‘There is a display of intent to continue to consolidate fiscal position well beyond FY26’
| Photo Credit: PTI

The FY25 Union Budget has sent out a strong message under the new administration — there remains an unequivocal focus on stability (fiscal) and continuity (of sustainable growth impulses) amidst a new chiselled focus on providing growth a more inclusive character in India.

Focus on ‘weaker building blocks’

The 8.2% GDP growth in FY24, while commendable, was driven by an uneven K-shaped segmentation. The premiumisation of consumption, as seen in the robust demand for luxury cars, houses and goods, coincided with stagnant wages, low fast-moving consumer goods sales and (food) inflation continuing to vociferously bite those at the bottom end of the income pyramid. The fiscal deficit, at 5.6% of GDP in FY24, still high compared to pre-COVID-19 pandemic levels, provided the needed growth impetus via capital spending at a time when the private capex cycle remained much on the sidelines. Against this background, the FY25 Budget, through a panoply of measures, has addressed the weaker building blocks, viz. to improve the quality of employment, fortify agriculture and bring in the micro, small and medium enterprises (MSMEs) into a meaningful roleplay in India’s manufacturing renaissance. This will pave the path to establish a Viksit Bharat by 2047.

From an agriculture perspective — currently a key priority — promotion of Atmanirbharta in pulses and oilseeds, a focus on agriculture research (bearing in mind the realities of climate change), large-scale clusters for vegetable production, and Digital Public Infrastructure (DPI) in agriculture for coverage of farmers and their lands, are all likely to support the Annadata (i.e., farmer). A thriving agriculture sector will allow the government to deliver on its promise of foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), now extended for five years.

On employment generation

The Budget entailed an energised focus on employment generation, for the youth especially, within the ambit of the formal workforce. A new scheme offering incentives to employers as well as employees who join the workforce for the first time, was announced at an outlay of ₹10,000 crore through the Ministry of Labour. Other fresh schemes incentivising internships with an outlay of ₹2,000 crore, and for skilling youth in collaboration with State governments and industry were envisaged. This somewhat resonates with the tripartite compact (between Centre, States, private sector) that the Economic Survey had recommended on the eve of the FY25 Union Budget to deliver on the rising aspirations of Indian youth.

Outlay towards housing saw a massive jump in the FY25 Budget. For urban Pradhan Mantri Awas Yojana (PMAY), the government allocated 37% more funds in FY25 versus FY24, which though impressive, pales into some degree of insignificance when compared to the 70% jump budgeted for the rural counterpart of the scheme. Housing for all remains a key hallmark of the government, which now embarks on its version 2.0.

The PLI Scheme too got a handsome raise of 75% in the FY25 Budget, driven by higher allocation to the auto sector. This was accompanied by tweaks to sectoral custom duties in a bid to support domestic manufacturing and deepen local value addition. Financing constraints, typically faced by MSMEs, were addressed via promise to facilitate term loans to MSMEs for purchase of machinery and equipment without collateral. To facilitate improved and undisrupted lending, banks will now be allowed to develop in-house credit assessment and a facilitation backed by the government to continue to extend credit to MSMEs even during stress times.

Most of these measures will dovetail handsomely with the macro focus of pushing a job-led growth in the medium term. Commendably, the government has succeeded in maintaining the fiscal discipline whilst extending a wide gamut of measures to stimulate the economy.

Looking ahead

Compared to the interim Budget’s fiscal deficit estimate of 5.1% of GDP, the government pruned the FY25 headline deficit target to 4.9%. It kept the intended 70 Basis points consolidation over FY24 intact, as in the interim Budget. This allows for a smoother transition to 4.6% fiscal deficit to GDP in FY26.

The display of intent to continue to consolidate its fiscal position well beyond FY26, preserves the trust that this government has earned from economy watchers in the last few years, despite facing the pressure of new demands by regional partners.

