The government is readying a strategy to focus on infrastructure, agriculture and restoring the health of the banking system as well as specific measures to ease stress in the rural economy when it unveils the 2016-17 budget in Februaryend. According to the preliminary blueprint that has emerged during the budget discussions, the government wants to focus on these crucial areas to accelerate growth and tackle growing unease in the farm economy .
"There will be more attention to irrigation and agriculture. We are working out the numbers. We will have to address the problems in the rural economy which has borne the brunt of two consecutive droughts," said a senior official, who did not wish to be identified. "This is a very crucial budget for the government," said the official, highlighting the need to take effective measures to revive vital sectors and overall growth.
He also said the infrastructure sector will see greater attention as the government is keen to step up investment despite a challenging fiscal situation. The government has allocated Rs 5,300 crore to support microirrigation, watershed development and the Pradhan Mantri Krishi Sinchai Yojana and had urged the states to chip in substantially in this vital sector. Sources say this effort will be stepped up in the current budget.
The rural economy , which is a key driver of demand and a support for the broader economy , has taken a knock from the two back to back season of patchy monsoon rains. The segment drives demand for everything from motorcycles to tractors, televisions and refrigerators.
Finance minister Arun Jaitley has already signalled the government's support by backing calls for raising investment in the crucial farm sector and leveraging technology to accelerate growth. "There have been demands that micro irrigation be given infrastructure lending status. We are looking at several options to step up irrigation," said the official, adding that reviving the farm sector was a top priority for the government. The farm sector growth slowed to 2.2% in the September quarter compared to 2.1% expansion in the same year-ago period.
The next focus area would be infrastructure where investment in 2015-16 was estimated to have gone up by Rs 70,000 crore in the year, including funds from the centre and state-run undertakings.Highways and roads have proved to be a success area and in the absence of private investment, indications are the sector will receive special attention, including unveiling of some innovative financing schemes.
The health of the banking sector has been a sources of worry . The government has taken several measures, including measures to pump in Rs 70,000 crore to recapitalize state run banks. Sources said there is a view within the government that more needs to be done to secure the health of the crucial sectors. Jaitley's budget team is also working on the big numbers, keeping in view the government's commitment to meet the fiscal deficit target of 3.9% of gross domestic product for the current fiscal year.
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