No reason to wait for the Budget

Those who understand Mr Modi would know that he is a hands-on PM who doesn’t shy away from going to the public and who is in a hurry when it comes to promoting development...

The shaping of policies and programmes is a continuous process. These policies and programmes get announced or launched as and when they get finalised. There is no reason to wait to bundle all new initiatives with the Budget, which happens only once in a year. Yet Prime Minister Narendra Modi’s announcement of new schemes on the eve of New Year — at a time when the Budget Session is around the corner — is bound to create doubts in some quarters about the motives behind these announcements. But those who understand Mr Modi would know that he is a hands-on PM who doesn’t shy away from going to the public and who is in a hurry when it comes to promoting development.

Mr Modi’s New Year “gift” to the public can be grouped in three broad categories: (i) interest subsidy on home loans, farm loans and on term deposits by senior citizens; (ii) credit guarantees and enhanced credit limits for small businesses; and (iii) cash transfers to expectant mothers. The intended beneficiaries of these schemes are the lowincome people, small businesses and farmers, senior citizens and expectant mothers.

An examination of the scheme suggests continuity of pro-poor and prodevelopment thrust of the Modi government. For example, housing for lowincome people, both in rural and urban areas, has been high on Mr Modi’s development agenda. Interest subsidy is a clever way to encourage people to seek home loans to buy or build homes for themselves and their families. Further, the Modi government’s ambitious target of “housing for all” by 2022 just got a little tougher with his recent announcement of adding 33 per cent more houses in villages under the Pradhan Mantri Gramin Awas Yojana.

Similarly, schemes aimed at promotion of small businesses are in keeping with the Modi government’s thrust on employment creation. Given the multitude of small businesses across the country, and their role in employment generation, doubling of credit guarantee to `2 crores and raising of cash credit limits will only make it easier for such businesses to run their operations.

The extent of subsidy that these schemes would entail is not known as this would depend on their scale-up and uptake. But their analysis suggests that these are certainly not designed in a reckless manner as to create unreasonable burden on the exchequer. These are not doles but “smart” subsidies with a strong rationale behind them.

However, the scheme of cash transfer of `6,000 to expectant mothers is an odd one on the list. If it were just a maternity benefit scheme, it is fine. But the scheme is actually aimed at improving maternal and child health outcomes. Now improvement in these outcomes is also dependent on the public healthcare delivery system, which we all know is not in good shape, specially in rural and remote areas. Yet, its inclusion may have been to lend some weight to the package announced by the PM.

All attention is now focused on the forthcoming Budget, which is also the first Budget post-demonetisation. It would be interesting to watch how the government proposes to allocate collections under the Pradhan Mantri Garib Kalyan Yojana. Rajeev Ahuja is a development economist, formerly with the Bill and Melinda Gates Foundation and the World Bank. Email: ahujaahuja@yahoo.com