The Reserve Bank of India today released the May 2015 issue of its monthly Bulletin. Apart from regular features such as Speeches by the Top Management and Current Statistics, this issue of the Bulletin also includes three articles: (1) Union Budget 2015-16: An Assessment; (2) Small Borrowal Accounts of Scheduled Commercial Banks: 2014; and (3) Monsoon and Indian Agriculture – Conjoined or Decoupled?
1. Union Budget 2015-16: An Assessment
This article, based on the Union Budget 2015-16 presented to the Parliament on February 28, 2015 analyses the key features of the Budget and makes an assessment of the likely fiscal situation in 2015-16.
Revised estimates show that the budgeted targets of revenue deficit and gross fiscal deficit for 2014-15 were met mainly through expenditure compression in the face of sluggish non-debt receipts.
The Budget estimates for 2015-16 indicate a continuation of the process of fiscal consolidation albeit with revised roadmap, with all key deficit indicators relative to GDP set to decline.
The Budget estimates the GFD-GDP ratio to decline to 3.9 per cent in 2015-16 (BE). In the medium-term, the GFD-GDP ratio is expected to decline to 3.0 per cent by 2017-18. The envisaged reduction in GFD in 2015-16 is to be achieved through combined impact of a compression in revenue expenditure and an increase in non-debt capital receipts.
With the expected growth of 15.8 per cent in gross tax revenues over 2014-15 (RE), the gross tax revenue to GDP ratio is estimated to improve by 0.4 percentage points to 10.3 per cent in 2015-16 (BE). Net tax revenue accruing to the Centre, however, is budgeted significantly lower at 6.5 per cent of GDP in 2015-16 (7.2 per cent of GDP in 2014-15 RE) due to higher devolution to States following the Fourteenth Finance Commission award.
Despite the shortfall in achieving the targets set in the past, including in 2014-15, aggregate disinvestment receipts are budgeted to grow by 121.7 per cent in 2015-16.
Total subsidy expenditure is budgeted to decline by 8.6 per cent to 1.7 per cent of GDP in 2015-16 on account of 50 per cent reduction in provision for petroleum subsidy and modest increase in fertiliser and food subsidy.
Capital expenditure is budgeted to increase sharply by 25.5 per cent in 2015-16 (BE) over 2014-15 (RE), reflecting high growth in non-defence capital outlay (38.6 per cent).
2. Small Borrowal Accounts of Scheduled Commercial Banks: 2014
The article presents salient features of small borrowal accounts (accounts each with credit limit of ₹ 0.2 million or less) of scheduled commercial banks in terms of different classificatory characteristics viz., type of account, sector, organisational category, interest rate, loan quality, borrower-category and population groups as on March 31, 2014, based on the results emerging from the Basic Statistical Return (BSR)-1 survey.
In March 2014, out of 138.8 million borrowal accounts with scheduled commercial banks (including regional rural banks), 109.2 million accounts (78.7 per cent) were small borrowal accounts (SBA) with credit limit up to ₹ 0.2 million.
In terms of amount, SBAs had a share of 8.4 per cent in total outstanding credit.
Majority of small borrowal accounts pertained to the household sector, particularly individuals, and were concentrated in a few sectors such as agriculture, small business, retail trade and personal loans.
Loans through Kisan credit cards accounted for one-fourth of the outstanding amount of all SBAs.
Two-thirds of the SBAs were sanctioned in rural and semi-urban centres, both in March 2013 and March 2014. Further, 76.4 per cent of credit outstanding in such accounts was in rural and semi-urban centers in March 2014 (70.5 per cent share a year ago).
Agriculture accounted for 65.8 per cent share in credit outstanding in all SBAs in 2014 (57.3 per cent in 2013).
The Weighted Average Lending rate (WALR) of SBAs has increased by 41 basis points to 12.00 per cent in 2014.
3. Monsoon and Indian Agriculture – Conjoined or Decoupled?
Indian agriculture remains vulnerable to monsoon shocks, as the experience of 2014-15 confirms. Over the years, the volatility of monsoon outcomes has, in fact, increased undermining the accuracy of forecasting and contingent planning. Structural factors such as climate change and rising greenhouse emissions could be at work alongside one-off events such as El Nino. The silver lining is that crop output turns out to be statistically more sensitive to net area sown than to monsoon variations. This provides the rationale for strategic long-range planning encompassing expansion of net sown area by reclaiming arid and semi-arid areas, introducing better technology and efficient water management to make Indian agriculture weather proofed over time.