The Gist of Yojana: May 2016
Union Budget 2016-17 - Highlights
Growth of Economy accelerated to 7.6% in 2015-16
Allocation for Agriculture and Farmers’ welfare is Rs 35,984 crore.
‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. 28.5
lakh hectares will be brought under irrigation.
- Implementation of 89 irrigation projects under AIBP, which are
languishing for a long time, will be fast tracked
- A dedicated Long Term Irrigation Fund will be created in NABARD with an
initial corpus of about Rs 20,000 crore .
Allocation for rural sector - Rs 87,765 crore. A sum of Rs 38,500 crore
allocated for MGNREGS.
- 100% village electrification by 1st May, 2018.
- A new Digital Literacy Mission Scheme for rural India to cover around 6
crore additional household within the next 3 years.
- New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of Rs
Allocation for social sector including education and health care - Rs
- Rs 2,000 crore allocated for initial cost of providing LPG connections
to BPL families.
- 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened
- ‘National Dialysis Services Programme’ to be started under National
Health Mission through PPP mode.
- “Stand Up India Scheme” to facilitate at least two projects per bank
branch. This will benefit at least 2.5 lakh entrepreneurs.
- National Scheduled Caste and Scheduled Tribe Hub to be set up in
partnership with industry associations.
Education - 62 new Navodaya Vidyalayas will be opened
- Regulatory architecture to be provided to ten public and ten private
institutions to emerge as world-class Teaching and. Research Institutions.
- Higher Education Financing Agency to be set-up with initial capital base
of Rs 1000 crores.
- Digital Depository for School Leaving Certificates, College Degrees,
Academic Awards and Mark sheets to be set-up.
Skill Development. Allocation for skill development - Rs 1804. crore.
- 1500 Multi Skill Training Institutes to be set-up.
- National Board for Skill Development Certification to be setup in
partnership with the industry and academia.
- Entrepreneurship Education and Training through Massive Open Online
Total investment in the road sector, including PMGSY allocation, would be
Rs 97,000 crore during 2016-17. To approve nearly 10,000 kms of National
Highways in 2016-17.
- Allocation of Rs 55,000 crore in the Budget for Roads. Additional Rs
15,000 crore to be raised by NHAI through bonds.
- Total outlay for infrastructure Rs 2,21,246 crore.
Allocation of Rs 25,000 crore towards recapitalisation of Public Sector
- Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased
to Rs 1,80,000 crore.
Amendments in Companies Act to improve enabling environment for start-ups.
- Price Stabilisation Fund with a corpus of Rs 900 crore to help maintain
stable prices of Pulses.
- “Ek Bharat Shreshtha Bharat” programme will be launched to link States
and Districts in an annual programme that connects people through exchanges
in areas of language, trade, culture, travel and tourism.
100% de uction of profits for 3 out of 5 years for startups setup during
April, 2016 to March, 2019.
A Shot in the Arm of Agriculture
The Union Budget2016-17 is highly encouraging as regards
agriculture and rural development. Many new initiatives, particularly related to
irrigation, have been introduced to address the long-run issue of agricultural
growth. This budget comes in the backdrop of a sluggish performance of the
agricultural sector in the last two years because of the two consecutive drought
After an encouraging performance during the XI Five Year Plan
period, agricultural growth has stuttered somewhat, with a growth rate of 1.5
per cent in 2012-13, followed by growth rates of 4.2 per cent and -0.2 per cent
in the subsequent two years. The latest estimates from the CSO indicate that
2015-16 will be only marginally better with a projected growth rate of 1.1 per
cent. Notwithstanding two consecutive droughts, structural problems ranging from
irrigation to input provision to marketing are responsible for this
deceleration. The present budget attempted to address some of these
long-standing issues faced by agriculture. The positive initiatives proposed
broadly relate to irrigation, rural infrastructure and marketing.
This adverse situation was largely due to continuous decline
in capital investment in agriculture, aggravated further by reduced input usage
due to decline in farm profitability. The first signs of turnaround came in
2005-06, with improvement in input usage, aided by some positive state action.
Some of the subsequent programs launched in 2007-08 helped maintain and further
accelerate this growth momentum. Programs to increase investment in agriculture
by states (RKVY) and targeted increase in food production (NFSM) helped this
process. These programs helped agriculture in improving its growth performance
over the last few years. However, production uncertainty and marketing
bottlenecks still continue to plague the sector. The present budget attempted to
address some of these long-standing issues.
Irrigation: One of the major problems facing Indian
agriculture is its excessive dependence on monsoon. Only about 45 per cent of
the cropped area in the country is irrigated, which results in wide-spread
production uncertainty. This budget attempted to address this issue in a major
way through the Pradhan Mantri Krishi Sinchai Yojana (PMKSY). This major
irrigation program, with an outlay of f17000 crores, aims to bring new area of
about 28 lakh hectares under irrigation. There are also proposals to
reinvigorate 89 defunct irrigation schemes under the Accelerated Irrigation
Benefit Program (AIBP), which is expected to benefit about 81 lakh hectares.
