Public spending in Rural India focused on asset creation

Most of the public welfare programmes pushed forward by Prime Minister Narendra Modi government have resulted in asset creation. Major schemes that have resulted in significant asset creation in rural India include Pradhan Mantri Awas Yojana – Gramin, Pradhan Mantri Gram Sadak Yojana (PMGSY), National Rural Employment Guarantee Scheme (NREGA), Pradhan Mantri Ujjwala Yojana (PMUY), Swachh Bharat Abhiyan (SBM), Deen Dayal Upadhyaya Gram Jyoti Yojana Saubhayaga (DDUGKY), Pradhan Mantri Jan Dhan Yojana (PMJDY) and Ayushman Bharat (PMJAY) scheme. Jal Jeevan Mission introduced in August 2019 is another important scheme targeted at significant asset creation in the rural India.

01 January, 2020 Article, Rural Development
Print Friendly, PDF & Email

Most of the public welfare programmes pushed forward by Prime Minister Narendra Modi government have resulted in asset creation. Major schemes that have resulted in significant asset creation in rural India include Pradhan Mantri Awas Yojana – Gramin, Pradhan Mantri Gram Sadak Yojana (PMGSY), National Rural Employment Guarantee Scheme (NREGA), Pradhan Mantri Ujjwala Yojana (PMUY), Swachh Bharat Abhiyan (SBM), Deen Dayal Upadhyaya Gram Jyoti Yojana Saubhayaga (DDUGKY), Pradhan Mantri Jan Dhan Yojana (PMJDY) and Ayushman Bharat (PMJAY) scheme. Jal Jeevan Mission introduced in August 2019 is another important scheme targeted at significant asset creation in the rural India.

The government spending on rural development programmes has gone up significantly in recent years. Rural spending as a percentage of total budget increased to 8.6 per cent in the financial year 2018-19 as compared with less than 6 per cent in 2013-14. In fact, in 2004-05 it stood at 4.7 per cent of the total budget. Clearly, there is a steady increase. Around Rs 1.5 lakh crore is spent on rural development schemes annually in recent years. This includes the share of states, which is typically 40 per cent. In addition to this over Rs 40,000 crore is spent through Panchayati Raj system.

Fund allocation to rural development rose by 74 per cent during 2014-15 to 2019-20. “There are sufficient funds under each head and government is working at a greater pace,” Narendra Singh Tomar, Union Minister for Rural Development, Agriculture and Farmers’ Welfare, said while replying to Demands for Grants for his ministry in the Lok Sabha in July 2019.

Majority of the money spent by the government in the rural India is being used for creation of durable assets. There are two important factors that have led to the unprecedented assetisation in rural areas. The first being a significant increase in rural spending through the rural social welfare programmes and the second equally important is the structural changes in the delivery system.

Now the majority of the funds are transferred directly into the bank account of the beneficiaries. “We have tried to build a governance framework with research and evaluation. We spend Rs 1.5 lakh crore in rural development sector including the state shares every year and another about Rs 40,000 crore on the Panchayati Raj side. We don’t issue a single cheque now,” Amarjeet Sinha, Secretary, Ministry of Rural Development, Government of India.

Rs 25 lakh crore targeted investment

“The rural economy of the country is now being given as much attention as never before. Already the work is going on the roads of the village. Now in the coming years, Rs 25 lakh crore will be spent to develop infrastructure in the villages. The money will also be used to construct modern storage centres for crops,” Modi said while addressing a public rally recently.

Out of this, Rs 3.5 lakh crore is estimated to be used for water conservation and building facilities for water conservation. “We started the Jal Jeevan Mission as soon as we formed the government for the second time. In the coming years, Rs 3.5 lakh crore will be used for water conservation and building facilities for water conservation,” the Prime Minister said.

Rural Housing

The government has given big emphasis on creation of rural housing under the Pradhan Mantri Awas Yojana – Gramin (PMAY-G). In the first five years of Modi government 1.54 crore houses were constructed under the scheme. Another 1.95 crore houses are proposed to be constructed by 2022 that would ensure a pukka house for every household in the country.

The government has set a target of constructing 60 lakh houses in the current financial year. During 2018-19 fiscal 47.33 lakh houses were constructed. The pace of house construction under the government scheme has increased by several times. In the preceding years of 2014, when Modi government took charge on an average 8 to 10 lakh houses were constructed annually. This has gone up to nearly 50 lakh houses.

In March this year, the second phase of PMAY-G was launched with a target of construction of 1.95 crore additional houses by 2022. Out of these 60 lakh houses are to be constructed in the current financial year. This is estimated to cost Rs 76,500 crore (Central government’s share of Rs 48,195 crore and State’s share of Rs 28,305 crore).

