Three features make 2018-19 Budget a historic one

Three features make 2018-19 Budget a historic one

by February 2, 2018 0 comments

Transforming agriculture into an enterprise, moving to universal healthcare and a labour subsidy related measure are the standout aspects of Budget 2018-19.

The Union Budget for 2018-19 is truly historic one because it includes some steps which are quite unpreedented. There are three main features of this Budget which need special comments.

First, it really promises to transform agriculture into a modern sector. As the Finance Minister in his speech has said, we need to think of agriculture as an enterprise and focus on generating high- er incomes for farmers and not just to be production centric in our approach to the farm sector. Apart from other things, this Budget has brought forth a cluster-based approach for fragmented farmers/holdings, Operation Green for better procurement of perishable agricultural products and specifically targeted concessions. We are talking about putting together farmers’ holdings so with 1,000 hectares in play they can move into different, higher value crops.

The value chain is enhanced by a holistic approach of connecting various Ministries including those of Agriculture, Food Processing, Commerce and the Niti Aayog which will pull the sector out of its backwardness. That’s crucial, because once rural income starts going up, it will lay the foundation for long-term, sustained growth for this country. That has not happened so far. The agriculture sector has remained untransformed.

The 18 lakh crore rupees allocated for what is termed ‘improving rural livelihood’, puts together a lot of allocations for various ministries and that too has never been seen before.

The Niti Aayog has been mandated to engage with all stakeholders to ensure mechanisms are in place to ensure the benefits of the Minimum Support Price for crops being one-and-half times the input cost reaches the farming community. There are a few schemes in this regard we are looking at.

One is the Madhya Pradesh Bhavantar scheme. It is like akin to viability gap funding with the State paying the difference. If the market price falls below MSP and a farmer is forced to sell at that rate, then what you do is to work out the average for the previous month or the previous week of the market price and you see how much lower it is to the MSP and then calculate the difference to be given to the farmer. The other way of doing it is by having robust institutions set up for price discovery and pre-information to the farmer – it gives farmers the option to switch crops if there is a potential of excess supply.

The third scheme we are working on is really important for tenant farmers (Andhra Pradesh has been implementing it and we will discuss it with all States) which we will roll that out so that tenants also get the advantages of the MSP. All of these together will work to end farmer distress. Farmer distress is mainly about perishable products; other distresses are being taken care of by other measures. This is a big difference between the current and earlier Governments.

The second aspect of the Budget which needs to be flagged is Operation Universal Healthcare. It’s an amazing ambition and to have 10 core families (approximately 50 crore citizens) and 5 lakh package per annum for each family which incidentally is a pretty good number even in dollar terms is huge.

And this will be extended as the Finance Minister himself has suggest-ed as much in the Budget. This will transform not only the health sector but the poverty line itself because on average 83 per cent of our medical expenses come out-of-pocket.

Today, every time there is a medical emergency whether for the poor or the lower middle class of the middle class / they have to sells assets and fall back into deprivation.On the demand side, there-fore, everybody agrees the health care proposal is transformative.

On the supply side, Niti Aayog has been working intensively on this for the past year. With all due modesty, it must be said this has really been driven by Niti Aayog. Noted Al India Institutes of Medical Sciences pediatrician Dr Vinod Pauland has led this whole effort with Dinesh Sharma and others. We have done all the numbers. The costs are covered and the budgetary allocation is more than sufficient. The numbers are not yet in the public domain but it can be said that just the additional one per cent cess levied by the Finance Minister will generate around 11,000 crore and that will more than suffice to cover the additional costs of this scheme.

Remember, it is the premium for the 5 lakh per family coverage that is being spoken of, which is likely to be about 3,000 or something close to that. A Niti Aayog team is also working on standardizing costs for all procedures. There are enough models of medical insurance existing in the country; its just the scale that must be diligently handled with the help of State Governments.

The middle class will also benefit greatly from the healthcare scheme because it must be kept in mind that of the 10 crore families covered, about six crore can be classified as poor while approximately four crore families or 20 crore citizens will be from the lower-middle class/middle class. All their health expenses are being taken over by the Government.This is a very substantial benefit.

The third major feature of Budget 2018- 19 is the assurance by the Government to pickup 12 per cent EPFO contributions across all sectors which is great news for all entrepreneurs big and small because that really does reduce wage costs. So, for the first time, you have a general labour subsidy related announcement; it has always been capital subsidy in India earlier. This will provide a real boost to employment prospects in the country.

Allied to the corporate tax rate for Micro, Small and Medium Enterprises (MSMEs) which too should provide a fillip to employment and growth, this is very good news for the Indian economy. Let me add that the 40,0000 standard deduction which will benefit the middle class is not something to be laughed at and senior citizens too have been taken care of especially in terms of medical expenses.

The entire effort of the Modi Government has been to convert the mai baap sarkar, the exploitative and rent seeking sarkar into a development state. The entire notion of e-governance and the transparency it promotes is part of that effort. The Union Budget is a reflection of all these themes.

(Dr Rajiv Kumar is “Vice-Chairman, Niti Aayog: Courtesy The Pioneer)

No Comments so far

Jump into a conversation

No Comments Yet!

You can be the one to start a conversation.

Your data will be safe!Your e-mail address will not be published. Also other data will not be shared with third person.