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Our MD & CEO Mr. Bhargav Dasgupta's view on the Union Budget 2017

Posted by - ICICI Lombard, GIC Ltd.
February 06 2017

The Union Budget was a much awaited event post the demonetisation drive, a momentous step by any standard. While many were expecting the budget to provide sops to balance the short term impact of the drive, I think the Government has done well to present a prudent balance sheet that focuses on the long term growth prospects of the nation and gives a boost to those areas that form the backbone of the Indian economy. To my mind, the focus on agriculture growth, digitisation, infrastructure development and enabling cashless transactions will give the necessary fillip to India's long term growth engine.

While there are many aspects of the budget that have been dissected by several experts, I would like to focus on one area that hasn't received adequate attention. For long, we as a nation, have been pursuing only the growth agenda without adequately emphasising on the importance of risk alleviation, even though natural catastrophes and man-made disasters now occur at an alarming frequency. The government has taken cognizance of this in recent times and has taken some steps towards risk mitigation for different segments of our population. Here, I would like to point towards a specific measure announced in the budget for a very critical sector - agriculture. Even though the contribution of agriculture to India's GDP is only 16%, it provides employment to over 50% of the working population. Further, the sector is highly volatile and vulnerable to both pricing as well as production risks due to droughts, inclement weather, floods etc.

While we have had several crop insurance schemes in the past, most of them have not been too successful given the complex structures and limited cover. The Pradhan Mantri Fasal Bima Yojana (PMFBY) announced in January 2016, however seems to be turning the tide. Within a year of its launch, the coverage of crop insurance has increased to 29% from 23% earlier. Today, crop insurance already accounts for the third largest segment for the non-life insurance sector as a result of PMFBY cover. By further increasing the budgetary allocation towards this scheme by ₹13,240 crore for FY18, the Government is looking to increase the coverage from the current 30% to 40% in FY18 and 50% in FY19. This will facilitate more farmers, especially the non-loanee ones to come under the ambit of crop insurance, thereby securing their harvest against the vicissitudes of erratic monsoons.

The Government has set the target to double farmer incomes in the next 5 years. By promoting risk mitigation measures through schemes such as PMFBY, we can look forward to a robust agricultural sector and ensure an inclusively growing India in the coming years.

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