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How the rural spending space has evolved

  • The NDA govt has maintained rural spending at 8% of the overall budget. But there are subtle shifts where it is directing its efforts
  • While the UPA focused on direct programmes, the NDA govt’s focus has been on indirect support mechanisms

For a country whose proportion of rural population is about 70%, efforts of governments toward rural development are vital. For the Union government, the annual budget is an influential policy lever in how much, where and how it spends to make a difference to rural lives.

Much of this is channelled through four ministries: agriculture, rural development, drinking water and sanitation, and panchayati raj. Plus, there is rural electrification under the power ministry. Allocation and expenditure data from annual budgets for the last 15 years, spanning three governments, shows a growing acknowledgement of the rural, although it is still insufficient. In 2004-05, when UPA-I came to power, spending on the above-mentioned areas was 4.7% of the total budget. In 2005-06, this increased to 7%, raising the benchmark for rural spending.

In 2008-09, an election year, the UPA-I raised this to 9.4%, the most in the 15-year period. But under UPA-II, rural spending took a beating, and it wasn’t until 2016-17, under the National Democratic Alliance (NDA), that it crossed 8% levels again. In terms of consolidated term averages, UPA and NDA are fairly close (see chart 1).

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The ministry of rural development accounts for the largest chunk of this spend, of close to 60%, followed by the ministry of agriculture. In 2016-17, the ministry of rural development spent a total of 96,727 crore. Nearly half of this ( 47,500 crore) went to the National Rural Employment Guarantee Scheme (NREGS). Despite its initial criticism of the scheme, the NDA has kept increasing allocations (budgeted at 55,000 crore in 2018-19)—a pointer to the livelihood conflicts and challenges facing rural India. Between the UPA and NDA, the spending mix across various ministries or programmes of rural influence has changed in three notable ways. First, the share of the ministry of rural development in the overall rural spending pie, though still the largest, has fallen under the NDA. It was 69% in 2009-10, but fell to 60% in 2016-17, and the government has projected this to drop further to 57% in its revised estimates for 2017-18.

Second, the share of the ministry of agriculture in the overall rural spending pie is the highest during this 15-year period. There’s also a difference in approach. While the UPA government focused on direct programmes (for example, in 2013-14, the Rashtriya Krishi Vikas Yojana, National Food Security Mission), the current NDA government’s focus has been on indirect support mechanisms like enabling cheaper credit and crop insurance. Third, though two of the government’s most coveted schemes are in this space, allocations to the ministry of drinking water and sanitation (which implements the Swachh Bharat Abhiyan), and for two rural electrification schemes (Deen Dayal Upadhyaya Gram Jyoti Yojna and Saubhagya) are not very different from what was given to this ministry or for rural electrification previously (see chart 2).

Both for 2017-18 and 2018-19, this government has projected a rural spend at 8.6% of the total budget. In the past, there have been yawning gaps between what was budgeted and the actual spend, notably between 2011-12 and 2014-15, with an average underspend of 21%. Conversely, 2008-09, an election year, saw the government overspend by 41%. This government has exceeded its budgeted spend in the rural space in each of its three years. And this is an election year.

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