Insights

The march towards more inclusive growth continues with Budget 2020

Economy & Policy | 05 February 2020

Budget 2020 was announced against a dismal economic scenario. Both consumption and investment were bleak, leading to poor GDP growth and high unemployment. As a result, there were excessive expectations from this annual announcement.

 

Yet despite all the brickbats that followed, due to the lack of sparkle and razzmatazz, one thing was clear, the theme of inclusion was woven in at various levels, without succumbing to populist giveaways. In a sense, the Finance Minister plodded on the tough and uphill path that the government chose when it declared that “fundamental structural reform and inclusive growth” were its priorities, almost six years ago. This distinct theme was visible through various rural initiatives, social sector proposals and measures to encourage enterprise.

 

Greater involvement of Women and SHGs at the rural level: The Finance Minister announced a 16-point action plan towards doubling farmers` incomes by 2022. While detailing proposals to enhance and upgrade agri-warehousing, cold storage, reefer van facilities, etc., she announced a Village Storage Scheme to be run by the SHGs, as a backward linkage.  This scheme aims at securing farmers with better holding capacity and reducing their logistics cost.  The strategic involvement of Women SHGs endorsed the government’s confidence in their track record of delivering success stories.

 

Expansion of credit to agri-sector funding through NBFCs and Cooperatives: The Finance Minister acknowledged the role of NBFCs and cooperatives in the agriculture credit space.  She proposed to expand the NABARD re-finance scheme to INR 15 lakh crore for agriculture credit in 2020-21, covering all eligible beneficiaries of the PM-KISAN scheme.

 

Setting up hospitals in the PPP mode in Aspirational Districts: Budget 2020 proposed a Viability Gap funding window for setting up of hospitals, in aspirational districts (to begin with) where presently there are no Ayushman empanelled hospitals. The dual effect of such an initiative would be the large-scale employment opportunities for youth, in addition to availability of medical facilities for the underprivileged. Interestingly, proceeds from taxes on medical devices would be used to support this vital health infrastructure.

 

Setting up an Investment Clearance Cell to facilitate grass root entrepreneurship: To encourage entrepreneurship amongst youth and remove road-blocks from their path, the Finance Minister proposed to provide “end to end” guidance and support through an Investment Clearance Cell. This facilitator would offer pre-investment advisory, information related to land banks and clearances at the Centre and State level, etc. and would work through a portal.

 

Greater involvement of youth and start-ups in infrastructure development: The Finance Minister suggested that a project preparation facility for infrastructure projects should be set up to actively involve young engineers, management graduates and economists from Indian Universities. She also proposed that all infrastructure agencies of the government would receive a directive to involve youth-power in start-ups to help in rolling out value added services in quality public infrastructure for citizens. If this works, it will not only create jobs for our educated youth but bring fresh ideation into the infrastructure, catapulting its development.

 

The ‘X factor’ for success

There have been many budgets before which have acknowledged the need for better income generation opportunities amongst the underprivileged sections of society and a more universal approach to wealth creation. However, implementation has always been the stumbling block. This begs the question: Why should these initiatives be any different?

 

In the current era, the availability of data and access to analytics, Fintech, Internet of Things (IOT) and other evolving technological enablers are emerging as game changers. During the Budget 2020 speech, the Finance Minister assured that her government intends to leverage these new tools to rapidly expand inclusion, saying, “Our vision is that all “public institutions” at Gram Panchayat level such as Anganwadis, health and wellness centres, government schools, PDS outlets, post offices and police stations will be provided with digital connectivity.  So, Fibre to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year.”

 

Once these initiatives are underway, visibility of the impacts of various schemes at the grass root level will become more transparent and the execution should receive a great thrust, as it has in the case of DTBs and other tech driven initiatives. Effectively, the government could catalyse its mission for more inclusive growth by riding on technology.

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