There’s no denying the fact that the UPA government’s 2009 election triumph is largely the result of its spending on effective rural schemes such as NREGA, PMGSY and SSA. Over the last two years, the government spend on rural programmes has witnessed a CAGR of, as high as, 45 per cent.
Of all the schemes, the NREGA has been the most glittering. Granting every household a right of 100-day guaranteed employment, it was launched in 2007 to cover 200 districts. Till 2009, the scheme was rolled out to all 596 districts with an impressive allocation and expense of Rs 160bn and Rs 272bn respectively. Unlike a typical welfare scheme, the NREGA is demand-based, not allocation-based. Its key features include timely payment, minimum wage guarantee, unemployment allowance to those who qualify but cannot be provided work, employment with proximity to place of stay and all payments only through bank accounts with job cards and muster rolls open to audit.
Arguably one of the largest employment benefits schemes worldwide, the scheme currently covers around 30 per cent of the rural households in the country. Although, only 14 per cent of these have fully realized the assured employment benefit of 100 days, Dr. C P Joshi, Hon. Minister for Rural Development aims to raise the same to 50 per cent in the coming years.
The minster says his team has identified specific districts as focus areas and he’s hopeful that as soon as NREGA becomes applicable to private lands of farmers, employment figures will vastly improve.
While the scheme has been a bigger success than the PDS, the awareness on the qualification criteria is poor among the rural households as also some of the government officials running it. NREGA is yet to create relevant assets in a big way (roads, bridges, etc) and calls for a skill-building orientation of the labour force, a step likely to be taken by the government in the near future.
The NREGA apart, rural consumption is all set to scale new heights over the years. A focused study of 18 districts across seven Indian states within a time span of 12 weeks has helped us sketch a predictive pattern of the future in store.
The Indian agrarian sector is back on track – thanks to a host of direct and indirect factors like better mechanization, more power availability, improved infrastructure and better road and mobile connectivity. The tractor sale growth of 10 per cent annually in the last five years (as against 3.4 per cent in the previous ten years) bears testimony to the rural surge. More importantly, the dependence on monsoons, though high, is gradually waning. Despite the highest rainfall deficiency ever in almost last three decades, FY 2010 would still end on a positive note of 3 per cent rise in farm incomes. For a monsoon economy, this is an accomplishment.
The rising farm and non-farm incomes are now expected to accelerate rural consumption – currently at USD 200bn covering 152m rural households. In our reckoning, the government spending hike in itself will raise the consumption by 15-20 per cent over the next three to four years. Add to it the schemes like NREGA and the upside journey will get a further boost. What does this translate into? Beyond doubt, a surge in sectors like FMCG, Auto, Telecom, Farm equipment, farm input providers and of course banks and lending organizations.
The question that comes to mind is
“Will the fiscal deficit prove a hurdle to the rural spending spree?”
Not really. Factors like low farm waivers expected in FY11, more revenues from indirect tax rate hike, increased disinvestment proceeds, 3G auction receipts and better corporate tax collections are likely to help the government maintain the rural spending momentum.
Footprints of change …and Sirens of Status Quo
As observed during our Pan India survey
- In a backward area of UP, children exhibited remarkable interest in education way beyond the lure of Mid-day meals – a prime reason otherwise for majority of households sending their children to school.
- About 58 per cent of subsidized food grains under the PDS scheme do not reach the targeted Below Poverty Line households – thanks to corruption and supply chain leakages
- That a worker buys a second hand cell phone worth Rs 3000/- despite an income of Rs 1500 per month shows the rural consumption psyche
- 17 per cent of rural India yet remains unconnected from the rest of the country though road connectivity has vastly improved over the years
- There’s a noticeable dearth of cold storage facilities across the length and breath of the country