The Union Budget 2008-09 essentially has a rural flavour as significant emphasis has been placed on inclusive growth. Greater focus on education and health especially for the rural sectors as well as significant thrust on agriculture reiterates the finance minister’s commitment towards an inclusive growth.

Some of the key initiatives are expansion of NREGS scheme to 596 districts which will positively impact study of various livelihood options for rural youth in horticulture, bio fuels etc. Increased allocation for RIDF (Rural Infrastructure Development Fund) will help rural roads and hospitals.

In line with the rural focus of the budget, the outlay for Bharat Nirman was increased, which would benefit development of rural infrastructure, including roads, power, and water supply. The corpus of RIDF-XIV was also raised Rs 14,000 crore. Tourism and hospitality have also received impetus through a provision of five-year tax holidays.

A key positive take away is the rationalization of income tax slabs. This is a welcome step to revive consumption demand through higher disposable incomes available with middle income families which should stimulate demand for durables and non-durables, catalyzing the manufacturing sector in the process.

We believe that the waiver of farm loans is a short-term strategy without seriously addressing structural issues. However, this will greatly benefit the agricultural stakeholders by resuscitating farmers back into productive agriculture participation, as well as facilitating the cleaning up of banking portfolios. This should provide a significant multiplier to the agricultural community and extract them from a vicious cycle of indebtedness, with productive chanelising of their farming properties.

Overall, great for demand-driven future growth.