3. • First budget pillar - Agriculture and Farmers’ Welfare: 2X farm income 2021-22
• Second budget pillar - Rural Sector: boost employment & infrastructure
• Rural expenditure boost - in absolute and percentage terms
Powering the Rural Economy
0
20000
40000
60000
80000
100000
120000
140000
2012-13 2013-14 2014-15 2015-16 2016-17
Amount(inRs.Crores)
Total Allocations to MoA and MoRD*
Total allocation to Ministry of Agriculture
Total to Ministry of Rural Development
MoA+MoRD
0
1
2
3
4
5
6
7
8
2012-13 2013-14 2014-15 2015-16 2016-17
Percentage
Allocations as percentage of total budgeted
expenditure
Allocation to MoA as % of total expenditure
Allocation to MoRD as % of total expenditure
Total allocation to rural sector as % of total expenditure
4.4%
*MoA: Ministry of Agriculture; MoRD: Ministry of Rural Development
6.7%
2.2%
3
4. • Aim: to double farm incomes by 2022, three PM speeches in Karnataka, MP, UP
• Agriculture, largely ignored in Budget 2015-16, receives a whopping 127%
increase, from Rs 15,809 crores to Rs 35,983 crores, for 2016-17
• A special cess levied exclusively for funding farm initiatives
Krishi Kalyan cess @0.5% applicable on all taxable services
Agriculture
27931.59
29772.83 31062.94
24909.78
44485.2
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2012- 13 2 0 1 3 - 1 4 20 1 4 - 1 5 2015- 16 2016- 17
Total allocation to Ministry of Agriculture
1.9
1.8 1.7
1.4
2.2
0
0.5
1
1.5
2
2.5
2012- 13 2013- 14 2014- 15 2015- 16 2016- 17
Allocation as % of total expenditure
Amount(InRs.Crores)
*Total Plan and Non-Plan budget provisions net of receipts and recoveries
Source: Expenditure Budget Volume II
4
5. • Crop Insurance – second largest allocation in Budget
• Improving farm productivity
Irrigation
Soil fertility
Fertilizers
Organic farming
• Incentives for production
Availability of credit, largest provision (Rs 15,000 crores) for loan subvention
Price incentives
• Marketing of produce – digitising the APMC
• Food security - pulses
Key Farm Proposals in Budget 2016-17
5
6. Rank Scheme Share
1 Interest Subsidy for Short Term Credit to Farmers 41.7%
2 Pradhan Mantri Fasal Bima Yojna 15.3%
3 Rashtriya Krishi Vikas Yojana 15.0%
4 Pradhan Mantri Krishi Sinchai Yojana 6.5%
5 National Food Security Mission 4.7%
6 National Mission on Sustainable Agriculture 3.1%
Ag. Schemes with Highest Expenditure
Shares planned for 2016-17
6
7. • Focus scheme for government- Pradhan Mantri Fasal Bima Yojana
“Path-breaking” Crop Insurance Scheme
2014-15 actual 2015-2016 RE 2016-17 BE
Crop insurance 2598.35 2954.65 5501.15
0
1000
2000
3000
4000
5000
6000
Amount(inRs.crores)
Expenditure on crop insurance
Justification & Implementation Risks
Government hopes to address agrarian crisis,
largely ignored during its first two years, after two
consecutive monsoon failures. Second largest
allocation for agriculture.
Risks are highly correlated in agriculture: insurance works best
when they are not & probability of loss is low (but high at 14-
20%)
However the required infrastructure to implement
is not in place and unlikely to be in place if there is a
third monsoon failure
Moral hazard: Subsidising premiums will encourage risk-taking,
especially for MSP crops, where this is already suboptimal
Second largest
allocation for
agriculture in
Budget
7
8. Interest Subsidy on Short-term Credit
• Interest subvention has the largest share in total expenditure, Rs 15,000 cr.
