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New schemes announced in Budget 2015

March 16, 2015

In his first full budget presentation, the Finance Minister Arun Jaitley announced several new schemes. We present below an overview of some of the new schemes announced.


Pradhan Mantri Mudra Yojana

To consolidate the Prime Minister’s ‘Make in India’ call, the Finance Minister announced two schemes under the Pradhan Mantri Mudra Yojana. The government proposes to create a Micro Units Development Refinance Agency (MUDRA) Bank with a corpus of Rs 20,000 crore and another scheme to refinance Micro-Finance Institutions with a corpus of Rs 3,000 crore.

MUDRA Bank will go a long way in bringing focused attention to meeting the capital needs of the micro-industrial sector, while Micro-Finance institutions will get much needed capital boost, as this is a rapidly growing sector that offers micro-financing support to various individual women and self-help groups. The scheme will offer special focus to SC/ST category.

Given the fact that the SME sector is collectively the largest employer sector in the country, the capital base of Rs. 20,000 crore may not be sufficient to make a strong impact, since the sector is in dire need to modernise and increase the scale of production.

Similarly, as more women are coming out to take up micro-entrepreneurial roles, the capital requirement for individual women and other self-help groups cannot be met with a corpus of Rs. 3,000 crore. However, it must be said that this is a great start and hopefully in a year, the Finance Minister will have adequate feedback on the demand and response to the schemes, allowing him to enhance support for subsequent years.

Pradhan Mantri Krishi Sinchai Yojana

With the aim of supporting farmers towards achieving ‘per drop more crop’, the government allocated Rs. 5,300 crore to encourage organic farming, using micro irrigation techniques and improved water conservation and usage, through efficient watershed management.

The problem with schemes such as these is that the follow-up on outcomes is poor. The government needs to put in place efficient monitoring mechanisms to track and monitor outcomes and then extend further support to those areas or segments that optimise fund deployment and need greater support.

Again, the amount of allocation may not be sufficient for the vast sector that is involved in agriculture but this is a good beginning as it encourages farmers to optimise resource deployment and maximise agricultural output.

3 Social Security Schemes

Pradhan Mantri Suraksha Bima Yojana

A large section of the population is without any insurance cover and to offer some protection to this sector, the government announced an insurance cover of Rs. 2 lakh, against accidental death for an annual premium of just Rs. 12.

For the first time, insurance will become a reality for majority of the population that remained without protection all these years. The low premium is likely to attract large numbers to take this cover. However, for this scheme to reach the interiors, the government will have to initiate a focused awareness and communication exercise to ensure maximum people understand the affordability and benefits of this scheme.


Atal Pension Yojana

The scheme offers a defined pension based on the individual contribution and time period. Under the scheme, the government shall contribute 50% of the beneficiary’s premium limited to Rs. 1,000 per year, for a period of 5 years. The scheme will be offered to those opening an account on or before 31st December 2015.

Here again, a large segment of the population remains without any financial protection in old age. This scheme will go a long way in providing some relief to those who do not have any cover as yet.

However, this scheme will need to be well publicised and the benefits better communicated. After all, the Jan Dhan scheme saw several crore accounts being opened but most still remaining with zero balance.


Pradhan Mantri Jeevan Jyoti Bima Yojana

This insurance scheme covers individuals between 18 to 50 years of age and offers Rs. 2 lakh cover in case of natural or accidental death, for an annual premium of only Rs. 330.

The government must ensure that the people are made fully aware of the number of new schemes announced and the future benefits of taking up these schemes with due earnestness. All the three schemes mentioned above are good and will certainly provide a big relief, especially to those from low income and marginalised groups, who remain without any cover.

However, it must be noted that most social security schemes, though much needed, tend to drain government’s fiscal resources and this does bring to question the government’s plan to raise resources to fund these schemes, without impacting the CAD situation too much. The Finance Minister has had a tough time reducing CAD therefore, raising resources to fund various social security schemes is going to be Arun Jaitley’s biggest challenge.

Unlocking the Value of Gold

Gold Monetization Scheme

In an attempt to unlock the value of gold held in various forms in India as also to curb the rising imports of gold, the government announced a gold monetisation scheme. The scheme proposes to replace various gold loan schemes. Under the new scheme, metal account holders will now be able to earn interest on their metal accounts.

Jewellers and other dealers will also benefit from this scheme as they will now be permitted to raise loans against their metal accounts. Banks too will be allowed to monetise the gold lying with them.

It is estimated that India holds 20,000 tons of gold that is neither monetised nor traded, therefore, the new scheme will go a long way in monetising the gold held at both individual and trade levels.


Sovereign Gold Bond

The Finance Minister also announced the creation of a new financial asset, the Sovereign Gold Bond, which will carry a fixed rate of interest and be redeemable at the face value of the gold, at the time of redemption. This financial instrument is meant to provide an alternate to purchasing gold metal and is aimed at curbing gold imports.

Between April 2014 and January 2015, the gold imports have dropped from 142 tonnes to 38 tonnes. Although gold imports have declined significantly, the imports are beginning to rise once again. Indian buyers of gold still believe in physical possession of gold and therefore, it remains to be seen to what extent both the individual consumers, as well as traders take to the Sovereign Bonds.

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Disclaimer: The views expressed are of those of the author and do not represent the views of

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