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Big spending proposed for fresh push to rural economy

Big spending proposed for fresh push to rural economy
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First Published: Wed, Aug 05 2009. 01 02 AM IST
Updated: Wed, Aug 05 2009. 01 02 AM IST
New Delhi: In a move that could serve as a stimulus to the economy, the government has set ambitious targets for the second phase of its flagship development programme, Bharat Nirman.
One of these involves doubling the number of low-cost houses that are to be constructed to 12 million, a move that will cascade into more demand for steel, cement and construction material.
The second phase, which runs till 2014, will, in the next two years itself, aim to connect 23,000 villages by rural roads, electrify 40,000 villages and bring 3.5 million ha of land under irrigation.
Beginning last year, the Congress-led United Progressive Alliance (UPA) has been systematically stimulating the economy to grow through enhanced government spending to make up for the contraction in private sector spending in the aftermath of the global meltdown.
Including the fresh measures announced in the 6 July Union Budget, the total fiscal stimulus to the economy thus far adds up to Rs2.4 trillion.
While the government is yet to estimate the cost of the second phase of the programme, the first phase was estimated to be Rs1.76 trillion.
The focus of the accelerated second phase is on clearing backlog and setting higher targets, said an official at India’s apex policy planning body, the Planning Commission. While the emphasis on rural infrastructure will stimulate demand and drive rural growth, the government needs to invest significantly in irrigation projects, better implement road projects, and make more electricity available for villages, added this person who did not want to be identified.
The official added that India’s progress in providing electricity to 23 million poor households has been slow, with only 23% of the target having been achieved.
A note prepared by the Prime Minister’s Office (PMO) and reviewed by Mint says the entire backlog in rural housing is 20 million units. In the first phase of Bharat Nirman that ran between 2005 and 2009, seven million houses were constructed, exceeding the target by a million. Another 1.1 million houses are under construction.
“If 100% coverage is to be achieved complementary strategies should be considered through state-level action (some southern states have aggressive rural housing programmes) and by incentivizing states to allot homestead land to all homeless within a given timeframe,” adds the note.
Constructing more houses for the poor and a second phase for Bharat Nirman were mentioned by President Pratibha Patil in her speech to the joint session of Parliament on 4 June.
The note prepared by the PMO also says the government should first clear the backlog from the first phase of Bharat Nirman.
Bharat Nirman has six major components: rural housing, drinking water, electrification, roads, rural telephone connectivity and irrigation. All projects, except those dealing with telephone connectivity, are funded by the Union government.
According to the PMO note, targets were almost met in three areas in the first phase of Bharat Nirman. In rural housing, the target was actually exceeded.
However, only 58% of the target was achieved in the case of roads, 60% for electrification and 65% for irrigation.
N.R. Bhanumurthy, professor at the Delhi-based National Institute of Public Finance and Policy, said: “Any programme of this magnitude, such as Bharat Nirman, will boost demand for industrial commodities besides boosting services such as banking, insurance and (sale of) financial products. However, what is more important is that such programmes link agriculture to industry, something that economists have been arguing for.”
He added that the first phase of Bharat Nirman had helped integrate the rural agricultural economy into the mainstream and that the second phase would further build on these linkages.
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First Published: Wed, Aug 05 2009. 01 02 AM IST