Budget 2016: Big rural leap forward for equitable growth

The Times of India
01 March 2016

By Kumar Mangalam Birla, Chairman, Aditya Birla Group

The finance minister presented a transformative Budget that combines the imperatives of fiscal consolidation with a growth stimulus. On one hand, it provides a boost to domestic investment through infrastructure spending, and to consumption through higher purchasing power, especially for the rural sector. On the other, by steadfastly staying committed to the fiscal deficit target of 3.5% of the GDP for the next fiscal year, the FM has sent a signal of fiscal prudence to domestic and foreign investors.

This can then set the stage for the Reserve Bank of India to reduce interest rates, spur industrial investment, encourage foreign inflows, stabilize the currency and keep inflation under control. Thus, fiscal prudence is also a good macroeconomic strategy.

More importantly, the thrust on spending in rural areas and on agriculture is most apt and timely, and will give a hefty payoff. There was growing awareness that the rural economy, especially the agriculture sector, was facing a distress-like situation in many parts of the country. This was partly due to falling demand and purchasing power, stagnating rural wages and falling prices for agricultural commodities.

Thanks to the agriculture focus, farm credit will reach an all-time high of Rs.9 lakh crore. In the next fiscal year there will also be fast-tracking of irrigation projects, and a dedicated long-term irrigation fund is being c;reated. The Cabinet had already announced a crop insurance scheme that is a huge safety net. The focus has also shifted to not just providing food security but also income security, especially for the farmer. The aim is to double farm incomes over the next five years.

Rural roads, too, have got significant investments. In fact the overall expenditure of infrastructure in roads and railways is more than Rs 2 lakh crore. This investment will spur greater private-sector investment and employment. Moreover, such infrastructure and assets with a long life benefit multiple generations. The FM also recognized that many infrastructure projects under PPP remained locked in disputes. Hence the setting up of a new commission will help untangle these projects and speed up their implementation.

The Budget also pays special attention to employment and enterprise creation, especially in the MSME (micro, small and medium enterprises) sector. There are incentives for skilling initiatives and also lower taxes. The Budget paves the way for a stable tax regime with lower rates and fewer exemptions, which surely adds to India’s competitiveness and ease of doing business.

The FM’s vision for the Budget is based on nine pillars as its foundation. These combine the rural, infrastructure and social sectors, as well as deepening the financial sector and strengthening competitiveness. It is truly a transformative Budget that sets the stage for a sustained inclusive and equitable growth.