india

Updated: Oct 20, 2019 23:51 IST

New Delhi: The Narendra Modi government is set to pump more money into the rural economy through welfare programmes amid reports of consumption in the countryside hitting a seven-year low and other worrying signs of a slowdown. The money will be largely spent on the rural job programme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), two officials familiar with the plan said.

The rural development ministry has sought an unprecedented Rs 20,000 crore to fund additional expense as the government prepares its first supplementary demand for grants, to be approved by Parliament in the upcoming winter session.

When a ministry’s financial requirement falls short of the expenditure approved in the general budget, the finance ministry seeks Parliament’s approval for additional grants.

“We have sent a proposal for roughly Rs 20,000 crore for the first supplementary demand for grants as we need more money in the MGNREGS. We don’t know how much the finance ministry will finally allot,” said a senior official who asked not to be named.

The request for additional funds comes on top of a record allocation of Rs 60,000 crore for MGNREGS in the Budget for fiscal 2019-20 presented by finance minister Nirmala Sitharaman in July. The total budget for the rural development ministry was Rs 1.2 lakh crore.

MGNREGS offers at least 100 days of guaranteed wage employment in every financial year to every rural household whose adult members volunteer to do unskilled manual work.

The plan to pump more money into the countryside comes at a time when India’s economic growth has slowed for five consecutive quarters, hitting an over six-year low of 6% in the three months ended June, as households tightened spending.

Consumption in rural India fell to a seven-year low in the September quarter, growing at a slower pace than that witnessed in urban areas, in a sign that prolonged agrarian distress, uneven rainfall spread, and stagnant rural incomes have hit sales of branded packaged goods, market researcher Nielsen said in a quarterly report on Thursday. In July-September, rural consumption grew 5%; consumption in urban India grew faster at 8%, Nielsen said.

A report published by the Reserve Bank of India in September said farmers were borrowing more money than they needed for cultivation as they struggle to meet household expenses. The central bank has cautioned against a debt problem in the farming community.

The Food Security Act, which came into force in 2013, has resulted in an annual subsidy of Rs 1.76 lakh crore, officials pointed out,conceding that farmers would be happy if inflationary pressure pushed up the prices of agricultural commodities.

“In other words, the government is also spending, over and above PM Kisan and other schemes, around Rs 600 to 800 per person in a family per month for 25 kilos of foodgrains,” saida second government official, also requesting anonymity.

More money needs to be infused into the MGNREGS because 540 million persondays out of the estimated 2.5 billion persondays of work in fiscal 209-20 would go into just building houses under Pradhan Mantri Awas Yojna (PMAY). Under the MGNREGS rules, a beneficiary can spend up to 90 days of persondays in building a house.

“So, one-fifth of the MGNREGS money actually goes into the housing project, which is an important step in assetization in rural India. But we need more money as we have to invest more in agriculture and water-related works,” said thesecondofficial cited above.

The government has set a target of spending at least 75% of MGNREGS funds on employment for water-related works.

“MGNREGS is a demand-driven programme so it means that more and more people are asking for jobs as they are unable to find other jobs. But MGNREGS can’t be the solution to the rural woes and the government must look at other ways to boost employment,” said economist Prosenjit Bose.

In an article published in Hindustan Timeson October 15, Yamini Aiyar, president and chief executive of the Centre for Policy Research, argued that there was a strong case to be made for an improved MGNREGS to serve as a vehicle for delivering rural stimulus, saying it had “the potential of boosting incomes across all sectors of the rural economy.”

A majority of the work done through the programme is “on developing farm land (for instance, constructing irrigation facilities, livestock sheds) owned by small land owners,” Aiyar said. “Improved land productivity can in principle raise farmer incomes and stimulate demand for agricultural labour, thus planting the seeds for a longer term revival.”