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GALLERY: Key Budget 2020 Points In 36 Graphic Cards

Decent amount of allocations have been made in the infrastructure space which may be pivotal for economic growth.

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Key Budget Announcements:

The nominal GDP growth for FY 20-21 estimated at 10%


Fiscal Deficit for FY20 revised to 3.8% from 3.3% earlier

New personal income tax rules* – excluding reliefs, exemptions. DDT to be abolished. To be taxed in the hands of the investor as per the individual tax slabs

Govt. committed to doubling farmers’ income by 2022 by allocating Rs 2.83 lakh crore for the agriculture sector


Increased allocations to various schemes^ related to infrastructure to boost economic growth

Stake sale in LIC through IPO along with Govt. stake sale in IDBI

(Graphics Courtesy: All graphic cards are copyright of PIB, Government of India)

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ECONOMY-DEVELOPMENT

Cabinet Approves Increase In Minimum Support Prices For Kharif Crops

The highest increase in MSP is proposed for nigerseed, followed by sesamum, urad and cotton (long staple).

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NEW DELHI: The Cabinet Committee on Economic Affairs (CCEA) chaired by the Hon’ble Prime Minister Shri Narendra Modi has approved the increase in the Minimum Support Prices (MSPs) for all mandated Kharif crops for marketing season 2020-21.

The highest increase in MSP is proposed for nigerseed (Rs 755 per quintal) followed by sesamum (Rs 370 per quintal), urad (Rs 300 per quintal) and cotton (long staple) (Rs 275 per quintal). The differential remuneration is aimed at encouraging crop diversification.

The increase in MSP for Kharif Crops for marketing season 2020-21 is in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the All-India weighted average Cost of Production (CoP), aiming at reasonably fair remuneration for the fanners.


The expected returns to farmers over their cost of production are estimated to be highest in case of Bajra (83%) followed by urad (64%), tur (58%) and maize (53%).

For the rest of the crops, return to farmers over their cost of production is estimated to be at least 50%.

Government’s strategy is one of promoting sustainable agriculture with diversified cropping pattern matching with the country’s agro-climatic conditions, towards higher productivity without jeopardizing nation’s bio-diversity. Support is in the form of MSP as well as procurement.

Besides, with the intention of giving enough policy thrust to the income security of the farmers. Government’s production-centric approach has been replaced by income-centric approach.


Concerted efforts were made over the last few years to realign the MSPs in favour of oilseeds, pulses and coarse cereals to encourage farmers to shift to a larger area under these crops and adopt best technologies and farm practices, to correct the demand-supply imbalance.

The added focus on nutrient-rich nutri-cereals is to incentivize its production in the areas where rice-wheat cannot be grown without long term adverse implications for groundwater table.

In continuation with the above-mentioned measures, Government is taking a holistic approach towards supporting the farmers and facilitate farming-related activities in the lockdown situation due to COVID-19. Efforts are being made to facilitate the marketing of agricultural produce by the farmers.

Advisories have been issued by the Union Government to State Governments / UT to facilitate Direct Marketing, enabling direct purchase from the fanners / FPOs / Cooperatives etc. by Bulk Buyers /Big Retailers / Processors by limiting regulation under State APMC Act.

Besides, the Umbrella Scheme “Pradhan MantriAnnadataAaySanraksHanAbhiyan” (PM-AASHA) announced by the government in 2018 will aid in providing a remunerative return to farmers for their produce.


The Umbrella Scheme consists of three sub-schemes i.e. Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS) and Private Procurement & Stockist Scheme (PPSS) on a pilot basis.

In addition, under the Pradhan MantriKisanSammanNidhi (PM-KISAN) Scheme during the lockdown period from 24.3.2020 till date, about 8.89 crore farmer families have been benefitted and an amount of Rs. 17,793 crore has been released so far.

