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Is Modi govt trying to decongest Indian cities? Its economic package gives that impression

Economic package assumes people will go back to villages, and rural incomes need to be boosted. Modi govt seems to be trying to give them employment there.

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The economic package announced by Finance Minister Nirmala Sitharaman has a strong rural bias, a primarily liquidity package for industry, and a few schemes for the urban poor. It proposes a number of coping strategies like delays in the bankruptcy laws, tax filings, decriminalisation of violation of compliances, and a set of long-term economic reforms.

In its social security outreach, the package assumes that people will go back to their villages and try to find work there. If there are fewer jobs in cities, incomes in rural India need to be boosted, for which many other schemes for dairy, infrastructure, fishery, herbs, micro food units and farms have been announced, in addition to laws for freeing up farmers’ access to markets.

The biggest demand-boosting measure in the government’s stimulus package is an increased allocation of Rs 40,000 crore to MGNREGA.

It seems that the government is trying to decongest cities, as no large urban welfare programme or significant urban unemployed assistance programme was launched.

Right from the first Garib Kalyan Programme, or the first stimulus package, the focus has been assistance to rural areas, even though at that time, migrant workers were being asked to stay where they were in cities.

This may be partly due to the administrative problem that there was no single database of workers in cities to whose accounts money could be beamed. Now that provisions are being made for them to return to villages, the government appears to be stepping up its efforts to give them employment there.

Also read: 65% boost for MGNREGA, relief for companies from IBC — final part of Modi govt Covid package

Indian agriculture’s moment of liberalisation

This could, however, be an opportunity for Indian agriculture. If the next two to three years are genuinely devoted to increasing rural incomes by diversification, modernisation and liberalisation of Indian agriculture, India could become a world leader in the production of fresh farm produce, herbs, organic fruits and vegetables.

In addition to a fiscal spend of about Rs 2 to 3 lakh crore, the economic package announced in five tranches by Sitharaman seeks to boost credit with the help of sovereign guarantees. Some of the liquidity boosting measures may have fiscal implications in coming years. A number of economic reforms, in agriculture, mining, power distribution, atomic energy, space, defence, that have been on the table for some time, were announced.

Some of the reforms in agriculture that the government has promised to enact — such as an amendment to the Essential Commodities Act that would facilitate investments in storage, a legal framework that would allow contract farming that would assure a price to the farmer at the time of sowing crops, and a central law that would remove barriers to inter-state trade and commerce and create a national food market — would be game changers.

Many governments have talked about these laws but no one has had the political courage to enact them. If the government fulfils this promise, then the liberalisation of agriculture would be akin to the 1991 liberalisation of Indian industry.

Also read: How India can stop over-producing cereals & give people what they want — veggies, dal, meat

Spending on rural India

Among the first set of measures announced, there were direct benefit transfers to farmers and an increase in MGNREGA wages.

In the second tranche announced by Sitharaman last Thursday, Rs 2 lakh crore of concessional credit and Rs 30,000 crore working capital funding through NABARD were added.

The focus of the third tranche of the economic package was fully on agriculture. A Rs 1 lakh crore agri infrastructure fund was set up for financing projects relating to farm gate infrastructure like cold chains, storage infrastructure etc. The fisheries value chain was extended support through the setting up of the Pradhan Mantri Matsya Sampada Yojana.

There was an announcement to address the supply chain disruption across all fruits and vegetables through an expenditure of Rs 500 crore, and spending of Rs 4,000 crore over the next two years to promote herb cultivation.

Other measures including control of animal diseases, development of animal husbandry infrastructure, and micro food enterprises were announced.

Finally, in the last tranche, the MGNREGA allocation was increased by Rs 40,000 crore.

Also read: Modi govt’s Rs 20 lakh crore package is a missed opportunity for MSME credit reform

Measures for urban poor

The measures focussed on the poor, including migrant labourers and street vendors. The government would spend Rs 3,500 crore for foodgrain supply to migrants and Rs 1,500 crore through interest subvention of 2 per cent for Shishu loans under the Mudra Scheme.

The government announced relief for street vendors, through a special credit facility of Rs 5,000 crore. Among other announcements made, the government would spend Rs 6,000 crore towards employment generation in afforestation, forest management, soil conservation and forest and wildlife-related infrastructure.

The package seems to have to been designed with an objective to strengthen the rural economy. With reverse migration assuming significant proportion, this seems to be a prudent approach. The speedy implementation of the agricultural reform measures through legislative changes would hold the key to India’s economic growth revival.

Also read: India’s young people can be the corona-warriors who’ll put the economy back on track


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  1. to decongest move ministry of women and child welfare to rural areas 200 Km in to UP consumer ministry to Patna

  2. The focus on conferring benefits on rural regions may be for two fold reasons: One, it is good idea to decongest urban agglomerations and provide employmentr opportunity not only in farms, but also by promoting agro-processing industries in rural areas. It will ease the pressure on urban infrastructure. Second important reason is that political parties get most of their votes from rural areas. Modi government is investing for 2024 election. He is confident that urban middle class will continue to support him, though their votes not very significant for coming back to power. So, the urban middle class continue to support Modi and get punished for it.

  3. Will it be a mistake to decongest Indian cities?
    In every walk of life we have brokers making money in the name of poor. There was an echo-system which brought in the labor from villages for peanuts, created the slums at the cost of the honest tax payer and continued lord over the to slums and the slum dweller.They exploited the both the employer and employee as well. The cheap labor in India was never cheap, the product had to absorb the extortion and cover up the inefficiency, which made it uncommunicative in the world market. In came the rulers to made sure no serious players came in leaving the field open to JUGAUDs in the closed controlled domestic market. We kept on buying Fiat, Ambassador, Vespa and the likes for over 40 years at exorbitant price with on money.
    The other set of do-gooders are the the rich, super-rich farmers and the set of professionals hiding their income as agricultural income, who dominate the parliament and make sure their interests are protected. The congesting list needs to include these as well.

  4. Thanks for decoding as always. Its fresh and gives perspective of govt. Bharath time has arrived.

  5. If implementation of programs on the ground is good, then the scenario of Indian Economic activity spread will dramatically change. Wealth will be more evenly spread spatially, instead of concentrated clumps at present. This will also spur a reverse migration of the intellectual and the entrepreneur to rural India, sorely missed vital ingredients for its well being. A great advantage which will help in this is the Indian psyche of proudly identifying with his/ her village, and maintaining the social relationships in it.
    If what Ila says comes to pass, then as they say,’ Thumare muh me ghee shakkar’.

  6. If true, that would be going against the grain of urbanisation and economic progress as it has unfolded all over the world. If anything, India needs to speed up the process of people leaving farms / rural areas and entering manufacturing and services. Urbanisation has its own problems in a poor country, starting with slums, but it represents real progress. Read Katherine Boo’s Behind the beautiful forevers, a heartwarming story of life in a slum near Bombay’s International Airport.

    • Indian cities are definitely not underpopulated; just the opposite.

      We need something like the late President APJ Abdul Kalam’s “PURA” to provide good opportunities to villagers so that they are not forced to live in Dharavi or other hellholes.

      We will never have a labour shortage in manufacturing or services.

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