Harnessing groundwater resources is proposed to be undertaken at a cost of Rs
6000 crores. There are also complementary programs to improve farm ponds,
desilting and dug wells under MGNREGS (Mahatma Gandhi National Rural Employment
Guarantee Scheme). All these initiatives, together with the proposed long-term
irrigation fund of 25,000 crores, are certain to be high beneficial to
Credit and Insurance: Credit ‘Constraint is an important bottleneck in
agriculture. Although, the ratio of agricultural credit to agricultural GDP has
increased from 10 per cent in 1999-2000 to 38 per cent in 2012-13, the share of
long-term credit has declined sharply in recent years, falling from 55 per cent
in 2006-07 to 39 per cent 2011-12. This needs to be arrested in the long-run
interest of the sector. Perhaps with this objective, the target for agricultural
credit in the current budget has been increased to 9 lakh crores from 8.5 lakh
crores in the previous year. In addition, a provision of about Rs 15,000 crores
has been made to provide relief to the farmers in the form of interest
However, much will depend on the access to credit of the
actual cultivators, which depends on the legal right to land or formal tenancy.
Crop losses due to vagaries of climate is debilitating to the farmers. A
revamped insurance program has been announced recently to address this (PMFBY or
Prime Minister’s Fasal Bima Yojana). An allocation of Rs. 5,500 crores has been
made to this new crop insurance scheme.
Procurement, Distribution and Marketing: One of the
interesting proposals is to encourage more states to take up decentralized
procurement through online procurement and a transparent mechanism. A buffer
stock of pulses is also proposed to be built through procurement. There is also
a proposal to automate 3 lakh fair price shops (out of a total of about 5.35
lakh FPS in the country). A scheme for setting up a National Agriculture Market
(NAM) through Agri-Tech Infrastructure Fund (AITF) was approved by the cabinet
in July 20 15 with a budget of Rs 200 crores. The current budget proposes to
connect about 585 regulated markets under this scheme. However, there are
significant barriers to this. To implement this, all the states need to amend
their respective Agricultural Produce Marketing Committee Acts (APMC). This also
involves evolving system with a single license valid across the state, single
point levy of market fee and provision of electronic auctioning system for price
discovery. At present, only 12 states have amended the APMC Acts and speedy
action is needed from other states to fully operationalize this.
Rural Development: The total allocation to the rural
development has been increased to about 87,765 crores, out of which about Rs
38,500 crores is allocated to MGNREGS. By far, the biggest allocation for the
rural sector comes from the increased grants-in-aid to Gram Panchayats and
Municipalities to the tune of about 2.87 lakh crores. This is likely to
translate into Rs .80 lakhs per gram panchayat, which is substantial. The
increased allocation for rural roads under PMGSY (Prime Minister s Grameen Sadak
Yojana) is also a step in the right direction. The rural non-farm sector in
general and rural construction, transportation and services in particular, have
been the main sources of rural non-farm employment in the recent past. These
increases in allocations should have a positive effect on spending in the rural
non-farm sector, which in turn, should have positive effect on rural employment.
The Budget falls short of expectations mainly on the following aspects.
The first relates to the incentives for states to invest in
agriculture. After all, agriculture is a state subject and the states need to
step up investment to achieve growth in the sector. There is a distinct slowdown
in investment in agriculture in recent years. Gross capital formation in
agriculture (as a percentage of the gross value added in agriculture) has
declined from 18.3 per cent in 2011-12 to 15.8 per cent in 2014-15. This sharp
fall in investment during the last few years is in sharp contrast to the rapid
increase since 2004-05.
The second issue relates to the top-down approach. India is a
heterogenous country with large differences in agro-clirnatic conditions. The
massive irrigation program, crop insurance program or any other programs
proposed in the ‘current Budget will need to be tailored to local conditions to
Another important issue that has a bearing on the success of
many of the proposed initiatives such as credit, DBT or insurance is the tenancy
reforms and modernization of land records. Success of many of these proposed
initiatives hinges crucially on the correct identification of the beneficiaries.
Modernization of land records, establishment of secure property rights and
undertaking tenancy reforms is sine qua non to the success of many of the
proposed initiatives. Reforming tenancy laws is urgently needed to make tenancy
The last issue is related to the modernization of extension
services. There is little focus in most of the recent Budgets, including the
current one, on this important aspect of agriculture. A large part of the
non-adoption of technology, non-utilization of government schemes etc can be
traced to lack of awareness on the part of farmers because of poor extension. It
is imperative that extension services need to be vastly improved to put
agriculture firmly on a higher growth path.