In order to provide food security during the prevailing situation due to COVID-19 pandemic, the Government has decided to distribute pulses to the eligible households under Pradhan MantriGaribKalyanYojana (PM-GKY). About 1,07,077.85 MT pulses have so far been issued to the States/UTs.

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HISTORIC: Cabinet Approves Amendment To Essential Commodities Act

‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’ approved.

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NEW DELHI: The Union Cabinet also approved The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.

The ordinance will empower farmers for engaging with processors, aggregators, wholesalers, large retailers and exporters on a level playing field without any fear of exploitation.

It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs.


It will reduce the cost of marketing and improve the income of farmers.

Briefing media in New Delhi, Agriculture Minister Narendra Singh Tomar said, farmers, have been provided adequate protection.

Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.


Effective dispute resolution mechanism has been provided for with clear timelines for redressal.

This Ordinance will act as a catalyst to attract private sector investment for building supply chains for the supply of Indian farm produce to global markets.

About The Amendment, Ordinances:

While India has become surplus in most agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing and export as the entrepreneurial spirit gets dampened due to hanging sword of Essential Commodities Act. Farmers suffer huge losses when there are bumper harvests, especially of perishable commodities. With adequate processing facilities, much of this wastage can be reduced.

Benefits:

With the amendment to Essential Commodities Act, commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from the list of essential commodities. This will remove fears of private investors of excessive regulatory interference in their business operations.


The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into the agriculture sector. It will help drive up investment in cold storages and modernization of the food supply chain.

Safeguarding Interest of Consumers:

The Government, while liberalizing the regulatory environment, has also ensured that interests of consumers are safeguarded.  It has been provided in the Amendment, that in situations such as war, famine, extraordinary price rise and natural calamity, such agricultural foodstuff can be regulated.  However, the installed capacity of a value chain participant and the export demand of an exporter will remain exempted from such stock limit imposition so as to ensure that investments in agriculture are not discouraged.

The amendment announced will help both farmers and consumers while bringing in price stability.  It will create a competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.

Barrier-Free Trade In Agriculture Produce:

Cabinet approved ‘The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020’.

Farmers in India today suffer from various restrictions in marketing their produce. There are restrictions for farmers in selling agri-produce outside the notified APMC market yards. The farmers are also restricted to sell the produce only to registered licensees of the State Governments.

Further, Barriers exist in the free flow of agriculture produce between various States owing to the prevalence of various APMC legislation enacted by the State Governments.

Benefits:

The Ordinance will create an ecosystem where the farmers and traders will enjoy the freedom of choice of sale and purchase of agri-produce. It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.


This is a historic-step in unlocking the vastly regulated agriculture markets in the country.

It will open more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices. It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.

The ordinance also proposes electronic trading in transaction platform for ensuring a seamless trade electronically.

The farmers will not be charged any cess or levy for sale of their produce under this Act. Further there will be a separate dispute resolution mechanism for the farmers.

One India, One Agriculture Market:

The ordinance basically aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition.

This will supplement the existing MSP procurement system which is providing stable income to farmers.

It will certainly pave the way for creating One India, One Agriculture Market and will lay the foundation for ensuring golden harvests for our hard-working farmers.

Farmers Empowered To Engage With Processors, Aggregators, Wholesalers, Large Retailers, Exporters:

Cabinet approved ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’.

Indian Agriculture is characterized by fragmentation due to smallholding sizes and has certain weaknesses such as weather dependence, production uncertainties and market unpredictability. This makes agriculture risky and inefficient in respect of both input & output management.

Benefits:

The ordinance will empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field without any fear of exploitation.

It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. It will reduce the cost of marketing and improve the income of farmers.

This Ordinance will act as a catalyst to attract private sector investment for building supply chains for the supply of Indian farm produce to global markets. Farmers will get access to technology and advice for high-value agriculture and get a ready market for such produce.

Farmers will engage in direct marketing thereby eliminating intermediaries resulting in full realization of price.

Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery. Effective dispute resolution mechanism has been provided for with clear timelines for redressal.