The cost of house construction under the PMAY-G is shared between Central and State Government in the ratio 60:40 in plain areas and 90:10 for North Eastern and the Himalayan States. This scheme was implemented as Indira Awas Yojana (IAY) during the UPA government. The Government of India (GoI) provides the full cost in respect of Union Territories (UTs).

The government provides financial assistance and support to poor deprived sections of the society for construction of houses. Modi government has increased the financial assistance given under the scheme. The government provides Rs 1.47 lakh and Rs 1.59 lakh under PMAY-G for construction of a house in plain and hilly areas respectively. This stood at Rs 70,000 for plain and Rs 75,000 for hilly area earlier. The minimum size of the house has also been increased to 25 sq mt from 20 sq mt.

Apart from the government grants the households also use their savings and borrow money in order to construct a better livable house. According to a study recently released by the National Institute of Public Finance and Policy (NIPFP), the beneficiary households put an additional amount of Rs 25,000 to Rs 2 lakh in construction of the houses under the scheme. Construction of houses have strong forward linkage with other sectors in the economy. It results in huge employment and income directly as well as indirectly.

An end-to-end e-Governance architecture has been put in place to ensure efficient and transparent implementation of the scheme. Two e-Governance models have been developed for effective implementation and monitoring of the programme. These are AwaasSoft and Awaas App. While AwaasSoft is a work–flow enabled, web-based electronic service delivery platform through which all critical function of PMAY-G, right from identification of beneficiary to providing construction linked assistance (through PFMS) is carried out. AwaasApp, a mobile application, is used to monitor real time, evidence based progress of house construction through date and time stamped and geo-referenced photographs of the house. These IT applications help identify the slip ups in the achievement of targets during the course of implementation of the programme.

This ensures that real and verifiable assets have been created in the rural India. While construction of houses are in itself aspirational and a huge asset, it pushes for assetisation in many other forms.

Rural Roads

Sustainable assets have been created in the form of rural roads. The government has implemented the third phase of Pradhan Mantri Gram Sadak Yojana (PMGSY) with a target to upgrade 1.25 lakh km of road length over the next five years, with an estimated cost of Rs 80,250 crore.

The pace of rural road construction has gone up significantly under the Modi government regime. It has increased to an average 130 to 135 km per day in the past three years from the earlier around 70 km per day. The pace of construction of roads under the PMGSY reached an average of 134 km per day during the financial year 2017-18 as against an average of 73 km per day between 2011 and 2014.

Narendra Singh Tomar
Minister of Agriculture & Farmers Welfare and Rural Development

“States must ensure that the maintenance of roads is done on a regular basis to ensure that quality of roads remain good. Now with the launch of Phase-III of PMGSY, states must begin preparing and ensure effective implementation of the scheme.”

Over 97 per cent habitations have been provided with all-weather connectivity now. Under the programme, more than 5.50 lakh km of roads have been constructed.

Road construction and connectivity have boosted economic activities in the rural India. According to the data released by the Union Rural Development Ministry, PMGSY through its all-weather roads has contributed to the development of 11,499 new unconnected habitations for the first time in 2017-18.

The second phase of PMGSY was launched this year with a target to build 50,000 km roads. The union cabinet recently also approved third Phase of the scheme with a target to build 1.25 lakh km of road with an investment of over Rs 80,000 crore. “The aim of the government is to have a fast pace, better quality and green technology in building roads,” Tomar said. In utilising green technology, plastic waste has been used to build 27,000 km roads.

“A three tier monitoring system has been constituted to ensure good quality roads are provided to all the citizens. The three tier includes district level, state level and national level quality monitoring,” the minister said.

Modi government has set a target to build 7,000 km roads under the PMGSY during the current financial year. Out of this 3,000 km roads are estimated to be constructed under the green technology with use of cold mixture, terazyme, iron slag, envirotac, cement stabilisation, waste plastic, panel concrete, cell-filled concrete, nano-technology and roller compacted concrete. Rs 3,936 crore is expected to be spent for construction of all 7,000 km roads.


Allocation of funds to MGNREGA has almost doubled in the last five years. Budgetary allocation to MGNREGA increased to Rs 61,084 crore in 2018-19 from Rs 34,000 crore in 2014-15. For the current fiscal Rs 60,000 crore has been allocated.

What is more important is the increased focus on asset creation. Earlier there used to be only eight types of work undertaken under MGNREGA. Thirty new works were added to the programme’s list in 2015. The programme now covers almost every source of rural livelihood in every agro-ecological zone, from poultry to fishery and from watershed development to sanitation works.

