There is little doubt that demonetisation has affected rural livelihoods even though its mid-term impacts remain uncertain. In this context, many expect the Budget to make substantive announcements that can significantly impact rural livelihoods. A comprehensive agri-rural package is required to put the economy back on a sustainable growth path.
But more critically, for the Modi government this is a political imperative, with elections to five States around the corner. There are already strong voices urging the Government to have a closer rural connect to retain its electoral base. What then are the options available to the finance minister? Can he announce rational schemes that have long-term benefits rather than populist and ill thought-out programmes?
To strengthen rural infrastructure and improve connectivity a programme that can create immediate rural impact, give a boost to employment as well as create durable assets would be the well-functioning Gram Sadak Yojana (PMGSY). Doubling the outlay under the programme would enable the Government to take well-deserved credit especially as this programme was initiated by the first NDA government. The quality of rural roads built has been uniformly good, even in States where governance structures are relatively weak. This has been made possible through much closer quality monitoring, including through external audits.
Apart from rural connectivity, one area that needs immediate attention is improving agricultural marketing infrastructure. The Government has announced the National Agricultural Market. The NAM project envisages electronically linking 585 mandis in the next three years. This linkage would, at best, create a minor ripple, given the fact that there are over 15,500 active mandis.
More importantly, in most States, farm produce bypasses mandis . There has to be much greater engagement of the private sector if agricultural markets are to get modernised and reformed. There must be a level playing field so that multiple private entities can enter, and different models, specific to different crops, can be tried. The Indian agricultural market space is too vast and too complex for one State-run model to succeed. It is hoped that the finance minister sets the tone in his budget to provide a fillip to private sector initiatives in this area.
Agriculture warehousing and related infrastructure has seen good investments in the last 3-4 years, as this was backed by capital subsidies and income tax benefits under Section 35 AD of the Income Tax Act. However, there is now need to modernise storage infrastructure through large-scale construction of silos.
The finance minister should retain these incentives to ensure that the agricultural economy gets a fillip. A lot of efficiencies can take place with quality storage and logistics infrastructure; large-scale investments are needed both in cold chain infrastructure as well as in modern silo complexes.
The writer is MD & CEO of NCML