Budget to focus on rural economy, small businesses

NEW DELHI: Even as a prominent section within the government is opposed to universal basic income — an unconditional cash transfer to the poor— the view on the focus areas in budget is virtually unanimous: boost the rural economy and support the housing sector and small businesses.

Apart from being the areas worst-hit by demonetisation drive, these are also seen as sectors from which the government hopes to earn the maximum reward, especially in five states, (including Punjab and Uttar Pradesh) which are slated to vote after the Budget.

In addition, creating rural infrastructure has been a key theme and the government has focused on reviving the employment guarantee scheme through increased allocation, with a thrust on developing physical assets.


There are indications that the rural development ministry could see a 20% jump in allocation, especially with the renewed focus on housing and rural roads. By boosting rural demand, the government is also hoping to revive sales of two-wheelers, other durables as well as non-durables post-demonetisation.

Similarly, in case of housing the government is likely to offer tax concessions to the middle class, which will clear the large pile of inventory with the developers and revive the sector over the coming months. Given its linkages with cement and steel, a revival in housing sector is seen to be crucial to meet overall job demand. But when it comes to universal basic income, whose proponents are in favour of transferring a fixed amount into bank accounts of the poor, the government is split.

Sources said a prominent section is against handing out doles and will prefer a scheme that results in the creation of physical assets.

In fact, they cite the instance of NREGA, where the Narendra Modi government opted to rework the scheme.

The government may not be keen to offer handouts when general elections are more than two years away, and as a result political rewards may not accrue in 2019. In any case, finding resources for such as grand transfer of funds could be an issue, especially when the government has committed itself to fiscal consolidation. Further, sources said, universal basic income is still an untested concept despite experts such as chief economic adviser Arvind Subramanian backing it. While trials are being conducted in countries such as Scotland and Finland, Switzerland voted and rejected the plan.