India is a land of diverse economic and social structure. India has witnessed unprecedented growth in the last decade but rural development remains to be one of the biggest challenges for modern India.
India is a land of diverse economic and social structure. India has witnessed unprecedented growth in the last decade but rural development remains to be one of the biggest challenges for modern India. Despite many large scale rural development schemes, the absolute number of people in poverty has not declined substantially. Majority of India’s rural population lives with inadequate basic social and physical infrastructure. The growth story of India’s economic development would be incomplete without development of the country’s social and rural segment. There is no denying the fact that development of rural areas is slow due to improper provision of infrastructure with compare to urban areas. The government on its part has introduced some time bound plans including the ‘Bharat Nirman’ program, Mahatma Gandhi National Rural Employment Guarantee act (MGNREGA) and Indira Awaas Yojana (IAY) to structure the rural development of the country.
The budget is expected to provide a little over 6% increase in the government's developmental and social sector spending for the next fiscal. With the finance ministry walking a tight rope committed to a fiscal deficit of 4.8% of GDP in 2013-14, there is not much room for increasing social expenditure on social schemes including rural infrastructure. According to industry experts, the major part of the increase in the developmental social and rural infrastructure sector would focus on the Mahatma Gandhi National Rural Employment Guarantee Act and National Rural Health Mission while having a dedicated approach on the rural infrastructure.
For the rural infrastructural sector, a dedicated increased allocation of funds is one the cards. Conservative estimates point to a 5 to 6% increase in the overall expenditure increase over the 2012-13 budget allocation of Rs. 60,100 crore for railways Rs.19,434 crore for roads & highways, Rs. 5,675 crore for shipping and Rs. 24,000 crore for rural roads. This move is likely to bring in more investments in the infrastructure sector. Industry observers expect restoration of tax exemption u/s 80 CCF for Infrastructure bonds up to Rs. 20,000 and increase in limit of tax-free bonds issued by government agencies is very likely to trigger more funding for the rural infrastructure sector.
Rural housing one the other hand continues to be the largely ignored segment. The segment was ignored in the previous budget with no big incentive announced for companies to foray into this segment. Although The Rural Infrastructure Development Fund (RIDF) was given a corpus of Rs. 18000 cores in the fiscal layout, it was largely ineffective because of insignificant allocation of funds compared to the rural infrastructure segment and the sheer number of rural households in India. It remains to be seen whether the government can inject some positivity in the rural infrastructure sector with this year’s budget. With private players reluctant to foray into rural housing, any tax sops or incentives for real estate companies to focus on the rural infrastructure segment can be the best gift touching the lives of millions of rural Indian households.
More clarity of the populist scheme of National bank for agriculture & rural development (NABARD) introduced in last budget is expected. NABARD’s plan for interest subvention and re-financing through public banks triggered an interest in the warehousing sector but the scheme was unceremoniously scrapped by the RBI. Any focus on the warehousing sector either through subsidized government agencies or through public private partnerships is likely to bring joy to the rural infrastructure development industry. Social entrepreneurs also expect the government to put some thought behind the NREGA scheme to further develop India's rural infrastructure sector. Rather than being a populist social endeavor, the industry expects MGNREGA to be more focused on creating long-term valuable assets including constructions of roads, dams and checking depleted forest covers to help the farming sector.
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