Budget 2016-17 Infrastructure for Rural India

The Union Budget for 2016-17 presented by the Finance Minister, Arun Jaitley, has rural India as its principal theme. Prime Minster Narendra Modi describes it as a pro-village, pro-poor and pro-farmer budget that will change the lives of the common people. The budget appears to be very sensible, economically pragmatic and politically astute.

It is economically pragmatic as it recognizes that agriculture has become the Achilles’ Heel of India’s growth story – the weakest link, which, if not addressed, will hinder a reversal of the industrial slowdown and not allow the Indian economy to progress with the speed and effect that Modi wants. It is politically astute because with its promise of doubling farmers’ income in six years, it is aimed at creating a “feel good” sense among the farmers and the rural poor – an attempt to woo rural India, which was always a constituency of the Congress Party.

THE BUDGET

The politics of the budget seems to serve well the ends of economic development through inclusive, equitable, and growth-promoting rural development. The budget’s focus is understandably, therefore, on rural demand, rural output and rural welfare. To achieve these outcomes, adequate infrastructure in the rural sector is a pre-requisite. The previous UPA government had introduced a time-bound Bharat Nirman program for creation of rural infrastructure. The areas of action included: rural roads, irrigation, rural water supply, rural housing, telecommunication connectivity, and rural electrification. This budget recognizes the close link between infrastructure, economic growth and poverty alleviation, and builds upon a ‘modified’ conceptual framework of Bharat Nirman towards creating infrastructure for rural development.

Rural development requires infrastructure support of various kinds. Agriculture needs assured irrigation, development of rain-fed areas and watershed management, electrification, road connectivity, warehousing, storage, agriculture servicing facilities, agro-processing, and marketing infrastructure such as mandis. In addition to the above, infrastructure is required for school and skill development, healthcare facilities, sanitation services, and supply of piped drinking water. This budget takes a few steps towards creating and enhancing the infrastructure support for rural development. Agriculture and farmers’ welfare gets an allocation of Rs. 35,984 crore, an increase of 127 percent over the previous year’s allocation. The Ministry of Rural Development gets an allocation of Rs. 87,765 crore compared to Rs. 73,269.66 crore it received in 2015-16.

IRRIGATION AND LAND RESOURCES

Out of the 141 million hectares of net cultivated area, only 46 percent is under irrigation. The budget for 2016-17 proposes to bring 28.5 lakh hectares of additional crop area under irrigation. For this purpose, the budget has allocated Rs.17,000 crore, under the Pradhan Mantri Krishi Sinchai Yogna (PMKSY). The budget also provides support for fasttrack implementation of 89 incomplete irrigation projects under the Accelerated Irrigation Benefit Programme (AIBM). When completed, these would bring irrigation benefits to 80.6 lakh hectares of land. By the end of March next year, 23 such projects would be completed.

Simultaneously, for sustainable management of ground water resources, the budget has made a provision of Rs.6,000 crore, to be financed multilaterally. In addition, at least 500,000 farm ponds and dug wells in rain-fed areas would be taken up by making productive use of allocations under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Moreover, the budget has announced that a dedicated long-term Irrigation Fund would be created in the National Bank for Agriculture and Rural Development (NABARD) with an initial corpus of about Rs. 20,000 crore. Towards this corpus, budgetary support and market borrowings for 2016-17 would be Rs. 12,517crore.

Drought-prone and distressed areas would be brought under the Deendayal Antyodaya Mission. Cluster Facilitation Teams will be set up under MGNREGA to ensure water conservation and natural resource management in each drought prone block. Such areas would also be taken up on a priority basis under PMKSY.

MARKETING INFRASTRUCTURE

Farmers need market for good income. In July 2015, the Union Cabinet had approved a scheme for setting up a National Agriculture Market (NAM). This is to be put in place through the Agri-Tech Infrastructure Fund (ATIF) for which a budget of Rs.200 crore has been earmarked. Under this scheme, 585 regulated markets will get connected on the e-market platform. The Unified Agricultural Marketing e-Platform came into effect on April 14, this year.

In order to give a boost to agro-processing industry, the budget allows 100 percent FDI in marketing of food products produced and manufactured in India.

RURAL ROADS

Rural roads contribute significantly to rural development by linking farms to market and creating opportunities to access goods and services located in every village or small town. For road and highway development, the budget has allocated Rs. 97,000 crore, out of which Rs. 19,000 crore are meant for rural roads under the Pradhan Mantri Gram Sadak Yogna. In the past, the rural roads scheme had suffered because of underfunding. The allocations in 2012-13 and 2013-14 were only Rs. 8,885 crore and Rs. 9,805 crore, respectively. In addition to Central allocation, state governments too would spend around Rs. 8,000 crore. The target is to connect all eligible 65,000 habitations by constructing 2.23 lakh kilometers of roads.

