The Union Budget has the potential to impact the lives and livelihoods of all significantly and lastingly, living up to its title of ‘budget for all’. The Interim Budget 2024-25 is going to be critical not only for the incumbent government but also for the common man as this is going to be the last budget of the Modi 2.0 regime.
Given the backdrop of the Covid-19 pandemic in the recent past although India did not escape from pandemic, but the country has managed well to escape from its expected adverse impacts. India could maintain its growth rate closer to the SGD-8 target of 7 percent growth rate which should be a cause for celebration as many other developed countries had faced adverse impact of the pandemic and also recorded negative growth rates in the recent past.
Rolling towards its recovery path, India is among one of the fastest growing economies, and at present is ahead of various developed countries of the world. The country has achieved the position of fifth largest economy of the world with GDP size of USD 3.7 trillion of which nearly half the share comes from the rural India which is about 46 percent (NITI Aayog Report, 2017). However, on the development front, rural India is still confronted with the glaring disparities due to high level of poverty and socio-economic inequalities.
In order to address such disparities and make growth more inclusive, the development of the rural economy through employment generation and the rural infrastructure development is the need of the hour. This is in cognizance of the fact that agriculture has its limited capacity and over the time the growth of the agricultural sector has stagnated and the non-farm activities have largely supported both the agricultural as well as non-agricultural households in the rural areas.
The present article attempts to examine the role of public spending in enhancing employment generation in the rural areas especially in the construction sector as the annual periodic labour force survey (PLFS) data reported a continuous rise in the share of employment in rural construction sector during post pandemic year.
In order to address such disparities and make growth more inclusive, the development of the rural economy through employment generation and the rural infrastructure development is the need of the hour. This is in cognizance of the fact that agriculture has its limited capacity and over the time the growth of the agricultural sector has stagnated and the non-farm activities have largely supported both the agricultural as well as non-agricultural households in the rural areas.
The present article attempts to examine the role of public spending in enhancing employment generation in the rural areas especially in the construction sector as the annual periodic labour force survey (PLFS) data reported a continuous rise in the share of employment in rural construction sector during post pandemic year.
By analyzing budgetary allocations in some of the major centrally sponsored schemes (CSS) which aim to augment construction of infrastructure in the rural areas this study tries to establish a relation between the rise in the employment share in rural construction sector and expenditure incurred under some of the major schemes to promote rural development in India. It also tries to suggest some of the areas that needs to be focused upon in the upcoming budget.
Achievement and its drivers
According to the Economic Survey (2022-23), around 65 percent population of the country still lives in the rural areas. The rural India has much more potential to contribute more in overall GDP of the country. Rural India has witnessed the constant rise in employment share in construction in the recent years and fluctuations in agriculture sector (supposed to be the employment of last resort). The agriculture and the construction sector together proved to be highly effective in absorbing the massive phenomenon of reverse migration in the rural areas during and post Covid 19 period.The PLFS 2022-23 data reports that 58.4 per cent of the total rural population is still dependent on agriculture for their livelihoods which was reported to be 61.6 percent in 2019-20. During the pre-pandemic period (in 2018-19) the share of employment in agriculture sector in rural areas was 57.8 percent.
The share of employment in the construction sector has grown substantially in the rural as compared to the urban areas over the last few years from 12.3 percent in 2017-18 to 13.9 percent in 2022-23 (Table 1). So, we have tried to explore the possible drivers of this employment in rural construction by analyzing the major employment generation schemes that has direct or indirect linkages with the construction activities in the rural areas.
The focus of the government to promote rural development has remained imperative over the years which is evident by launching some of the major schemes to promote infrastructure development in the rural areas. These schemes are considered to be the lifelines for improving the quality of life by promoting more equitable and inclusive development in the rural areas.
The major schemes which have led to massive expansion of the infrastructural activities in the rural areas over the past few years are Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pradhan Mantri Awaas Yojana- Grameen (PMAY-G), Pradhan Mantri Gram Sadak Yojana (PMGSY) and Jal Jeewan Mission (JJM). These schemes are directly linked with the construction activities in the rural areas. As is evident from Figure 1, except MGNREGS, the expenditure under all the other schemes is showing an upward trend especially in the post pandemic years.
The Pradhan Mantri Awas Yojana- Grameen (PMAY-G) which aims to achieve housing for all by 2022 has been extended to March 2024 due to Covid-19 and also due to delay in release of Central & State Share from the State Treasury to State Nodal Account of PMAY-G, cases of unwillingness of beneficiaries, migration, disputed succession of deceased beneficiaries, delay in allotment of land to landless beneficiaries by the States/UTs, at times General/Assembly/Panchayat elections, and unavailability of building materials (Rajya Sabha, GoI, 2023).
Through this scheme enhanced priority was given to rural housing therefore in the past few years a drastic increase in the budgetary allocations in 2021 and 2022 were made. This is evident from the fact that against the target of 2.95 crore houses, a total of 2.85 crore houses were sanctioned and 2.22 crore houses have already been completed as on March, 24, 2023 under the scheme. The Budgeted Expenditure (BE) for 2023-24 has been raised to Rs.54,487 Crore for the scheme.
The enhancement of funds under the PMAY-G in the last two fiscals reflects that the government is not just targeting “Housing for All”, but also enhancing the capacity of productive consumption which may have higher multiplier effect in raising the levels of rural employment and income. However, this should also be taken into consideration that due to completion of target by 2024 there would be a saturation for employment avenues under the scheme and less scope for employment would be there.
Another important scheme for rural infrastructure development is the introduction of the Jal Jeevan Mission (JJM) scheme with an objective of ‘Har Ghar Jal’, which was launched on 15th August 2019 to provide Functional Household Tap Water Connections (FHTC) in rural areas and public institutions in the villages. This scheme has played a critical role in India’s journey towards achieving UN Sustainable Development Goal – 6 (UNSDG-6), which aims to “ensure availability and sustainable management of water and sanitation for all”.
