Rural India: The nucleus in Budget 2019

Rural India has a lot to cheer about. To the credit of Piyush Goyal, he has managed to please rural and urban India without putting too much of a burden on the fiscal math.

Feb 12, 2019 02:02 IST India Infoline News Service

The thrust on rural India is nothing new. In fact, even the 2018 budget was essentially a rural India budget. It announced the minimum selling price (MSP) for Kharif crops at 150% of the cost of production. It also made large allocations to rural housing, free power, and cooking gas for rural households.

In addition, the 2018 budget had announced the world’s largest health insurance cover by proposing to cover 10cr rural families up to a value of Rs5 lakh per annum in the form of family floater insurance. In that sense, the rural thrust of Budget 2019 was more an extension of the previous budget.

How rural India got another boost from Union Budget 2019
Budget 2019 was all about helicopter money. MSP takes time to show results and there could be other factors like warehousing, transport and logistics that can make or break the success of MSP. The Prime Minister Kisan Samman Nidhi (PMKSN) yojna will directly transfer a fixed allowance of Rs6,000 per annum to all marginal farmers who own less than 2 hectares of land. This will be paid out in three instalments of Rs2,000 each and will entail a total outlay of Rs75,000cr. With direct bank transfers, one can be certain that the delivery will be seamless and flawless. The PMKSN scheme will be effective from December 2018 itself.
  • The budget goes a step further and has also announced one more step towards inclusiveness for rural India. The budget also announced the move to set up 100,000 digital villages that will be entirely digitally enabled opening them to a world of information, commerce, and communication.
  • The budget has indirectly facilitated investing in rural and semi-urban properties. Currently, the roadblock is that if you sell a property, it has to be reinvested in another property to be eligible for tax exemption from capital gains under Section 54. However, this will restrict reinvestment only to urban areas. By allowing reinvestment in 2 properties, this will give a boost to property investments in rural and semi-urban properties where land prices are a lot lower. Also, the extension of the capital gains exemption makes it a lot more attractive.
  • Apart from the direct income support of Rs6,000 to the farmers, the budget has also announced pension of Rs3000 per month after 60 years of age to labourers of the unorganized sector with a contribution of Rs100 per month.. This can be a major booster for the standard of living in rural and semi-urban areas.
  • The allocation under MGNREGA has been set at Rs60,000cr with the option of raising the figure if necessary. Being a rural employment guarantee scheme, this will complement very well with the assured annual income for marginal farmers of Rs6000. Overall, these two measures will help rural farmers deal better with farm stress.
  • The allocation under the Pradhan Mantri Gram Sadak Yojna has been enhanced from Rs15,500cr to Rs19,000cr with coverage of 100% rural population to be achieved by 2021. In rural India, good roads have much bigger economic impact due to the high elasticity that rural growth and incomes have shown to improvement in road connectivity.
Overall, rural India has a lot to cheer about. To the credit of Piyush Goyal, he has managed to please rural and urban India without putting too much of a burden on the fiscal math.

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