RURAL ELECTRIFICATION

Village electrification not only lights homes but also facilitates economic activities. It is needed for irrigation, agro-processing, agro-servicing and for many economic activities in the non-farm sector. Nearly 50 percent of the income of rural households emanate from the non-farm sector. This underlines the importance of electrification. The village electrification project was started earnestly during Bharat Nirman (2005-09). As on April 1, 2015, a total of 18,542 villages were yet to be electrified. On August 15, 2015, the PM announced that all remaining villages would be electrified within the next 1,000 days. The budget has allocated Rs. 8,500 crore under Deendayal Upadhyaya Gram Jyoti Yojna and the Integrated Power Development Schemes for this purpose. The goal is 100 percent electrification by May 2018. 

INFRASTRUCTURAL INTERLINKS

Infrastructure building is also being undertaken through: 1. MGNREGA; 2. National Rurban Mission; and, 3. Strengthening of the panchayat raj system. MGNREGA is not only a rural employment guarantee scheme, but it is, simultaneously, a scheme for building rural infrastructure and productive assets through public works related to water conservation and water harvesting; drought proofing irrigation canals including micro and minor irrigation works; restoring traditional water bodies including through desilting of tanks; land development; flood control and protection works including drainage in water logged areas; and, rural connectivity to provide allweather access. The budget provides an enhanced outlay of Rs. 38,500 crore, after two years of neglect by the Modi government.

The newly-conceived National Rurban Mission (NRuM) also focuses on building infrastructure. NRuM aims at developing village clusters which have potential for growth, have economic drivers and possess locational and comparative advantages. To enable such clusters to emerge as growth centres, economic, social and physical infrastructural facilities have to be built up. Over the next five years, 300 such clusters will be developed. Resources for the Mission would be mobilized by convergence of existing schemes, and the gap in resource mobilisation is to be met by the Mission’s critical gap fund.

The most momentous budget provision that would have a long-term effect on creation and maintenance of rural infrastructure is the allocation of Rs. 2.87 lakh crore as grants-in-aid to the panchayats and municipalities based on the recommendation of the 14th Finance Commission. This is a quantum jump of 228 percent compared to the last five years. It will give a boost to the creation of critical rural infrastructure based on gram panchayat and district development plans.

NOT BOLD ENOUGH

The budget provisioning for rural infrastructure, however, does not seem to be bold enough and falters on resource mobilisation.

According to agriculture expert Ashok Gulati, first of all, irrigation outlays are really not up to the challenge of increasing productivity and drought-proofing of India’s agriculture. He believes that outlays/investments in irrigation of the order Rs. 5,000 to 10,000 crore will not release farmers from distress. If the government is serious about providing income security to farmers and about its promise of doubling farmers’, income by 2022, then an investment in irrigation of the order of Rs.40,000 to 50,000 crore every year for five years is needed.

Secondly, the total allocation for Agriculture, Cooperation and Farmers’ Welfare (ACFW) of Rs.35,984 crore is misleading because the budget estimate for 2016- 17 includes Rs.15,000 crore for ‘interest subsidy for shortterm credit to farmers.’ This head earlier appeared as part of the demand for grants of the Finance Ministry. If we deduct this amount then the real allocation is only Rs. 20,984 crore. When this is compared with the revised estimates for 2015-16, which is Rs.15,809.54 crore, then the increase is just around 33 percent and not 128 percent.

Thirdly, the allocation for MGNREGA also needs to be taken with a pinch of salt, and for two reasons. One, this allocation is only marginally higher than the revised estimate of 2015-16 – a year in which MGNREGA’s performance was down; and, two, the program had accumulated very large arrears as many workers had not been paid. As the arrears have to be disbursed to workers out of this amount, in real terms it means a fall in the allocation to MGNREGA.

Fourthly, the difficulties in setting up an e-market platform for agriculture are immense. All the states need to amend their respective Agricultural Produce Marketing Committee (APMC) Act. This also involves evolving a system with a single licence valid across the state, single-point levy of market fee and provision of electronic auctioning system for price discovery. At present, only 12 states have amended the APMC Act, and speedy action is needed from the other states to fully operationalize this. Moreover, there is a shortage of market yards or mandis. There are about 7,000 APMC-regulated mandis today. If market yard has to be provided within a radius of five kilometres from a village, India needs 42,000 such mandis.

The point, therefore, is that the promise-laden budget has not really managed the resources needed to fulfil its promises to the farmers and rural poor. But, in the context of its formulation, the budget is economically pragmatic and politically correct even if it is not really a game-changer or a vehicle for transforming India.

The author is an associate professor at Aryabhatta College, University of Delhi. He teaches Political Theory and Indian Government, and Politics. His research interests include rural development, public policy, and identity politics. He is author of Constitutional Democracy In India: Institutions at Work (2015) and has edited two books: Introduction to Political Processes In India (2016) and Development Process and Social Movements In India (in press).