• However, this scheme was with Finance Ministry before it was transferred to
Ministry of Agriculture in this current budget
• Previous year’s allocation for scheme was Rs 13,000 crore
• Scheme is reported to be misused by large farmers who borrow at subsidized
rates to invest in higher return schemes, or lend to unbanked farmers
• There is no clear framework to monitor and evaluate who avails scheme and
how it is used, or how it should be modified based on experience
8
9. • Pradhan Mantri Krishi Sinchai Yojana an allocation of Rs 5,717 crores in 4
subcomponents
• Accelerated Irrigation Benefits Programme
• New long-term NABARD Irrigation Fund Rs 20,000 crores (Rs 12,517 cr this year)
• Sustainable ground water management: Rs 6,000 cr. multilateral funding sought
• 5 lakh farm ponds and dug wells & 10 lakh compost pits through MGNREGA
Irrigation: holds the key, will take time
2015-2016 RE 2016-17 BE
Irrigation- Pradhan Mantri
Krishi Sinchai Yojana
1550.01 2340.00
0
500
1000
1500
2000
2500
Amount(inRs.crores)
Pradhan Mantri Krishi Sinchai Yojana*
*Per Drop More Crop scheme; Overall allocation among 4 sub-schemes is Rs 5717 crores, including Water Resources Ministry
9
10. Soil Fertility
Soil Health Card Scheme:
• Target: to cover all 14 crore farm holdings by March 2017
• Allocation: Rs 368 crore
2014-15 actual 2015-2016 RE 2016-17 BE
National Project on Soil
Health & Fertility
92.76 141.82 368.30
0
50
100
150
200
250
300
350
400
Amount(inRs.Crores)
National Project on Soil Health & Fertility
10
11. Promoting Organic Farming
• Aim: To increase crop yields in rain fed areas- 55% of the country’s
arable land
• Parmparagat Krishi Vikas Yojana-
Aim: to bring 5 lakh acres under organic farming over a three year period
• Promoting organic farming in North-East region
Focus is on value addition so that organic produce grown in these parts find
domestic and export markets
11
12. Promoting Organic Farming
• While allocations under Parmparagat Krishi Vikas Yojana have increased,
allocation for Organic Farming/Value Chain Development for NE region
has decreased
2015-2016 RE 2016-17 BE
Paramparagat Krishi
Vikas Yojana
249.6 297.00
220
230
240
250
260
270
280
290
300
310
Amount(inRs.Crores)
Paramparagat Krishi Vikas Yojana
2015-2016 RE 2016-17 BE
National Project on
Organic Farming / Value
Chain Development for
North East Region
125 114.76
108
110
112
114
116
118
120
122
124
126
Amount(inRs.crores)
National Project on Organic Farming / Value
Chain Development for North East Region
12
13. • Availability of credit
Target for agricultural credit in 2016-17: Rs. 9 lakh crore
Rs. 15,000 crore in BE 2016-17 towards interest subvention
• Price incentives
Incentives for production
13
14. Agricultural Marketing Reform
• Unified Agriculture Marketing Scheme
a common e-market platform will be deployed in selected 585
regulated wholesale markets, requiring states to amend APMC: 12
states have already done so
• 100% FDI allowed through FIP Board to market food products
produced and manufactured in India
14
15. • Rs 500 crores under National Food Security Mission for procurement
of pulses
• The number of districts covered increased to 622
Food Security
2014-15 actual 2015-2016 RE 2016-17 BE
Food security 1872.74 1136.61 1705.86
0
200
400
600
800
1000
1200
1400
1600
1800
2000
InRs.crores
Food security
15
16. • Allocation of Rs. 38,500 crore for MGNREGS in 2016-17
• Targeted Delivery of Subsidies, Benefits and Services using Aadhaar
framework
• Rs. 19,000 crore PM Gram Sadak Yojna, with states share, total Rs
27,000 crores
• Increase in allocation to Gram Panchayats: Rs 80 lakhs for gram
panchayat
• Launch of new restructured scheme: Rashtriya Gram Swaraj Abhiyan-
aimed at developing governance capabilities of panchayats
• 300 RURBAN clusters to provide infrastructure amenities, market access
for farmers, and skill development opportunities for youth
• National Digital Land Record Modernisation Programme to be
implemented as a Central sector scheme [incentive framework]
Non-Agriculture Rural Sector
16
17. • There is no differentiation in schemes between small farmers and
large farmers
• Missing: Rationalisation of fertilizer subsidy
Price of urea very low relative to neighbouring countries, smuggling
A significant chunk of subsidized urea still diverted for industrial use
DBT in fertilizer subsidy will reduce leakages, but the effect will be
very small, since being introduced on pilot basis
• Missing: rationalization of food subsidy
• Together, food and fertiliser subsidies eat up more than 2 lakh crore,
and pending 1 lakh crore – when will reforms start? Already late in
political cycle?
