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Budget 2023 for Farmer: The Modi government has always been in favor of the farmers of the country. She is constantly seen working for the poor farmer. Many schemes have also been started under the leadership of PM Modi, but this time the situation is different, the government has paid less attention to the farmers. According to a JM Financial report, the focus on the rural economy in the budget has been declining over the years and revival of the rural economy will take time.
These are the reasons for not paying special attention to the rural economy.
JM Financial has said that analysts do not see any immediate triggers for revival in the rural economy due to the lack of focus on the rural economy in the Union Budget for 2023-24. We believe that the rural environment has to be revived on its own. So we would see businesses dealing with price sensitive low ticket items as having less profit potential. After getting less response in the financial year 2023-24, an attempt has been made to make the new tax system more attractive. However, we believe that the benefits in terms of tax savings on the increased no-tax limit (INR 0.2NN) are unlikely to drive demand in a meaningful way.
Contrary to the expectation of a section of the market, the rural focus was missing in the budget announcements. The expectations of the populist budget were linked to elections to nine states in 2023, besides the last full-year budget before the general elections. However, we believe that schemes related to women self-help groups, empowerment of artisans and setting up of digital infra for agriculture and farmer centric solutions will provide opportunities to improve their livelihood in the rural economy.
The government is also diverting attention from MNREGA
Apart from this, the budgetary allocation for rural centric schemes like MNREGA and PM Gram Sadak Yojana has been decreasing since FY-2022 itself. JM Financial said that even the sentiments polled by CMIE show a declining trend in the rural economy since June 22, while the sentiment in the urban economy is holding up well. Due to lack of specific focus on rural economy, we do not see any immediate triggers for revival in rural economy. The latest rabi sowing, except for wheat, is progressing well even on a higher base than last year.
The subsidy burden led by rising fertilizer and food prices has been a major pain point in India’s fiscal year. The fertilizer subsidy was increased from INR 1.1 tonne in FY23 and was higher than the budgeted figure of INR 1.05 tonne. Allocation to the extent of 1.75 tonnes has been made for fertilizer subsidy in FY24. We believe that with inflationary pressures easing, the government could have limited the allocation to INR 1.4 tonne, as fertilizer prices have come down by 40% from their peak. However, the geo-political situation is still in flux and higher allocation from the government seems prudent at this juncture. The food subsidy is pegged at INR 1.97 tonne (vs INR 2.9 tonne FY23), as the outlay will come down with the discontinuation of the PM Garib Kalyan Yojana. At the aggregate level, subsidies are 1.2 per cent of GDP versus 1.9 per cent in FY23.
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