Budget 2020: Tackling rural distress, leaving more disposable income with individuals to be in focus

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Updated: November 25, 2019 12:20:45 PM

Budget 2020 India: Housing fund to increase, despite reduced offtake, FY21 PM-Kisan outlay to be higher than FY20 actuals

Budget 2020-21: The government recognises the urgent need to improve farmers’ earnings.Budget 2020-21: The government recognises the urgent need to improve farmers’ earnings. (Representational image)

Union Budget 2020 India: Faced with the uphill task to stimulate demand and reverse decelerating economic growth, the government will likely enhance focus, in the upcoming Budget, on tackling persisting rural distress, leaving more disposable income with individuals, spending more on infrastructure and improving the flow of liquidity to the shadow-banking sector.

Simultaneously, it may also make a strong pitch for the next wave of reforms in factors of production, especially land and labour, to complement the recent sharp cut in the corporate tax rates.

The details, however, will be announced later by respective departments.

While the clamour for a cut in the personal income tax rates to spur sagging consumption grows shriller by the day, the government is also weighing certain supply-side measures, including a greater commitment under the housing fund beyond its already-pledged Rs 10,000 crore, to help deliver flats, a senior government official told FE.

This would also potentially stimulate demand (by leaving more money in the hands of people who won’t have to pay rent and EMI on home loans at the same time).

Similarly, despite lower offtake, the government will raise the allocation for PM-Kisan for the next fiscal from the revised estimate for FY20, as the income support scheme has the potential to support rural demand instantly.

The offtake under this income support scheme is expected to drop by some Rs 20,000 crore in FY20 from the budgeted target of Rs 75,000 crore, for reasons, including reluctance of some states like Bengal to share farmers’ data.

Similarly, to ensure that farmers get better price for their produce, the government will aim to link at least 1,000 mandis across the country to the electronic-National Agriculture Market (e-NAM) system. So far, 585 mandis across 16 states and two Union Territories have been linked to e-NAM.

“The government recognises the urgent need to improve farmers’ earnings. So, it will allocate adequate funds for PM-Kisan in FY21, keeping in view potential higher demand as data on more beneficiaries come in and once states like West Bengal come on board,” another government official said.

As of October 31 this fiscal, the Centre’s spending under the PM-Kisan stood at Rs 27,937 crore, including administrative expenses, according to the latest official data. By mid-November, the Centre could obtain details of only 8.82 crore of the estimated 14 crore farmers eligible for this scheme, with Uttar Pradesh alone accounting for as many as 2.16 crore of them.

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To shore up liquidity and improve flow of funds for affordable housing loans for individuals, the government may ask the National Housing Bank (NHB) to infuse another Rs 5,000-10,000 crore into eligible housing finance companies (HFCs) in its next financial year starting July 2020. Earlier this fiscal, the government had announced an extra infusion of Rs 10,000 crore for this purpose by the NHB.

This infusion is over and above what the NHB provides to the HFCs through its two existing refinancing schemes.

Discussions are also on if the government would need to extend the existing partial guarantee scheme for NBFC assets by another year with a larger commitment.

Under the plan announced in the Budget for 2019-20, the government offers a one-time six-month partial guarantee of Rs 1 lakh crore to public-sector banks for purchasing consolidated high-rated pooled assets of financially sound NBFCs. This covers their first loss of up to 10%.

This move would continue to ease the liquidity stress in the NBFC sector and increase the access of these shadow-lenders to bank finance, and, in turn, enable them to meet the financing the requirement of productive sectors of the economy.

Given the subdued tax collection growth in recent years, the government will make an aggressive push for disinvestment of central public-sector units next fiscal as well. The disinvestment target for FY21 is likely to be raised from the Rs 1.05 lakh crore set for the current fiscal. While the government would “obviously like to go for pure privatisation”, CPSE-to-CPSE deals are “very much on the agenda as well, if private players stay away or don’t place good bids”, one of the sources said.

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