Developmental Concerns
17
18. The second biggest focus of budget
• Reviving PPP Model of infrastructure development
• Boosting transportation
Infrastructure
18
19. • Kelkar Committee on Revisiting and Revitalising PPP Mode of
Infrastructure Development recently submitted its recommendations.
• Two Kelkar Committee recommendations implemented:
Disputes resolution bill to streamline institutional arrangements for resolving
infrastructure contract disputes
Guidelines for renegotiation of PPP Concession Agreements to be issued
• Additional measures:
A new credit rating system for infrastructure projects to be developed. This will help in
improving accuracy in pricing of loans to the sector.
Reviving PPP Mode of Infrastructure Development
If implemented, these measures will help immensely in kick-starting stalled
projects and in increasing attractiveness of Indian infrastructure sector
19
20. • Achieving infrastructure outlays depends significantly on off-budget
resource raising initiatives
National Investment and Infrastructure Fund
Tax-free infrastructure bonds
• Lack of push to PPP India (3PI) for analytical, negotiation, and legal
capacity building for infrastructure PPPs
Concerns
20
21. • Roads and highways:
85% of stalled road projects have been put back on track
Allocation of Rs. 55,000 crore in the Budget for Roads and Highways
• Airports:
Government is drawing up an action plan for revival of 160
underserved airports
Boosting Transportation
21
22. • Under this category, the budget’s focus has been on increasing
domestic value addition through:
Supporting small businesses
Promoting growth in real estate sector
Boosting construction sector
Incentivising oil and gas exploration in India
• The government has focused on its role as an enabler by taking steps
towards easing tax compliance and reducing tax litigation
Industry
22
23. Presumptive taxation scheme:
• Budget has increased turnover limit to Rs. 2 crores to avail scheme
• Earlier the turnover limit was Rs. 1 crore
• Professionals opting for the scheme are not required to maintain
books of account and get the accounts audited
• Currently about 33 lakh small business people avail of this benefit
• Increase in the turnover limit would reduce the compliance burden
of the small taxpayers
• Some start-ups might also gain from this revised turnover limit
Relief to MSMEs
23
24. • Three-year tax holiday for start-ups set up during April 2016 to March
2019
• Capital gains will not be taxed if invested in regulated/notified Fund
of Funds
• Special patent regime with 10% rate of tax on income from patents
developed and registered in India.
• Increase target of Pradhan Mantri Mudra Yojana to Rs. 1,80,000 crore
Benefits for Start-Ups
24
25. • Boosting demand for housing:
Rs 50,000 deduction on interest on loans for first-time home buyers for
loans upto Rs. 35 lakh
• Incentivising supply of affordable housing:
100 per cent deduction for profit on development of affordable housing
• Facilitate investments in Real Estate Investment Trusts:
REITs exempt from Dividend Distribution Tax.
• This will also give a boost to construction sector- second largest
employer
Boosting Real Estate Sector
25
26. Little focus on external sector:
• Import-substituting adjustments of customs duties
Increase in customs duty on manufactured imports, decrease in duty for some inputs
Protectionism: Increase in Basic Customs Duty on aluminium and its products
Should India focus on integrating into global value chains? Will it get left behind?
• Negligible steps taken to address India’s poor export sector performance
• India is at a risk of being left out mega-trading blocs: TPP, APEC, FTAAP
• No steps taken towards raising quality standards to prepare for TPP regime,
or even join APEC
Industry & Manufacturing Concerns
26
27. • No serious attempt at addressing exemptions
• Budgeted capital expenditure 1.6% relative to GDP less than FY16
expenditure: 1.8% of GDP
• Factor market reforms kept on backburner
Goods and Services Tax
Land Acquisition Act
A comprehensive national labour law
Industry & Manufacturing Concerns
27
28. • A budget with focus on domestic value creation
• Aims to address important sectors of domestic economy:
Rural sector: through small positive steps. However the infrastructure
surrounding big schemes- interest subvention and crop insurance needs to
be strengthened to achieve the expected results
Industry: primarily through steps to enhance infrastructure
• Decision to stay on the fiscal consolidation path commendable
• However, external sector has been ignored
• Factor market reforms remain out of discussion, left to states
The big picture: Direction right, steps small
28
