Reviving growth: Focus on rural India

November 12, 2019 1:59 AM

If panchayat allocations are merged with MGNREGA to aid asset creation, it can trigger infrastructure growth, resulting in extra income and improved conditions.

Of the total developmental funds available to each district annually from both the Centre and the states (Rs. 800-1,200 crore), fund utilisation is only around 60% and the qualitative outcome only 40-50%

By Aruna Sharma

There is a lot of debate around 5% GDP growth and its impact on the organised sector. Although the government has been taking multiple steps to trigger the economy, there is a need to focus on rural India, in terms of optimising of fund allocations and revision of MGNREGA wages. This may improve earnings in rural India, supported by good kharif crop. And, could be the beginning of recovery in consumer goods demand and, eventually, the economy. A further push towards systematic value addition locally in the form of strategic investments in industries and group of Panchayats may provide extra income and employment.

More than two-thirds of the country resides in 6 lakh villages. The 73rd and 74th amendment to the constitution and the finance commission directly providing funds to the local self bodies have transformed rural infrastructure. A panchayat with a population of 2,500 gets around Rs. 60-70 lakh per annum, one with a larger population of around 20,000 gets Rs. 2.5 crore. If allocations are merged with MGNREGA to aid asset creation, it can trigger infrastructure growth, resulting in extra income and improved conditions.

The first requirement will be to ensure the development of non-negotiable structures like development of drainage following systematic planning of topography, cement concrete lanes for every habitat in village, source for drinking water, piped drinking water, pucca housing, Panchayat bhavan with computer and internet connectivity, appropriate school buildings, play grounds etc. This will require drawing from pool of funds from ministry of rural development, Panchayat, drinking water and sanitation. Funds from human resource department, women and child welfare for anganwadi buildings can also be used.

Thus, the government will create smart villages and smart panchayats without generating a demand for additional funds. This would also contribute to better health outcomes.

MGNREGA wage revision, which sets the trend of minimum wages in rural India, is long overdue. If wages are revised during kharif pre-harvest, they can increase incomes and thereby spending. In lieu of good monsoon,there is a need to provide farmers the best price for their produce. Demand to match the MGNREGA wages with minimum wages of individual states is long pending. The last time the MGNREGA wages were aligned was in 2009. Two committees in last four years have suggested revisions. One headed by agriculture economist Mahendra Dev suggested indexation of wages as per the consumer price index (CPI) to protect against inflation, as against the previous approach indexing wages with consumption patterns. In 2016, the government set up a second committee to study the financial implications of the Dev panels report. In its 2017 report the Nagesh Singh panel suggested a shift from CPI Agriculture to CPI Rural. The panel highlighted that this could be done by incurring an additional burden of Rs. ,2500 crore. But the government has not deterred. Even the present allocation of Rs. 55,000 crore, this is just a 2.9% increase from last year, needs a relook.

Financial inclusion—having an account in 5km radius and ensuring social protection debit—can also trigger the economy.

Social protection can be ensured if the government provides death and accident insurance for everyone, ensures accuracy of BPL data and easy access to financial institutions.

Livelihood opportunities in the vicinity can be created by encouraging value addition to agriculture produce. For instance, vegetable mint be made into menthol. Such solutions will add to the income of households.

This will trigger a consumption economy. The road, internet and financial access itself is good stimulant.

Plethora of issues have to be addressed. The first challenge is the lack of financial resources to match competitive demands. My experience of being an administrator for 37 years shows that lack of financial resources is actually the least of the problems; the main challenge is to set quality standards and establish a system to appraise the status of households and infrastructure to ensure appropriate interventions.

Sustainable development cannot be achieved with the gap between the rich and the poor getting wider; there can be no lasting peace or security in such a society. From the competing demands of a development agenda, the government’s first responsibility is to enhance the quality of lives of the poorest citizens. The Millennium Development Goals (MDG) and the new Sustainable Development Goals (SDG), which replaced them in 2015, are not just rhetoric, but a commitment to ensure that no one goes to bed hungry, and that no one misses an opportunity for a better life because of poverty. This can be attained only when disaggregated efforts are made by all elected representatives.

It is estimated that the total developmental funds available to each district annually—combining all the central and state government schemes—are between Rs. 800 crore and Rs. 1,200 crore (this does not include the salary component). However, fund utilisation is only around 60% and the qualitative outcome only 40 to 50%. (Budget 2017)

An intergovernmental transfer from the centre to the states takes place through three channels: statutory and other transfers mandated by the Finance Commission, formula-based transfers for State Plan Schemes, and other discretionary transfers by various central ministries. As much as 40% of the total grants are released directly to implementing agencies. As such, the utilisation of available funds under various grant schemes becomes a function of the institutional setup and efficiency at three levels—panchayats, districts and the state. As the extent of such utilisation has caused some concern in recent years, various aspects of this issue merit a detailed examination. A system and systematic approach is the key to trigger the demand in rural India and, thus, accelerate GDP growth.

(The author is Development economist and retired secretary, GoI. Views are personal)

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