“Government a Step Forward: Union Financial Budget and Rural Development”

  • Dr. Parashram Jakappa Patil


Government of India is keen to make positive changes in the rural sector of the country. The present Union Budget shows government’s willingness and dedication for the common citizen’s concern in remote parts of India. For rural development as a whole Rs 87,765 crore including Rs 38,500 for MGNREGA has been allocated. The Indian rural economy accounts for more than 40% of the entire national output and an improved rural infrastructure will make impact on the overall economy.  If the rural economy is improved it would generates the benefits to farmers and other constituents of rural sector in significant manner. Hence there is need to address rural sector development in detailed. Present article is focusing on the contribution of union financial budget 2016 on rural development. It is assessing impact of present budget on overall Indian rural economy.

Key Words: Budget, Rural Sector, Impact, Development, Agriculture.


“Government a Step Forward: Union Financial Budget and Rural Development”

  1. Introduction: The rural economy which is the key driver of demand and a support for the broader Indian economy, has taken a knock from two back-to-back seasons of patchy monsoon rains. Rural India needed the government’s immediate attention and priority to provide additional resources for its development. There is need to make special effort for its development, therefore budget is always a necessary component while making systematic planning of rural sector. The Union Budget 2016 has made provisions for rural India. A glance of these provisions and its impact on overall Indian rural economy shall be in order in the present discussion. The article thus focuses on the Union Budget and rural development.
  2. Need of Budget for Rural Sector: Integrated development of rural sector is one of the big tasks before the Government of India. At present the rural economy in India and its subsequent productivity growth is predicated to a large extent upon the development of its 700-million strong rural population. The agricultural economy of India is drawn according to the needs of rural India since the majority of the population lives in about 600,000 small villages. In India, agriculture accounts for almost 19% of Indian gross domestic products (GDP). Rural economy in India is wholly agriculture based and it is of tremendous importance because it has vital supply and demand links with the other Indian industries. In Indian socio-economic growth rural economy plays a big role. Hence rural sector development is imperative for overall development of nation because it is giving its direct input to reduction of income inequality, poverty reduction, inclusive development, socio-economic development, rural entrepreneurship development and reduction of migration etc. Providing additional resources for rural sector development will boost different sectors of rural economy.
  3. Budget Provision for Rural Sector Development: The Union Budget has made different provisions for the rural sector which is bound to have overall positive impact on the rural economy. The following are the provisions which are worth noting.

(1) The total allocation for rural sector is Rs 87,765/- crores. There will be Rs 2.87 lakh crores given as Grant in Aid to Gram Panchayats and Municipalities (14th Finance Commission).

(2) Under the Deendayal Antyodaya Mission every block which is under drought and rural distress will be taken up as an intensive block. 

(3) Total sum of Rs 38,500/- crores has been allocated for MGNREGS.

(4) Under the Shyama Prasad Mukherjee Rurban Mission 300 Rurban Clusters will be developed.

(5) By 1st May, 2018 there will be 100% village electrification.

(6) District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.

(7) Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.

(8) A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional households within the next 3 years.

(9) National Land Record Modernization Programme has been revamped. A new scheme Rashtriya Gram Swaraj Abhiyan has been proposed with allocation of Rs 655 crore.

(10) Govt. has raised agriculture spending to Rs 36,000 crore.

(11) Long-term irrigation fund under NABARD (National Bank for Agriculture and Rural Development), with an initial corpus of Rs.20,000 crore.

(12) Rural credit got a boost, too, from a target of Rs.8.5 trillion in 2015-16 to Rs.9 trillion next year. And to ease the burden of loan repayment on drought-hit farmers, the Budget has allocated Rs.15,000 crore towards interest subvention.

(13) Pradhan Mantri Krishi Sinchai Yojana (PMKSY) is to be implemented in mission mode aiming to bring 28.5 lakh hectares under irrigation.

(14) Programme for sustainable management of ground water resources with an estimated cost of Rs 6,000 crore will be implemented through 3 multilateral funding.

(15) Rs 2,000/- model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years.

(16) Unified agricultural marketing e-Platform to provide a common e-market platform for wholesale markets.

(17) Pradhan Mantri Gram Sadak Yojana (PMGSY) has been increased to Rs 19,000 crore.

(18) To reduce the burden of loan repayment on farmers, a provision of Rs 15,000 crore has been made in the BE 2016-17 towards interest subvention.

(19) Prime Minister Fasal Bima Yojana (PMFBY) Rs 5,500 crore.

(20) Rs 850 crore has been allotted for 4 dairy projects – Pashudhan Sanjivani, Nakul Swasthya Patra, E-Pashudhan Haat and National Genomic Centre for Indigenous Breeds.

Thus, many provisions have been made in the present Budget generally for rural sector development and particularly for agricultural and farmers welfare. This Budget has given a major emphasis on different segments of the rural economy. Perhaps for the first time such an emphasis and focus is being made on the rural sector.

  1. Impact of Budget on Rural Sector: A tremendous enhancement has been made in the Budget especially on the rural sector development, on agriculture, irrigation and farmers welfare. It will make a positive impact on the poor, small and marginal group, and the poor farmers. By providing more funds to MGNREGA it will help create more employment opportunities in rural part of India. Improvement in infrastructure development in rural India would promote non-farm sector development as well. Overall the Union Budget 2016-17 will boost rural sector development with an emphasis on infrastructure and employment in rural sector.
  2. Conclusion: The rural sector is one of the important pillars of Indian economy which need to be address very carefully. Including issues like (1) irrigation development, (2) conservation soil nutrients, (3) improvement in flow of credit, (4) agriculture marketing reforms, (5) insurance cover (6) infrastructure development (7) expansion of MSP coverage,  (8) livestock enterprises,  (9) modernizing land records, (10) expansion of Pradhan Mantri Fasal Bima Yojana, (12) Farm Research (11) More fund to MGNREGA  and (12)  value chain etc has the potential to alter altogether the rural sector in India. Indian rural economy accounts for more than 40 per cent of the entire national output and improved rural infrastructure will make impact on the whole overall economy. If the rural economy is improved it would generates the benefits to farmers and other constituents of rural sector in significant manner. This first Budget which has given so much attention to the rural sector, it generates hope that a new paradigm shift will emerge in India’s rural economy.
  1. References:

(1) Dianne Nongrum, Government increases Budget allocation for rural development, MGNREGA, India Today, 2016.

(2) Shashnaka Bhide, Need to Catalyse Rural Sector, Business Today, 2016.

(3) Suchi Bansal, Budget 2016: Longer-term enabler for rural growth. Live Mint, 2016.

(4) Jyotindra Dube, Next Green Revolution, Business Today in Budget 2016.

(5) Farhan Hameed, Budget Transparency and Financial Market, International Budget Partnership, 2011.

(6) Fredrik Hartwig, Four Papers on Top Management’s Capital Budgeting and Accounting Choices in Practice.. Företagsekonomiska institutionen. 2012.

(7) Radha Mohan Singh, The Budget to change the destiny of rural background and farmers in the country, Press Information Bureau, Government of India, Ministry of Agriculture, 2016.

(8) Union Financial Budget 2016, Ministry of Finance Govt of India, 2016.

(9) Pallavi Sengupta, Union Budget Highlights, One India Portal, 2016.

(10) Mike Paulden, Karl Claxton, Budget Allocation and the Revealed Social Rate of Time Preference for Health, Centre for Health Economics, University of York, UK

(The author is Chairman of The Institute for Natural Resources, Kolhapur and research scholar on issues of policy, governance, agriculture, water, natural resources etc. He is also a Dr. S. Radhakrishnan Post Doctoral Fellow)