Firefighting on various fronts: Agri, infra, asset quality get boost

Jul 11 2014, 00:13 IST
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SummaryThe new government has carved out a Budget that addresses concerns of all segments of the society

The new government has carved out a Budget that addresses concerns of all segments of the society. An attempt has been made to address the basic issues ó bijli, sarak, pani, makaan and shouchalaya (BSPMS). In agriculture, which needs to grow at 4% consistently, the credit target has been raised to R8 lakh crore for FY15. With continuation of interest subvention at 3%, and a further subvention for regular repayment, crop loans will be available to farmers at 4%.

For the development of rural infrastructure, the RIDF corpus has been increased to R25,000 crore. Also, the Warehouse Infrastructure Fund and Long Term Rural Credit Fund with R5,000-crore allocation each have been created. This augers well for long-term investment in agriculture.

The Budget has earmarked R10,000 crore for the MSME sector, which has a huge potential to create employment. This is meant to set up a venture fund to provide for the equity requirements of such companies and is, therefore, expected to drive entrepreneurship.

Allowing banks to issue long-term bonds without recourse to statutory pre-emption (CRR/SLR) for financing infrastructure is a positive step. Allowing infrastructure loans for longer periods, matching the life of the asset (25X4 structure), is a big positive. It will prevent undue stress in repayment of infrastructure loans and also reduce user charges. Bank consolidation in a time-bound manner is a welcome move too.

Setting up of six more DRTs is expected to help banks recover dues, particularly when asset quality is the number one priority. Increasing the limit on Section 80C from R1 lakh to R1.5 lakh will boost financial savings. The increase in tax-exemption limit for individuals and senior citizens will help banks mobilise more deposits. However, the increase in the PPF limit will ensure healthy competition. The governmentís focus on infrastructure will possibly lead to faster growth in productivity rather than consumption. This will help in a lower and stable inflation regime.

Arundhati Bhattacharya

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