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.
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.
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.
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.