The Union Budget 2023 was presented by the Honorable Finance Minister, Smt Nirmala Sitharaman, on the 1st of February 2023. The announcement received widespread attention as it was the last budget presentation prior to the 2024 general elections. The industry looked forward to the 2023-24 budget with anticipation, as it was expected to aid in achieving India’s target of a $5 trillion economy. The Finance Minister referred to the Budget 2023 as the “Amrit Kaal Budget.” In this article, we will take a look at some of the key insights from the budget that would impact the rural sector, as well as some of the top stocks in the sector by market cap and their price movement post-budget.
The preservation of domestic growth impulses has been given the highest priority in this year’s budget. This highlights the significance placed on maintaining and supporting growth within the country.
Problems for the Rural Economy
The rural economy has faced numerous challenges in recent times, including rising input costs in agriculture, higher inflation, and weather-related issues. The Budget 2023-24 aims to address these challenges by focusing on the rural economy, which has been consistently affected by negative growth in real wages, higher rural inflation, and persistent elevated employment under NREGA due to the COVID-19 pandemic. The government hopes to improve the standard of living in rural areas and boost the rural economy through various initiatives outlined in the budget.
Solutions via the Budget
Summarizing the initiatives outlined in the budget impacting the rural demography:
- Increased Spending on Rural Infrastructure: The government has allocated INR 14.5 lakh crore ($20 billion) for rural infrastructure in the budget, with a focus on developing rural roads, airports, and water supply systems. This increased spending is expected to boost the rural economy by creating jobs and improving connectivity between rural areas and urban centers.
- Agricultural Reforms: The government has announced several reforms in the agricultural sector, including the creation of a centralized agricultural market, a new agricultural insurance scheme, and an agricultural credit system. These reforms are aimed at improving the livelihoods of farmers and ensuring that they receive a fair price for their produce.
- Digitalization of Rural India: The government has outlined plans to increase the digitalization of rural India, including the creation of a digital platform for farmers and the expansion of rural broadband networks. These initiatives will help to improve access to information, reduce barriers to entry for businesses, and increase the efficiency of the agricultural sector.
- Focus on Health and Education: The budget includes a significant allocation for health and education in rural areas, with a focus on increasing the availability of healthcare facilities and improving the quality of education. This is expected to have a positive impact on the rural economy, by increasing the productivity and earning potential of rural citizens.
- Boost for Micro, Small, and Medium Enterprises (MSMEs): The government has announced several measures aimed at boosting the MSME sector in rural areas, including the creation of a new rural MSME fund and the expansion of the collateral-free loan scheme. These initiatives are expected to improve the ease of doing business and increase the access to credit for rural entrepreneurs.
- Increased Spending on Rural Employment Programs: The government has allocated INR 1.2 lakh crore ($1.6 billion) for rural employment programs in the budget, with a focus on improving the livelihoods of rural citizens and reducing poverty. These programs are expected to create jobs and increase the income of rural households, helping to boost the rural economy.
Also read: New Income Tax Slab 2023-24
Stocks to benefit
It is expected that the government will announce additional rural schemes similar to the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MNREGA) and hikes in minimum support prices (MSPs), which will result in an increase in disposable income for rural and low-income populations. This is likely to benefit consumer goods companies such as Jyothy Labs, Hindustan Unilever, Dabur, and Britannia.
The budget has proposed an increased allocation for the Jal Jeevan Mission/National Rural Drinking Water Programme. This allocation is likely to benefit companies such as L&T, JMC Projects, KSB, Thermax, and VA Tech Wabag, as they are involved in implementing water supply and distribution projects.
The budget has proposed a higher allocation for reform-linked distribution schemes and the strengthening of power systems and indirectly it will affect rural areas the most. This allocation is expected to benefit companies such as PGCIL, Siemens, Hitachi Energy, Voltamp Transformer, GE Power, CG Power, ABB, and Schneider Electric Infra, as they are involved in the design, development, and implementation of power distribution systems.
In conclusion, the Union Budget 2023 has laid out several initiatives aimed at boosting the rural economy and improving the standard of living for rural citizens. These initiatives are expected to have a positive impact on the rural sector, as well as several stocks in the sector by market cap. While the full impact of the budget will become clear in the coming months, it is expected that the rural sector will see significant growth in the near future.