The interim Budget for 2019-20 contains a mix of good proposals for the farmers and the middle class that includes small and medium enterprises. The proposal to directly transfer Rs 6000 annually to the accounts of individual farmers having cultivable lands up to 2 hectares in 3 equal installments costing an annual outlay of Rs 75,000 crores is unique. The land records in each state need to be corrected on an urgent basis in order to identify the real beneficiaries before the scheme is implemented. Animal husbandry and fisheries sector have been allotted increased allocation apart from interest subvention of loans taken by the distressed farmers through Kisan Credit Card.
Small and marginal farmers owning small tracts of land would be largely benefited. Social security and health coverage for a large chunk of workers in the unorganised sector through innovative schemes announced in the Budget would also contribute to improve standard of life. Similarly as a part of the welfare measures for the rural women, the schemes of free LPG connections and making available the affordable loans through MUDRA Yojana and other schemes would be accelerated. Under Pradhan Mantri Kaushal Vikas Yojana (PMKVY) around 1 crore of youth has been trained for a better livelihood and allocation of Rs 7,511 crores has been earmarked for jobs and skill development in 2019-20.
MSME sector has been encouraged by enhancing government procurement through government e-marketplace (GeM) to 25 percent from them (out of this 3% from women-owned SMEs). Liquidity shortage in the current year affected the performance of SME sector and this would be partially taken care of by simplifying the credit scheme with interest subvention for the sector.
Although the Interim Budget is lower in scale compared to Budget and a full scale allocation of funds to various sectors is yet to be complete, a few sectors have been identified for higher fund allocation and these are good news for the steel industry. The defence Budget exceeding Rs 3,00,000 crores has been kept for 2019-20 which is nearly 15 percent of the total expenditure by the centre in next year. The capital expenditure (nearly 1/3rd of the total expenditure) is for modernisation related expenditure and emergency procurement.
As regards infrastructure investment, the challenge is stagnant trend of Gross Fixed Capital Formation as percentage of GDP at 28.5 to 29.5, declining saving rate to support the investment from 33.1 percent in FY13 to 29.6 percent in FY17, slowing down of private corporate investment and rising NPAs of the banks resulting in decline in lending. A few sectors have, therefore, been earmarked with rise in budgetary allocation to reverse the trend. It is heartening to note that the operating ratio (expenditure as a percentage of revenue) of Indian Railways has improved from 98.4 percent in FY18 to 96.2 percent in FY19 and further to 95 percent in FY20.
A total capital expenditure of Rs 1.58 crores has been allocated to railways in 2019-20 with the budgetary support of Rs 64,587 crores. Out of this new lines construction gets `7,255 crores, gauge conversion gets Rs 2,200 crores, doubling of tracks is allotted Rs 700 crores and what is more beneficial to steel industry is the allocation of Rs 6,115 crores and Rs 1,750 crores for signalling and telecom and Metro projects allotted Rs 17,714 crores.
Although no freight increase or enhancement in passenger fare has been announced, the major focus this year would be improvement in the safety system of Indian Railways. Civil Aviation (100 operational airports), roadways (27kms per day), Sagarmala project (Rs 550 crores for shipping and port development) and Coastal waterway would be the thrust areas of the Interim Budget.
In addition micro irrigation is allotted Rs 5,000 crores. It is interesting to note that rail, air connectivity and container cargo movement to the northeastern states would be further improved by enhancing budgetary allocation by 21 percent to Rs 58,166 crores in FY20 compared to the current year. Two flagship programmes, namely, PM Gram Sadak Yojana and PM Awas Yojana have been allotted Rs 19,000 crores and Rs 25,853 crores respectively.
Needless to mention all these infrastructure projects would significantly contribute towards generation of steel demand.