Budget Outlines Blueprint for Rural Development

The rural sector, often left behind in the race for economic growth, and the extensive network of Micro, Small, and Medium Enterprises (MSMEs), which is still reeling from the pandemic’s aftershocks, are pivotal for India’s aspiration to emerge as a global economic power. Union Budget 2024 has outlined some key reforms and significant allocations for these two sectors. The Budget, therefore, unveiled several measures aimed at revitalizing these sectors. 

In the wake of recent electoral setbacks, there were elevated anticipations that these sectors would receive a boost and budgetary allocations. It is also well timed to increase public investment and ignite growth in these key sectors. Likewise, MSMEs were anticipating government incentives to help them conquer global markets. The Budget unveiled a series of financial and regulatory reforms designed to fuel MSME expansion, including a credit guarantee scheme, revamped assessment models, e-commerce facilitation hubs, and quality testing centers.

The credit guarantee scheme promises to facilitate term loans for machinery investments without requiring collateral or third-party guarantees. Finance Minister Nirmala Sitharaman highlighted in the budget that this scheme would function by pooling the credit risks associated with these MSMEs. To enhance capital accessibility, MSMEs can now secure loan guarantees up to Rs 100 crore, even for substantial loans, through a specialized self-funding initiative. Additionally, the government introduced stress period credit support to ensure these enterprises maintain access to funds during challenging times. The Mudra loan limit has been doubled to Rs 20 lakh for those with a solid repayment record, offering a crucial financial lifeline—one of the sector’s most pressing needs.

Public banks will now evaluate MSME loan eligibility based on a business’s digital presence rather than solely on traditional financial statements. Industry experts anticipate this shift will revolutionize funding access for smaller enterprises lacking formal accounting systems.

The government also plans to bolster the presence of SIDBI branches in MSME hubs over the next three years. Currently, India boasts 242 major MSME clusters, and the plan is to establish a SIDBI branch in 168 of these clusters within the coming three years. Given that one in five of India’s 1,300 industrial clusters specializes in food processing, the government is committed to supporting this sector. The Budget has earmarked financial backing for the establishment of 50 multi-food irradiation units and 100 food safety and quality testing laboratories, aiming to swiftly meet the industry’s testing needs.

In the last five years, rural development has seen a steady rise in allocation of development funds. In 2019-20, the government allocated Rs 1,40,762 crore for this sector, and expenditure increased in subsequent years. This year, the government allocated Rs 2,65,808 crore for rural development, an increase of over Rs 1 lakh crore since 2019-20 levels. This infusion primarily aims to bolster rural infrastructure. The Budget introduced the fourth phase of the Pradhan Mantri Gram Sadak Yojana (PMGSY), intending to knit together a web of all-weather roads for 25,000 rural habitations. 

To rejuvenate agriculture, financial allocations have been made with a focus on research and development, and enhancing of agriculture supply chains. Despite abundant agricultural output, a weak supply chain has hindered farmer’s growth and income prospects. This funding will significantly improve the production, storage, and marketing of pulses and oilseeds, driving towards self-reliance in key crops like mustard, groundnut, and soybean. The Budget proposes creating large-scale production clusters near consumption hubs and supporting farmer producer organisations (FPOs), cooperatives, and startups to streamline collection and marketing.

A groundbreaking initiative to develop digital public infrastructure for agriculture is also on the horizon. Over the next three years, a digital crop survey for Kharif crops will be conducted across 400 districts, consolidating data from six crore farmers into national registries for easier access to services. The Finance Minister unveiled a new national cooperation policy aiming to emulate Amul’s success in the cooperative sector, promising to spark rural economic growth and job creation. 

Additionally, the plan to construct three crore new houses under the PM Awas Yojana seeks to provide essential shelter to millions, addressing a fundamental need in both rural and urban areas. The target of additional 3-crore houses under Pradhan Mantri Awas Yojana, both in rural and urban areas, is a major boost to rural infrastructure and affordable housing. Budget made an allocation of Rs 54,500 crore for rural housing in next year’s. This Budget’s dual focus on enhancing infrastructure and promoting agricultural self-reliance sets the stage for a more resilient and self-sustaining economy.

The Budget identified productivity and resilience in agriculture along with employment & skilling as two key pillars of a nine point strategy model of budgetary priorities. The government’s strong emphasis in Budget 2024 on boasting rural consumption was well received  by the investors. The budget outlined several initiatives aimed at boosting rural consumption, expected to support a recovery in FMCG sector volumes. This Budget offers a new lease of life for rural development and infrastructure in the next few years.