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Budget 2009-10: Focus on 'inclusive' growth

In its Budget 2009-10, the government has proposed a multi-pronged strategy to integrate agriculture and rural activities, aimed at pleasing both farmers and rural labour. Another major decision involves the convergence of the NREGS with other agriculture-related schemes in a bid to increase farm productivity, which has taken a hit in 2008-09

The United Progressive Alliance’s focus on inclusive growth continues with Indian Finance Minister Pranab Mukherjee announcing a Bill to enact a food security law and increasing allocations for existing flagship programmes in his Union Budget 2009-10. The National Rural Employment Guarantee Scheme (NREGS) alone receives a whopping 144% increase to a total of Rs 39,100 crore. 

“The Food Security Bill will be introduced after consultation with different stakeholders, and a draft of it will be put up on the website of the Ministry of Food and Public Distribution for public debate on the issue,” Mukherjee said during his budget speech in Parliament on July 6, 2009. 

President Pratibha Patil last week announced the formulation of a National Food Security Act that will entitle every below the poverty line (BPL) family to 25 kg of rice or wheat per month, at Rs 3 a kg, a promise the Congress made before this year’s general elections. At present, the Centre provides 35 kg of rice or wheat per month to each BPL family. Wheat is supplied at Rs 4.15 per kg, and rice at Rs 5.65 a kg to over 4 crore families living below the poverty line. 

Under the NREGS, a total of 44.7 million households are expected to be covered this year, as against 33.9 million last year; the finance minister has promised a real wage of Rs 100 a day. 

The government has proposed a multi-pronged stratagem to integrate agriculture and rural activities, aimed at pleasing both farmers and rural labour. Another major decision involves the convergence of the NREGS with other agriculture-related schemes in a bid to increase farm productivity, which has taken a hit in 2008-09.  

Mukherjee explained that to increase productivity of assets and resources under the NREGS, convergence with other schemes relating to agriculture, forests, water resources, land resources and rural roads was being initiated. In the first stage, 115 pilot districts will be selected for convergence. 

For farmers, Mukherjee not only raised the agriculture credit flow by 13.25%, from Rs 2.87 to Rs 3.25 lakh crore, but also extended additional interest subvention on short-term agricultural loans of up to Rs 3 lakh, which would be available at a lower interest rate of 7%.  

As incentive for those meeting repayment deadlines, the government proposes an additional subsidy of 1%, effectively reducing the interest rate to 6% and aimed at tackling the economic slowdown and countering the adverse impacts of a delayed monsoon. These steps, it is hoped, will help regain 4% growth rate in the sector; last year it slumped to 1.6%. 

Taking into account the late monsoon, the government has extended the deadline for returning 75% of overdue by farmers owning more than two hectares of land by six months, from June 30, 2009, to December 31, 2009. Mukherjee announced his decision to set up a taskforce to suggest a way out for farmers in parts of Maharashtra who were caught in the trap of private moneylenders and unable to benefit from the loan waiver scheme. 

The Bharat Nirman programme and the National Health Mission are both slated to get substantially higher allocations even as the government plans to increase credit availability in rural areas, assistance to women’s self-help groups, and fulfil its commitment to providing social security to sections in the unorganised sector.  

The outlay for the ambitious Bharat Nirman programme of six schemes for the development of rural infrastructure is proposed to be stepped up by 45%, compared to 2008-09. This programme is an important initiative for bridging the gap between rural and urban areas and improving people’s quality of life, particularly the poor in rural areas. 

To bridge the rural-urban divide and ensure that the aam aadmi (common man) remained at the centre of the development process and its programmes and schemes, budgetary allocation for all rural-focused schemes have been increased by 45-144%. The aim is to further stimulate demand in rural India, which has also been responsible for the perking up of many industrial sectors. 

Allocation to the Pradhan Mantri Gram Sadak Yojana (PMGSY) is proposed to be increased to Rs 12,000 crore; that for the Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) to Rs 7,000 crore; and for the Indira Awas Yojana (IAY) to Rs 8,800 crore. 

Mukherjee also announced that a sum of Rs 2,000 crore would be allocated for the Rural Housing Fund of the National Housing Bank (NHB) from shortfalls in the priority sector lending of commercial banks. This will boost the NHB’s resource base for re-finance operations in the rural housing sector. The move is expected to step up the pace of rural housing. 

The finance minister announced the launch of a new scheme -- the Pradhan Mantri Adarsh Gram Yojana -- for integrated development of 1,000 villages that have a population of over 50% scheduled castes. There are 44,000 such villages in the country. The scheme is being launched on a pilot basis, with an allocation of Rs 100 crore. Each village will be able to avail of gap funding of Rs 10 lakh over and above allocations under rural development and poverty alleviation schemes. The scheme will be extended on successful implementation of the pilot phase. 

The Swarna Jayanti Gram Swarozgar Yojana has been restructured as the National Rural Livelihood Mission to make it universal in application and achieve a time-bound poverty eradication target by 2014-15. 

Stress will be laid on the formation of women’s self-help groups, and a National Mission for Female Literacy will be launched with the objective of reducing current levels of female illiteracy by half in three years. It will focus on minorities, scheduled castes, scheduled tribes and other marginalised groups. The reach of self-help groups will be widened to enrol at least 50% of all rural women as members, over the next five years.  

The budget commits that Integrated Child Development Services will be extended to every child under the age of six by March 2012.  

“I think the budget will help meet the social objective of the government. But there is nothing out of the ordinary (in it). This was what was expected,” said Anwarul Hoda, former member of the Planning Commission.  

An official government release said: “The budget seeks to address the three challenges facing the economy -- to lead the economy back to a high GDP growth rate of 9% per annum at the earliest, to deepen and broaden the agenda for inclusive development, and to energise government and improve the delivery mechanism.” 

Indeed, a number of initiatives have been proposed to improve delivery of public services. The finance minister has expressed the hope that the first set of unique identity numbers will be rolled out within 12-18 months. Provision of Rs 120 crore has been kept aside for this purpose. 

The government’s ambitious project to set up a unique Identification Authority of India is similar to the social security system in the US, launched in 1936. The United Kingdom too spent a huge amount of money on creating the far-from-perfect National Health Scheme. 

Source: The Hindu, July 7, 2009
            The Economic Times, July 7, 2009
            The Indian Express, July 7, 2009
             Press Information Bureau, July 6, 2009