FM addresses rural distress in Budget 2019

Farm crisis topped the agenda of acting Finance Minister, Piyush Goyal who presented the Interim Union Budget 2019 on Friday, as the ruling government led by Narendra Modi approaches the end of its term. 

Before the announcement of the budget, the government had received considerable backlash for its inability to contain farm distress. In-line with expectations, the budget addressed the concerns of the rural sector.

The government has allocated a whopping Rs. 75,000 crore to support farmers’ incomes in 2019 under a new scheme called the Pradhan Mantri Kisan Samman Nidhi. The prices of agricultural commodities have witnessed a fall in international markets and this has in-turn adversely impacted the income of small and marginal farmers in India. Thus, in order to alleviate the burdens faced by farmers, structured income support is proposed by the government.

Under the Kisan Samman scheme, vulnerable farmers with a land holding of upto 2 hectares will receive direct income support to the tune of Rs. 6,000 per year. This amount will be paid in three equal instalments of Rs. 2,000 each and shall be transferred directly to the beneficiary farmers’ bank accounts. This program will receive 100 per cent funding from the Government of India. 

Around 12 crore farm-dependent families will benefit from this move. The scheme was implemented on December 1, 2018 and the first instalment of Rs. 2,000 will be disbursed very soon. The government has reassured farmers that they will continue to receive support in procuring inputs such as fertilizers, high-quality seeds, neem coated urea and pesticides. This will help curtail the problem of indebtedness suffered by farmers. 

Besides this scheme, bearing in mind Indian farmers' vulnerability to natural calamities, the government has announced that farmers that have been impacted severely on account of natural disasters will receive 2 per cent interest subvention with an additional 3 per cent interest subvention upon timely repayment of loans. This is likely to benefit farmers more than rescheduling of crop loans. 
Furthermore, the budget announced 2 per cent interest subvention to farmers pursuing the occupations of animal husbandry and fisheries. 

The Union Budget has also allocated Rs. 19,000 crore for constructing and developing rural roads in 2019, as compared to Rs. 15,000 crore allocated previously. 

Overall, these announcements are in-line with the government's earlier projections of doubling farmer income by 2022. The government has also promised a special emphasis on organic food and adoption of modern farming practices including micro-irrigation and value addition. 

As for the equity market, the Finance Minister's approach to enhance farm income will boost consumption in the rural economy, which will in turn benefit the FMCG sector, as well as companies engaged in the businesses of micro-irrigation, fertilizers, animal feed, etc. The demand for tractors will certainly increase post these announcements. As such, the shares of tractor companies are likely to trade in the green. The demand for two-wheelers in the rural sector is also likely to pick up. 

On Friday, at 3:03 pm, the share performance of rural stocks stood as follows. In the 2-wheeler segment, the shares of Hero MotoCorp were trading at Rs. 2,794.80, up 7 per cent. On the other hand, the shares of Bajaj Auto were trading at Rs. 2,612.00, up 2.30 per cent.

Under the tractor segment, the shares of Escorts and Mahindra & Mahindra were trading at Rs. 674.45 and Rs. 688.25, respectively, up 2.03 per cent and 1.09 per cent, respectively.

In the FMCG sector, the stock of ITC was trading at Rs. 279.95, up 0.43 per cent. Similarly, the stock of HUL was up 2.03 per cent, at Rs. 1,798.10.

Under the Irrigation segment, the shares of Jain Irrigation Systems were trading at Rs. 59.00, down 3.36 per cent. On the other hand, the stock of Finolex Industries was trading at Rs. 515.95, up 0.20 per cent.

In the Fertilizers sector, the shares of Coromandel International were trading at Rs. 458.70, up 2.25 per cent. Meanwhile, UPL’s stock was trading at Rs. 780.15, down 0.96 per cent.

In the industry dealing with Other Food Products, the shares of Avanti Feeds were trading at Rs. 345.40, down 3.18 per cent. The stock of Waterbase was trading at Rs. 153.45, down 4.27 per cent.