The King Cereal Wheat will not be displaced but the Finance Minister’s Rs 300-crore thrust on Bajra Ragi, Jowar and other such coarse grains is very interesting. These grains are now reduced to occasional consumption but they are high glycemic foods, high in nutirion, and are great for a diabetes-prone country such as India!

There is only one caveat though, the farmer should find good margins in growing these cereals. Currently, the margins on wheat growing are as much as 20-25 percent. And the margins on these millets should match that. The finance minister has targeted semi-arid and arid region for growing millets. These regions a few years ago had been targeted for growing Jatropha. Since that move has not worked out, he is hoping these farmers will switch to growing millets.

The excise duty increase on iron ore will benefit local steel makers in two important ways. This comes at a time when the international prices of iron ore are ruling high, 40 percent above the year-ago level. So, iron ore miners in India are tempted to export more and sell less locally. But the duty hike will make all grades of ore that much costlier and less export-competitive. There will be more ore in the domestic market.

The duty hike will result in costlier ore in the domestic market also, but then steel prices will go up in conjunction with that. Companies like Steel Authority of India Ltd. and Tata Steel, which have tied up their iron ore supply, will benefit from this price increase but won't have to pay the excise duty because they use their own ore. That means extra profits.

Salaried tax payers were looking for a bigger relief in the budget given the context of runaway inflation. But the finance minister gave only a marginal saving of Rs.2,000 per person by increasing the exemption limit to Rs.180,000. The increase was just 12.5%, less than the average food inflation of recent times.

Tell us whether you are happy or unhappy with the quantum of increase in tax exemption. 

It is not a secret that microfinance institutions are under fire for what their critics see as usurious interest rates. The sector plunged into a crisis last year with Andhra Pradesh, the largest market for microfinance, introducing a restrictive law and the country’s largest MFI, and calls being raised all over to put a cap on MFI interest rates. The companies, on their part, said they would be forced to close down if such a cap was imposed.

 

What was required to pull MFIs out of this mess was the establishment of an MFI regulator who would balance the need for encouraging the growth of the sector with the social objective of taking cheap loans to the poor. Finance Minister Pranab Mukherjee was silent on this objective but instead announced the setting up of an MFI equity fund with a corpus of Rs.100 crore in association with SIDBI.

It remains to be seen how this equity fund can scale up. Will it invest in MFIs criticised for charging high interest rates? Will it ask the investee company to cap its interest rates? How will it achieve a market-based solution for the problem?