Why govt spending on rural sector will boost the economy2 min read . Updated: 03 Jul 2019, 06:22 PM IST
With the govt promising about ₹90,000 cr toward an income support scheme for small farmers and another ₹25 trillion to increase farm productivity, the question is how will the govt fund all these big-ticket programmes
New Delhi: With the National Democratic Alliance government promising about ₹90,000 crore toward an income support scheme for small farmers and another ₹25 trillion to increase farm productivity, besides spending on programmes such as rural jobs, the question is how will the government fund all these big-ticket programmes.
Expenditure management will be a key challenge considering that revenue collections are not as robust as they should be. In the interim budget in February, the fiscal deficit target was 3.4% of gross domestic product (GDP) for 2019-20. Finance minister Nirmala Sitharaman is expected to reveal the answer on 5 July, considering that the rural sector is a key constituency.
Following record harvests in 2016-17 and 2017-18, a crash in crop prices led to a sharp dip in farm incomes—seen as one of the factors behind the Bharatiya Janata Party (BJP) losing state elections last year. Subsequently, the NDA government announced the income support scheme for 125 million farmers, and then extended it to all 145 million landholding farmers in its second term. This, at a time when a World Bank Commodity Markets Outlook says that agriculture prices are projected to fall 2.6% this year, but are estimated to rebound in 2020 due to lower crop production and higher costs for energy and fertilizers.
The NDA government in its interim budget had also promised to provide ₹60,000 crore for a rural employment guarantee scheme. Introduced in 2006, it provides for 100 days of unskilled work every year. However, since its launch, the scheme has provided only 49 days of work a year on an average, but was credited with raising rural household income, especially in drought years.
Other big programmes include the Pradhan Mantri Gram Sadak Yojana, under which ₹19,000 crore has been allocated to connect rural habitats with all-weather roads, while an equal sum has been provided for the Pradhan Mantri Awas Yojana, which promises housing for all by 2022. The total budget of the rural development ministry in 2019-20 is nearly ₹1.2 trillion. “These programmes are the best way of reviving the rural economy," said Himanshu, associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.
A rural development ministry official, requesting anonymity, said the government has its own resources of funding, such as borrowing from National Bank for Agriculture and Rural Development. “We also share expenditure with state governments."
“It’s only when the central government increases its allocations for these programmes that the states make their contributions. Ideally speaking, the numbers (funds allocated to each programme) should see an increase, so there is a question about where the money will come from," added Himanshu.