Agriculture, Industry & Infrastructure: Policies, Schemes and Financing

Institutional farm credit reaches the village through three channels: commercial banks, Regional Rural Banks (created by ordinance in 1975 and the RRB Act, 1976, owned by the Centre, a sponsor bank and the state in the ratio 50:35:15), and the short-term cooperative structure of state cooperative banks, district central cooperative banks and primary agricultural credit societies (PACS). Behind them stand NABARD as the refinancer and priority-sector lending as the obligation — both met in the chapter on institutions. The point of the whole structure is to replace the village moneylender, whose interest rates the formal system was built to undercut.

• Kisan Credit Card (KCC), 1998 — a revolving credit limit, designed by NABARD on the recommendations of the R. V. Gupta Committee, so that a farmer can draw for seeds, fertiliser and other crop needs without a fresh loan application each season. It was extended to farmers in animal husbandry and fisheries in 2018-19.
• Interest subvention — the Centre subsidises short-term crop loans up to a ceiling so that they carry 7% a year, with a further 3% prompt-repayment incentive, making the effective rate 4% for a farmer who repays on time.
• Collectives — the scheme for 10,000 Farmer Producer Organisations (2020) helps small farmers pool produce and bargain as one seller; the Agriculture Infrastructure Fund (2020) offers interest subvention and credit guarantees on loans for post-harvest infrastructure such as warehouses and cold storage.

Crop insurance went through several generations — the Comprehensive Crop Insurance Scheme (1985), the National Agricultural Insurance Scheme (1999), weather-based insurance (2007) — before the Pradhan Mantri Fasal Bima Yojana (PMFBY), launched for the kharif season of 2016. Its design is built around a low, uniform premium for the farmer, with the rest paid by government:

The balance of the premium is shared equally by the Centre and the state, and 90:10 in the north-eastern and Himalayan states. Widespread losses are assessed on an area approach — a notified area is the unit and crop-cutting experiments estimate the yield — while localised calamities (hailstorm, landslide, inundation, cloudburst, natural fire) and post-harvest losses from cyclonic or unseasonal rain on a crop left to dry in the field are assessed farm by farm. Since kharif 2020 enrolment has been voluntary for all farmers, including those with crop loans, for whom it was earlier compulsory.

Independent India decided early that the State would build the base of industry and the private sector would work within limits the State drew. Each resolution redrew those limits; questions usually test how many categories each one had and what fell into them.

The MRTP Act was replaced by the Competition Act, 2002, which set up the Competition Commission of India to act against anti-competitive agreements, abuse of dominance and harmful combinations — regulating conduct rather than size, which is the whole philosophical change from 1969. Public-sector policy moved from expansion to management and sale: the department responsible was renamed the Department of Investment and Public Asset Management (DIPAM) in 2016, and the best-performing central public-sector enterprises are graded Maharatna, Navratna and Miniratna, with greater financial autonomy at each step up.

The legal home of the sector is the MSMED Act, 2006. It originally graded enterprises by investment alone, with separate limits for manufacturing (plant and machinery) and services (equipment). From 1 July 2020 the Government replaced this with a composite test of investment and annual turnover, identical for manufacturing and services, and excluded exports from turnover so that a firm would not lose its status by exporting more. An enterprise that crosses either limit moves to the next class.

The limits were raised again with effect from 1 April 2025, following the Union Budget for 2025-26: investment limits to 2.5 times and turnover limits to twice the 2020 figures (micro ₹2.5 crore and ₹10 crore; small ₹25 crore and ₹100 crore; medium ₹125 crore and ₹500 crore). The composite principle of 2020 is what endures, so learn that first and check the current notification before quoting numbers. Registration has been online and paperless through Udyam Registration since July 2020, linked to PAN and GST; the Udyam Assist Platform (2023) brings informal micro units into the formal net.

• Credit without collateral — the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE, 2000), set up by the Ministry of MSME and SIDBI, guarantees loans that lenders give without collateral.
• Getting paid on time — the MSMED Act requires buyers to pay micro and small suppliers within 45 days; since 2023-24 Section 43B(h) of the Income-tax Act denies a buyer the tax deduction for such payments delayed beyond that limit. TReDS platforms let MSMEs sell their invoices to financiers at a discount.
• Self-employment — the Prime Minister’s Employment Generation Programme (PMEGP, 2008), formed by merging two earlier schemes and implemented through the Khadi and Village Industries Commission, gives a capital subsidy on bank loans for new micro enterprises.

Make in India was launched on 25 September 2014 to turn India into a manufacturing hub. The nodal department is DPIIT — the Department for Promotion of Industry and Internal Trade, as the old Department of Industrial Policy and Promotion was renamed in 2019. The campaign rests on four pillars: new processes (easing regulation), new infrastructure (industrial corridors and smart cities), new sectors (opening defence, railways and other areas to private and foreign investment) and a new mindset (the Government as facilitator rather than regulator). The regulatory side has continued through the Business Reform Action Plan, under which DPIIT ranks states on reforms, the National Single Window System (2021) for clearances, and the Jan Vishwas (Amendment of Provisions) Act, 2023, which decriminalised 183 provisions in 42 central Acts — mostly minor offences that carried jail terms. The World Bank’s Doing Business report, which India had used as a yardstick, was discontinued in 2021.

