Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

Budget 2016: Impetus on boosting rural economy

The rural sector has been allocated Rs87,765 crore in the 2016-17 budget, including Rs38,500 crore for MGNREGS and Rs19,000 crore for the Pradhan Mantri Gram Sadak Yojna

In a bid to boost the rural economy and stimulate demand, finance minister Arun Jaitley on Monday announced a slew of measures including raising allocations to key social sector programmes aimed at re-energizing “Bharat", or rural India.

The steps outlined in Jaitley’s third budget include allocating 38,500 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and 19,000 crore for the Pradhan Mantri Gram Sadak Yojna (PMGSY). Adding the states’ contribution, PMGSY would in all have 27,000 crore allotted to it.

The first is aimed at ensuring that farmers and agricultural labourers get jobs on demand for 100 days in a year, as stipulated under the MGNREG Act passed by Parliament in 2005. This will, in turn, ensure money in the pockets of people in villages which will boost their spending capacity.

The allocation of 38,500 crore is one of the highest in recent years.

The biggest allocation for the rural employment scheme came in 2010-11, when the programme was granted 40,100 crore. Since then, funding for the project has steadily fallen, with the allocation standing at 33,000 crore in 2012-13.

The funds for PMGSY is aimed at increasing government spending in rural areas that will add jobs as well as increase connectivity.

In all, the rural sector has been allocated 87,765 crore in the 2016-17 budget.

Sketching the background to the increased spends on such key programmes, Jaitley in his speech noted that as the global economic recovery was weak and India’s exports were falling, “we must rely on domestic demand and Indian markets to ensure India’s growth does not slow down".

“We wish to enhance expenditure in the farm and rural sector, the social sector, the infrastructure sector and provide for the recapitalization of banks. This will address those sectors which need immediate attention," he said.

Also bringing a sense of urgency to the focus on the rural sector has been the two consecutive monsoon failures in 2014-15 and 2015-16 that have triggered a protracted period of rural distress. While 2014 saw a deficit of 12% in the June to September southwest monsoon, last year recorded an even worse deficit of 14%.

The central government spent nearly 13,000 crore in drought assistance to states in 2015-16.

Accordingly, Jaitley said he had hiked spending on agriculture to 35,984 crore, with focus on bringing more areas under irrigation, outlining a programme for a sustainable management of groundwater resources at an estimated cost of 6,000 crore to be implemented through multilateral funding, creating 500,000 farm ponds and wells in rain-fed areas and one million compost pits for the production of organic manure to be taken up under the rural employment programme.

A rural digital literacy programme, another plan to skill rural youth in the drought-hit districts of India and plans for rural electrification were also outlined by Jaitley.

The minister also announced that 2.87 trillion will be given as grant in aid to village councils and municipalities in towns—a rise of 228% from the previous five-year period—to ensure development.

Additionally, Jaitley also said the National Democratic Alliance (NDA) government was committed to doubling farmers’ incomes in five years.

Predictably, industry welcomed the news.

“By committing itself to doubling farmers’ income in five years, the government has ensured that all steps will be taken that would fortify the viability of the agriculture sector in the coming years," said Harshavardhan Neotia, president of lobby group Federation of Indian Chambers of Commerce and Industry, or Ficci. “In the rural sector, we see the government enhancing allocation under MGNREGS and linking it with asset creation to address the issues of rural and farm distress," Neotia said in an emailed comment.

But Nikhil Dey, social activist and member of the Rajasthan-based Mazdoor Kisan Shakti Sangathan, was less enthusiastic.

“Looking at the current fiscal (2015-16), the total expenditure as of date is around 37,000 crore (on MGNREGS). This excludes pending liabilities of around 6,000 crore. So the total expenditure today is around 43,000 crore... In other words, the allocation of 38,500 crore in the budget is actually a budget cut," Dey said.

Though he acknowledged the rhetoric around the programme was positive, the government needed to keep MGNREGS adequately funded to ensure rural distress was redressed.

N.C. Saxena, a former rural development secretary, agreed with Dey that the allocation for MGNREGS had actually come down. But he hailed the increased spending on the rural roads programme.

That the centre would hike the allocation for programmes such as MGNREGS was evident when earlier this month, on the 10th anniversary of the launch of the guaranteed employment scheme, Jaitley said investing in such programmes would benefit India’s hinterland, which has to be seen as another “engine" that will pull the Indian economy towards higher growth, given adverse global economic conditions.

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