While the capex target was left unchanged at ₹11.1 trillion, the gains from the Reserve Bank of India’s transfer of a record high dividend of ₹2.1 trillion earlier this year were divided between higher welfare spends and a reduction in fiscal deficit.

All this will serve India well, at a time when domestic bonds have embarked on a maiden journey of getting included in global bond indices. In the face of greater scrutiny of India’s fiscal metrics by international agencies, now more than ever, an adherence to fiscal discipline prepares the groundwork for the possibility of a sovereign rating upgrade in the future.

Yuvika Singhal is Co-Head, Research, QuantEco Research. Shubhada M. Rao is Founder, QuantEco Research

Image for representation purpose only.
| Photo Credit: K.R. Deepak

The Minimum Support rices (MSPs) for both kharif and rabi seasons 2023-24 ensured a minimum return of 50% over the cost of production for all crops, said the Reserve Bank’s Annual Report released on May 30.

The overall public stock of foodgrains as on March 31, 2024 stood at 2.9 times the total quarterly buffer norm, the report said.

On November 29, 2023, the government extended the scheme of free distribution of foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for five more years, effective from January 1, 2024.

The report, which is a statutory report of  Reserve Bank of India’s (RBI) central board of directors, noted that the agriculture and allied activities faced headwinds from the uneven and deficient South-West Monsoon (SWM) rainfall coinciding with strengthening El Nino conditions.

The overall SWM rainfall in 2023 (June-September) was 6% below Long Period Average (LPA) at the all-India level.

As per the second advance estimates, the production of kharif and rabi foodgrains in 2023-24 was 1.3% lower than the final estimates of the previous year.

Also read: Guaranteed MSP is an ethical imperative

The output of millets could benefit from productivity gains, the report said.

MSPs in 2023-24 were increased in the range of 5.3-10.4% for the kharif crops and 2.0-7.1% for the rabi crops.

Moong witnessed the maximum MSP increase among kharif crops, while the increase was the highest for lentils (masur) and wheat among rabi crops.

Amid the heat of the ongoing Lok Sabha electioneering, the Centre has announced plans to significantly increase wheat purchase from non-traditional States of Uttar Pradesh, Rajasthan and Bihar and set a target of seven-fold jump in procurement to 50 lakh tonnes in the ongoing 2024-25 marketing year.

Further, even as the ban on outbound shipments of wheat continues, “it will be a dream for us to export now”, Food Secretary Sanjeev Chopra told reporters on April 4.

“U.P., Bihar, and Rajasthan have been contributing much less than they could have. We are targeting total wheat procurement of 310 lakh tonne this year. Of which, we are hoping to procure at least 50 lakh tonne from three non-traditional procurement States alone,” he said.

While Uttar Pradesh, Rajasthan, and Bihar put together contributed only 6.7 lakh tonnes to the Central pool during the 2023-24 marketing year (April-March), the Union Food Ministry has decided to procure 16% of the total wheat procurement target of 310 lakh tonne set for 2024-25. Wheat procurement at Minimum Support Price (MSP) is normally undertaken by the Centre’s nodal agency Food Corporation of India (FCI) and State agencies. However, cooperatives Nafed and NCCF have also been roped in with a procurement target of five lakh each this year.

Wheat MSP has been fixed at ₹2,275 per quintal for the current year. Since October, the Centre has been working with these three States to increase the procurement level. “Various steps have been taken to address the gaps and it should help boost procurement levels in three States,” he said.

Asserting that 2024 general elections is unlikely to affect wheat procurement operations, the Secretary said the increase in wheat procurement from non-traditional States will help restore allocation of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana and other welfare schemes.

“The allocation of wheat has been reduced to 184 lakh tonnes annually from the previous 230-240 lakh tonnes under various welfare schemes in view of lower procurement in the last two years,” he added.

Mr. Chopra also said the Centre has not directed traders to avoid buying wheat from farmers till the government completes procurement. “No such instruction has been given to traders,” he added.

