The regular flow of data confirms our worst fears about the economy. With the index of industrial production (IIP) declining successively in September and August, there are serious concerns about jobs and incomes in the manufacturing sector. Construction has failed to recover too. Even service sector growth is a slowdown story once government expenditure is taken out. Private investment shows no sign of recovery and consumption continues to show a loss of pace. With exports also continuing their decline and signs emerging of rising inflation driven by food inflation, the task of reviving the economy is tougher than imagined.

There is also a consensus that the rural economy needs a stimulus if demand has to improve in the economy. At the same time, government has continued to make bold claims of increasing transfers to the rural economy in the last five years. However, most of these claims are based on dubious administrative data from departments responsible for managing various schemes. Some of these claims could have been checked had the government allowed the release of India’s full consumption expenditure survey of 2017-18. Leaked estimates suggest that consumption expenditure declined by almost 10% in rural areas, where most of the schemes were implemented. The puzzle then is why consumption declined if government transfers went up in the period this government has been in power.

Reports of the National Statistics Office (NSO) suggest that the problem may lie in a broken delivery system and exaggerated claims of transfers by the government. Not only were government claims found to be at variance with actual survey data, these also suggest serious problems of service delivery of government schemes. A recent report by the Comptroller and Auditor General (CAG) has not only flagged a decline in consumption of LPG cylinder refills under the Ujjwala scheme, but also highlighted cases of the delivery of cylinders to minors and unidentified beneficiaries. It also flagged other odd numbers recorded. For example, 1.4 million beneficiary families consumed anywhere between 3 and 41 cylinders each in a month, which is difficult to believe, given that most of them are poor.

Similar discrepancies have been noted on claims of toilet construction between data from NSO surveys and administrative data. As against the claim of several states being classified as “open-defecation free", the surveys show the proportion of our population with toilets and access to these at much lower levels than the figures claimed by the government. It is difficult to believe that people in rural areas will under-reporttoilets at home, given that these are clearly identifiable structures.

The largest scheme, of transferring cash to farmers as part of the Pradhan Mantri Kisan Samman Nidhi Yojana, has also run into trouble, with only 76.2 million people having received the money until 30 November 2019. Of these, only 31.2 million farmers have received all three instalments, as against a target of 140 million farmers. With less than one-fourth of farmers having received the full amount, the scheme has failed to provide the relief intended.

Among other major schemes, the National Rural Employment Guarantee Scheme (NREGS) is already suffering from delayed wage payments and non-availability of work. With NREGS wages almost half the market rate, the scheme has lost its ability to play the role of demand multiplier. Similar is the case of the Public Distribution System (PDS) with the government sitting on large stocks of foodgrains, instead of releasing these staples through the system. It has already affected the procurement of grains by the Food Corporation of India, which is struggling with huge stocks and debt due to non-payment of the government subsidy.

There is now an urgent need to revive the rural economy. Public-expenditure-led interventions could have provided the necessary stimulus to raise demand in the rural economy. Unfortunately, the situation on the ground suggests that most schemes are suffering from lack of financial and administrative support. However, even with financial and administrative support, these will be able to impact rural incomes only if the country’s broken service delivery regime is repaired and made efficient.

If the government is serious about reviving the economy, fixing that delivery mechanism should be as big a priority as the need for increased spending through a rural stimulus package.

*Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.

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