The production-linked incentive (PLI) schemes are the sharpest industrial instrument of recent years. The first three, notified in 2020, covered mobile phones and electronic components, critical drug intermediates and active pharmaceutical ingredients, and medical devices; later in 2020 the Government approved PLI for ten more sectors, and drones were added in 2021, making fourteen in all — among the later ones automobiles and auto components, pharmaceuticals, telecom and networking products, IT hardware, white goods (air-conditioners and LED lights), food products, textiles (man-made fibre and technical textiles), specialty steel, high-efficiency solar PV modules and advanced chemistry cell batteries. The design is what matters: a firm that commits a minimum investment and achieves incremental sales of goods made in India above a base year receives a percentage of that incremental sales as an incentive for a fixed period, typically about five years. Each scheme is run by its own ministry.

What counts as infrastructure — and therefore qualifies for cheaper long-term credit — is fixed by the Harmonised Master List maintained by the Department of Economic Affairs since 2012, in five categories: transport and logistics, energy, water and sanitation, communication, and social and commercial infrastructure. The basic choice in building any of it is who finances, who bears the risk and who collects the revenue. Every model below is an answer to those three questions.

Variants on BOT change the end of the story: BOOT (build–own–operate–transfer) gives the developer ownership during the concession; BOO (build–own–operate) has no transfer at all; DBFOT adds design and finance explicitly. The Swiss challenge is a procurement method for unsolicited proposals: a private party proposes a project, the government invites competing bids on it, and the original proponent may match the best counter-offer to win. Many PPP projects make economic sense but cannot earn enough to attract investors; for them the Viability Gap Funding scheme (2006) gives a capital grant — up to 20% of project cost from the Centre, with up to a further 20% from the sponsoring authority, and higher shares since 2020 for social-sector projects such as health and education. After a run of stalled highway PPPs, the Kelkar Committee (2015) reviewed the model and recommended fairer risk-sharing and a way to renegotiate failing contracts.

• InvITs and REITs — trusts registered under SEBI’s 2014 regulations that pool investors’ money into completed, income-generating infrastructure (InvITs) or commercial real estate (REITs), and must distribute at least 90% of their net distributable cash flows to unit-holders. They let a developer or a public body sell a stake in an operating asset and recycle the capital into new projects; the NHAI InvIT is one such vehicle for highways.
• NaBFID — the National Bank for Financing Infrastructure and Development, a development finance institution created by its own Act in 2021 and regulated by the RBI.
• NIIF — the National Investment and Infrastructure Fund (2015), a fund manager in which the Government holds 49% and domestic and foreign institutional investors the rest, so that it can co-invest without being a government company.
• Pipelines — the National Infrastructure Pipeline (2019) listed projects for 2020-25; the National Monetisation Pipeline (2021) set out brownfield central assets — roads, transmission lines, pipelines, stadiums — whose revenue rights would be leased to private operators for a period, with ownership staying with the Government and the asset returned at the end.

Infrastructure was long planned ministry by ministry, so a new road could be dug up for a pipeline a year later. PM GatiShakti National Master Plan, launched on 13 October 2021, is a GIS-based digital platform on which the infrastructure ministries — sixteen at launch, including railways and road transport — plan together on one map. It names seven engines of growth: railways, roads, ports, waterways, airports, mass transport and logistics infrastructure. The National Logistics Policy of 17 September 2022 aims to bring India’s logistics cost down to global benchmarks and to place India among the top 25 of the World Bank’s Logistics Performance Index by 2030, with a Unified Logistics Interface Platform (ULIP) joining the data systems of different ministries; the Commerce Ministry ranks states on logistics through the annual LEADS (Logistics Ease Across Different States) report.

Electricity is on the Concurrent List, and the Electricity Act, 2003 is the framework: it delicensed generation, made transmission a separate activity and gave the Central and State Electricity Regulatory Commissions the job of setting tariffs. The chronic weak link has been the state distribution companies (DISCOMs), which lose money through theft, billing gaps and tariffs below cost. UDAY (2015) had states take over 75% of their DISCOMs’ debt in exchange for efficiency targets; the Revamped Distribution Sector Scheme (2021) ties central funds to cutting losses and to smart prepaid metering. On access, DDUGJY (2014) electrified villages — every inhabited village was declared electrified in April 2018 — and Saubhagya (2017) connected households. PM Ujjwala Yojana (2016) gave LPG connections to women of poor households.

How much industry is producing is tracked by the Index of Industrial Production (IIP), compiled by the National Statistics Office, and, for the heaviest end of industry, by the Index of Eight Core Industries, compiled by the Office of the Economic Adviser in DPIIT: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. In the 2011-12 base series the eight carry about 40% of the weight of the IIP, and refinery products carry the largest single weight among them, followed by electricity and steel.