Other Measures:

A series of steps were announced as part of theAtmanirbhar Bharat Abhiyaan to provide a boost to those engaged in agriculture and allied activities.

These include the provision of concessional credit through Kisan Credit Cards, financing facility for agri-infra projects, Pradhan MantriMatsyaSampadaYojana and other measures to strengthen fisheries, vaccination against Foot & Mouth Disease and Brucellosis, Herbal Cultivation promotion, boost to beekeeping, Operation Green etc.

Through PM KISAN, over 9.54 crore farmer families (as on first June 2020) have benefited and an amount of Rs. 19,515 crore has been disbursed so far during the lockdown period.

An amount of Rs. 8090 crore has been paid during the lockdown period under PMFBY.

These steps are only the latest in a series of measures taken by the government, which shows its continuous commitment to championing the cause of welfare of the hardworking farmers of India.

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What Does It Mean For Moody’s To Downgrade India’s Rating To Baa3?

Baa3 rating implies that the economy is just one notch above the junk or non-investment grade.

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NEW YORK (United States): Moody’s Investors Service on Monday downgraded India’s sovereign rating to ‘Baa3’ from ‘Baa2’, saying there will be challenges in the implementation of policies to mitigate risks of a sustained period of low growth and deteriorating fiscal position.

Moody’s has also downgraded India’s local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2. The outlook remains negative,” the agency said in a statement.

The decision to downgrade India’s ratings reflects Moody’s view that the country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” added the statement.


The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to more severe and prolonged erosion in fiscal strength than Moody’s currently projects, it further said.

A “negative” implies India could be rated down further.

The agency has provided the following four main reasons behind its decision:

  1. Weak implementation of economic reforms since 2017
  2. Relatively low economic growth over a sustained period
  3. A significant deterioration in the fiscal position of governments (central and state)
  4. And the rising stress in India’s financial sector

Have is a brief encapsulation of the decisions by the Moody’s:


Rating Downgraded Rating Previous Rating
India’s Local Currency Senior Unsecured Rating Baa3 Baa2
Short-Term Local Currency Rating Prime-3 Prime-2
Short-Term Foreign-Currency Bank Deposit Ceiling Prime-3 Prime-2
India’s Long-Term Foreign-Currency Bond A2 A1
Bank Deposit Ceilings A2 A1

Baa3 Rating:

Baa3 is the subdivision of Baa, a credit rating for long-term bonds and investments by Moody’s. The Baa is divided into – Baa1, Baa2, Baa3 and Baa.

A Baa represents a bond or investment of relatively low-risk. Banks are permitted to make an investment in Baa rated bonds.

Baa3 is the lowest investment grade in Moody’s rating scale.

If an economy is rated as Baa3, it implies that it is just one notch above the junk or non-investment grade.

Baa3 rating represents a relatively low-risk investment or bond. Investors, who look forward to making low-risk investments, exercise caution in Baa3, especially when the rating has been downgraded recently.

It may be noted that the ratings are based on the overall health of the economy and the state of government finances. A rating downgrade means that bonds issued by the Indian governments are now “riskier” than before because weaker economic growth and worsening fiscal health undermine a government’s ability to pay back.


Lower risk is better because it allows governments and companies of that country to raise debts at a lower rate of interest.

When India’s sovereign rating is downgraded, it becomes costlier for the Indian government as well as all Indian companies to raise funds because now the world sees such debt as a riskier proposition.

In November 2017, Moody’s upgraded India’s ratings to Baa2, which was based on expectations that the implementation of key reforms will strengthen India’s credit profile. However, since then the implementation of reforms has been relatively weak and did not result in improvement in material credit.

India’s GDP was estimated at 4.2 per cent in the year 2019-20, which is the slowest rate since 2009. Moody’s forecasts that India’s GDP will contract to 4% in the current fiscal 2020-21. Even the RBI Governor  Shaktikanta Das has accepted that the Indian economy will contract in 2020-21.

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