The scheme has now evolved from being merely a mitigator of rural distress into focused campaign to raise rural incomes through Natural Resource Management (NRM) works. In 2014, the amendment to MGNREGA Schedule-I was done, which mandates that at least 60 per cent expenditure will be on agriculture and allied activities. Consequently, a list of permissible works under the Act now has nearly 75 per cent activities that directly improve the water security and water conservation efforts. 
All work done under MGNREGA is now geo-tagged. Geo-tagging is the process of ascertaining the geographical location of an image or video. This has increased the effectiveness of the scheme.

MGNREGA programme was introduced by Congress-led UPA government in 2005. It seeks to provide at least 100-days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. An additional 50-days of wage employment are provided over and above 100-days in the notified drought affected areas or natural calamity areas in the country on the recommendation of the Ministry of Agriculture and Farmers Welfare. The Ministry also mandates the provision of additional 50-days of wage employment to every Scheduled Tribe (ST) households in a forest area.

During the UPA rule most of the work under MGNREGA was related to ponds, dams and kachha road. However, due to lack of proper monitoring it got mired in corruption and failed to create durable assets. Several instances came up to notice where a pond was dug up several times or a road re-laid more than once.

Geo-tagging has eliminated the scope of such malpractices. In order to enhance the effectiveness of the programme the government also conducts concurrent social audits and community monitoring. Nearly 3 lakh frontline workers have been given training for geo-tagging and digital payments.

 Now the focus is on creation of sustainable individual assets to benefit the poor and vulnerable households. The assets include farm ponds, vermi and NADEP compost pits, construction of Aanganwadi Buildings and individual household latrines. The government has around 4 crore geo-tagged images of MGNREGA works, which are verified assets created in the rural India through MGNREGA programme.

Swachh Bharat Mission

Nearly 10 crore toilets have been built across India under the Swachh Bharat Mission scheme. Although the main focus of the Swachh Bharat Mission is sanitation it has led to huge asset creation in the rural India in the form of toilets and waste management facilities. Under the Swachh Bharat Mission scheme, an incentive of Rs 12,000 is provided for construction of individual household latrines to eligible beneficiaries in rural areas and covers for provision of water storage. 

The central share for the incentive is 60 per cent. The remaining 40 per cent cost is borne by state governments. For North Eastern States, Jammu & Kashmir and Special Category States, the central share is 90 per cent and the State share is 10 per cent. Additional contributions from other sources are also permitted.

A total of Rs 51,314 crore has been allocated since 2014-15 for SBM, out of which Rs 48,909 crore has been released (95.3 per cent). Additionally, a provision was made for Extra budgetary Resources of Rs 15,000 crore of which Rs 8,698 crore has already been drawn, according to the Economic Survey 2018-19 tabled in Parliament by Finance Minister Nirmala Sitharaman on 4 July 2019.

Skill Development

High unemployment, both in rural and urban areas, is perhaps among the biggest challenge. 62 per cent of India’s population is in the working age group of 15 to 59 years. Majority of them live in rural India.

Availability of job is one issue. Another important issue is that the majority of the people don’t have the skills to do the job. As per the National Policy for Skill Development and Entrepreneurship 2015, there will be a skills gap of 109.73 million people in 24 key sectors of the economy by 2022. It would be impossible to fill this gap without taking into account the bottom-of-the-pyramid 55 million from rural India who are in the age group of 18-34 years.

The Ministry of Rural Development has undertaken two initiatives in skill development under the National Rural Livelihoods Mission (NRLM). The first is placement linked skill development programme called DDU-GKY. It allows skilling in a PPP mode and assures placements in regular jobs. Further, Guidelines of the scheme mandate State Governments to take up skills training projects with CSR funding.

The second initiative is called Rural Self Employment and Training Institutes (RSETI). Under this scheme people are given the training and they are also enabled to take bank credit and start his/her own micro-enterprise.

DDU-GKY is an employment-linked skill development programme under which 2 lakh placements are taking place every year. Another 5 lakh are trained in RSETIs.

Recommended Articles


Modi Government Makes Great Stride in Financial Deepening

I have been analysing and writing on the issues related to financial inclusion for more than two decades. The National Sample Survey of 2005 drew the media and the policymakers’...

  • Data Protection and Business Striking a Balance

    India is transforming into a digital society owing to increased internet penetration from 2015 onwards. With over 750 million active internet users as of 2020, India is one of the...

  • KMSpico Activator Download | Official KMSpico 2022

    There has been ambiguity over whether crypto is treated as a script, currency, utility, or commodity. In cryptocurrency, a blockchain is a decentralized ledger of all transactions over a peer-to-peer...

  • Economy & Budget

    The Union Budget has arrived at a crucial moment in India’s journey to regain economic growth. The Indian Economy took a sizable hit from the pandemic and 3 COVID waves...

Inline Feedbacks
View all comments
Would love your thoughts, please comment.x