Mar 02, 2016 09:51 AM IST | Source: Moneycontrol.com

'Budget 2016 unveiled big focus on revival of rural demand'

Budget has unveiled a big focus on revival of rural demand through a carefully drafted focus on the agricultural sector that strives to increase agricultural productivity thereby paving the way for non-inflationary growth over medium term, says Soumya Kanti Ghosh, Chief Economic Adviser & GM, Economic Research Department, SBI.

'Budget 2016 unveiled big focus on revival of rural demand'

Soumya Kanti Ghosh, Chief Economic Adviser & GM, Economic Research Department, SBI

"The FY17 budget numbers are a positive surprise with Government sticking to the designated fiscal consolidation roadmap. On the back of it, FY17 Budget envisages a nominal GDP growth of 11 percent. Assuming that the Government is projecting a real GDP growth at around 7.4 percent (midpoint between 7-7.75 percent), the inflation rate (based on GDP deflator) turns out to be 3.7 percent. This is significantly higher than the projected GDP deflator at 1 percent for this fiscal, indicating that Government expects a significant traction in demand, particularly from the rural sector, that has seen the maximum push in the Budget.

There are special incentives for the MSME sector in the budget like incentivising the small businessmen. Additionally, we expect that the MUDRA scheme with a scaled up disbursement target at Rs 1,80000 crore in FY17 (Rs 70,000 crore in FY16) could provide employment to a significant segment of the population. The Stand Up India Scheme, will ensure coverage of skilled / semi-skilled entrepreneurs in different geographies across the country.

The Budget has however not provided any additional number for bank recapitalisation (over and above Rs 70,000 crores over 4 years) numbers and we expect it to be an ongoing exercise.

To sum up, the Budget has unveiled a big focus on revival of rural demand through a carefully drafted focus on the agricultural sector that strives to increase agricultural productivity thereby paving the way for non-inflationary growth over medium term."

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