Highlighting steps taken to strengthen wheat procurement in non-traditional States, the Secretary said the procurement window has been advanced/extended to March instead of April 1, set up a dedicated farmer helpline to address procurement-related queries, intensified media publicity of MSP rate, and drying facilities have been provided for early harvested crop.

Besides, the government has advanced farmer registration from January 1 instead of March 1, simplified farmers’ land record verification, including tenant farmers, given flexible procurement targets to agencies.

More importantly, the Secretary said the government has decided to ensure transfer of MSP to bank accounts of farmers within 48 hours, streamlined procurement incidental burden for farmers, smoothened banking-related issues such as Aadhaar integration with bank accounts.

“The government has also opened more procurement centres targeting production hotspots, set up mobile procurement centres, decide to leverage Self Help Groups, Panchayats, Farmer Producer Organisations,” he said.

“That apart, the government has ensured institutional preparedness through working capital to agencies to ensure payment of MSP to farmers within 48 hours,” he added.

The Secretary further mentioned that a Central control room has been set up in the FCI headquarters in Delhi for real-time monitoring of procurement ad coordination among various agencies.

According to the Food Ministry, six lakh tonnes of wheat have already been procured so far this year from six States — Uttar Pradesh, Madhya Pradesh, Rajasthan, and Bihar. The procurement from traditional States of Punjab and Haryana will begin soon.

On prices of wheat and rice, the Secretary said wheat flour and wheat prices are stable at present after introduction of retail sale of wheat flour at ‘Bharat’ brand. About 7.06 lakh tonne of wheat flour has been sold till now.

“Even retail inflation of rice remained stable at 13% and 14% for the last two months. About 3.1 lakh tonne of FCI rice has been sold under Bharat brand since February,” he added.

Asked if the government will revisit the wheat export ban amid estimates of higher production, the Secretary said, “It’s a dream for us to export now.” The government has banned wheat exports since May 2022 to boost domestic availability and check prices.

The wheat production is estimated to be a record 112 million tonne during 2023-24, compared to last year’s 110 million tonnes as per the Agriculture Ministry.

Union Minister of Consumer Affairs, Food and Public Distribution Piyush Goyal addresses virtually during the 60th Foundation Day celebration of the Food Corporation of India (FCI), in New Delhi on Sunday. Secretary, Department of Food and Public Distribution, Sanjeev Chopra, and CMD Food Corporation of India (FCI) Ashok k.k. Meena are also seen.
| Photo Credit: ANI

The role of the Food Corporation of India (FCI) is not only to deliver ration, but also to instill confidence in farmers and beneficiaries by bringing in transparency, efficiency and accountability, said Union Food Minister Piyush Goyal here on Sunday in his address on the 60th foundation day of the FCI. Mr. Goyal urged the youth and officers in the FCI to turn as whistleblowers to ensure transparency in running the organisation.

He said the FCI should emerge as a trusted partner of farmers and people of the country. “The FCI plays a crucial role in facilitating flagship schemes such as Pradhan Mantri Garib Kalyan Anna Yojana [PMGKAY] by providing ration to beneficiaries in every corner of the country,” the Minister said, reminding the officers that the role of the FCI was not only to deliver the ration. He added that Prime Minister Narendra Modi had promised to make India free of corruption and asked the youth and staff of the FCI to bring in transparency and become whistleblowers.

‘Ensure quality’

Mr. Goyal said the FCI needed to embrace digitalisation and technology by ensuring quality. “Quality can be achieved in areas such as inspection, procurement, transportation, distribution and storage,” he said, and suggested the FCI to reduce operational costs through route optimisation, mechanised loading/unloading, innovative storage solutions and others.

The Minister said the open market sale scheme (domestic) operations had also proved to be an effective tool in moderating the prices of wheat and rice. “Bharat Atta, Bharat Dal, interventions regarding onion and tomato have assisted the Government of India in price stabilisation,” Mr. Goyal said.