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Tagged by opposition parties to be an 'anti-farmer' and 'pro-corporate' government, the National Democratic Alliance (NDA) tried to change this image in the budget. The budget concentrated on issues surrounding the rural and agriculture distress. At a time when global economic recovery is tepid, it may not be a bad time to concentrate energies on improving domestic demand. Especially on the rural front, wherein 68% of the population resides.
The demand from rural India has been dull. This can be partially attributed to the deficit rainfall in India in the last two years. Thus, a push was required to boost the rural consumption. The budget may have provided the necessary impetus by allocating a mammoth sum of Rs 877.7 billion to address this rural distress.
A sum of Rs 385 billion is allotted for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). This scheme ensures that the labourers get jobs on demand for 100 days in a year. This is one of the many factors that could help boost consumption. Lately, the scheme has gained popularity and has recorded its highest enrolment in the quarter ended December 2015 over the preceding five years. The quarter witnessed a 46.1 crore person-day of employment generated under the scheme. This figure has doubled as compared to a year ago, a significant increase indeed. Just a year ago, the government was mulling scrapping this policy.
Further, an allocation of Rs 190 billion was made for the Pradhan Mantri Gram Sadak Yojana (PMGSY). This scheme aims to provide good all-weather road connectivity to unconnected villages. This will too add jobs as well as increase connectivity.
To add to this, government has also announced significant investments in the irrigation projects. Bringing more land under irrigation is another major step to boost rural growth. The last two years have seen agrarian distress intensify in the absence of sufficient rainfall that feeds agricultural land. With increased focus on irrigation, the farmers will not be left to the vagaries of nature.
All these measures could possibly drive the incomes and in-turn rural consumption and benefit the companies in the consumer packaged goods sector. The turnover of most of the consumer packaged goods companies have remained flat in the current fiscal year owing to poor rural demand. These measures could provide an impetus to the companies in this space.
Further, FM in the budget allocated a big share to infrastructure that totaled Rs 2.21 trillion. Within that, the allocation to road and rail stood at Rs 2.18 trillion. The FM also announced that as high as 85% of the stuck road projects (worth Rs 1 trillion and covering about 8,000 km) have been put back on track. The positive developments could help the steel as well as cement industries. Greater the quantum of road projects, higher would be the requirement for cement as well as steel.
However, it is imperative to note that announcements by the finance minister will pay off in the next two-three years. As it happens every so often, while plans and allocations are all good, what really matters, is the execution and what happens at the ground level. How this pans out over the coming years remains to be seen.
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