to show up in work output and also enhance rural incomes and spending power.

In another step to provide a boost to the standard of living and quality of life in rural areas, the budget proposes to provide nearly 8 crore free gas connections. This will also reduce the medical liabilities of these families that are a normal corollary as the Chula causes a variety of respiratory diseases in women.

The total credit to agriculture has been enhanced to Rs.11 lakh crore. To the credit of the government it has not focused too much on giving away freebies. Instead, the focus is more on interest subvention schemes and also funding for special products to enhance productivity

There is a huge information and capability gap between the rural and urban areas. The best way to resolve this problem is through the use of technology. The budget envisages providing broadband access to 10 crore rural households to bridge this divide.

The big game changer in the budget could be the rural livelihood plan. An allocation of Rs.14.34 lakh crore has been made for this program which will include non-farm work to more productively use time.

The budget has envisaged one of the biggest mass healthcare programs in the world with a view to cover nearly 10 crore households with a healthcare cover of up to Rs.5 lakhs. This can largely avoid rural households getting into debt burden at unsustainable rates of interest from usurers.

In addition, the government has also given a boost to organic farming and other ancillary services like fisheries and aqua. These are the high growth segments of the agri space.

The budget is a big step towards doubling farm incomes by the year 2022. A structural shift is required and that is what has been addressed in this budget.
 

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