Through this scheme enhanced priority was given to rural housing therefore in the past few years a drastic increase in the budgetary allocations in 2021 and 2022 were made. This is evident from the fact that against the target of 2.95 crore houses, a total of 2.85 crore houses were sanctioned and 2.22 crore houses have already been completed as on March, 24, 2023 under the scheme. The Budgeted Expenditure (BE) for 2023-24 has been raised to Rs.54,487 Crore for the scheme.
The enhancement of funds under the PMAY-G in the last two fiscals reflects that the government is not just targeting “Housing for All”, but also enhancing the capacity of productive consumption which may have higher multiplier effect in raising the levels of rural employment and income. However, this should also be taken into consideration that due to completion of target by 2024 there would be a saturation for employment avenues under the scheme and less scope for employment would be there.
Another important scheme for rural infrastructure development is the introduction of the Jal Jeevan Mission (JJM) scheme with an objective of ‘Har Ghar Jal’, which was launched on 15th August 2019 to provide Functional Household Tap Water Connections (FHTC) in rural areas and public institutions in the villages. This scheme has played a critical role in India’s journey towards achieving UN Sustainable Development Goal – 6 (UNSDG-6), which aims to “ensure availability and sustainable management of water and sanitation for all”.
Smaller allocation to PMGSY and decline in MGNREGS may lead to stagnation in rural jobs, especially in construction sector
The rising budgetary allocation for the scheme since 2021-22 indicates that progress in achieving its goal of providing tap water supply to 83 percent of rural households by 2024 would be gradually achieved. As on 2nd February, 2023, the scheme has provided tap water connections to over 11 crore households, achieving an increase in coverage by 57 percent since its inception in 2019. The Budgeted Expenditure (BE) for 2023-24 has been raised to Rs.70,000 Crore for the scheme to complete the unfinished target.
The employment generation through JJM in rural areas would also not be everlasting at the same pace. It would be stagnant in after some time or may be deteriorating in upcoming future as once all the required infrastructure is created. Workers would be required only for repair and maintenance (technicians and plumbers) and staff water supplying such as pump operators would be needed.
The third important scheme related to the construction activities is Pradhan Mantri Gram Sadak Yojana (PMGSY). PMGSY is one of the major schemes which is primarily meant to expand the rural infrastructure, which covers the construction of roads and bridges under its ambit. As a matter of fact, around 7.19 lakh km of roads and 7700 bridges have been completed under PMGSY as on December 14, 2022 against the target of 7.95 lakh km of roads (length) and 10,070 bridges.
The budgetary allocations for the scheme have remained consistently low over the period of time and will remain Rs. 19,000 crore every year up to March 2025 for completion of all on-going components of the scheme. Accommodating for the inflationary tendencies each year, this aforementioned allocation may not be adequate thus requiring greater provisioning of resources to complete the targets.
Among all the four schemes MGNREGS has the highest proportion of budgetary allocation over the period of time, which substantially increased in year 2020-21 due to increase in demand for work in the rural areas owing to reverse migration caused by Covid-19. However, the declining allocation in the MGNREGS in the past three years (BE for 2023-24 was 46 per cent lower than 2020-21 level) is a concern despite the fact that the demand for work under the scheme has not reduced substantially even though the after-effects of the pandemic have largely subsided. Thus, the scheme requires more impetus through bigger allocations.
From these findings, it is crucial to note here that given the scenario of completion of the targets under PMAY-G and JJM in the near future, smaller amount of allocation to PMGSY and continuous decline in MGNREGS, together may lead towards the possibility for stagnation in rural employment especially in the construction sector. Therefore, there is an urgent need to find new avenues for rural employment generation so that more and more rural infrastructure development could be done and overall rural development can be achieved.
Though the government has its own limitation in the current interim budget; however, the increasing avenues for employment generation thereby increasing the income levels of the rural population should always be on priority. This will not only help to compensate losses sustained in the last few years due to the widespread and adverse effects of Covid-19 pandemic but also will bolster the levels of consumption in the rural areas leading towards a fast-track economic recovery.
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*Dr. Puneet Kumar Shrivastav is Assistant Director (Faculty) at National Institute of Labour Economics Research and Development (under NITI Aayog), Delhi; Dr. Mitali Gupta is Senior Policy Analyst with Centre for Budget and Governance Accountability (CBGA), New Delhi; Ujala Kumari is Policy Analyst with CBGA, New Delhi. Views expressed are personal
From these findings, it is crucial to note here that given the scenario of completion of the targets under PMAY-G and JJM in the near future, smaller amount of allocation to PMGSY and continuous decline in MGNREGS, together may lead towards the possibility for stagnation in rural employment especially in the construction sector. Therefore, there is an urgent need to find new avenues for rural employment generation so that more and more rural infrastructure development could be done and overall rural development can be achieved.
Way forward
Thus, in order to bring the growth trajectory of the Indian economy to the level of the pre-pandemic period, the rural sector would require higher allocations to augment new infrastructure development such as innovative irrigation system, management of flooded water, revival of canal system to ensure the flow of water to the last mile field etc. These steps have become the need of the hour given the vagaries of the weather and climate change conditions.Though the government has its own limitation in the current interim budget; however, the increasing avenues for employment generation thereby increasing the income levels of the rural population should always be on priority. This will not only help to compensate losses sustained in the last few years due to the widespread and adverse effects of Covid-19 pandemic but also will bolster the levels of consumption in the rural areas leading towards a fast-track economic recovery.
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*Dr. Puneet Kumar Shrivastav is Assistant Director (Faculty) at National Institute of Labour Economics Research and Development (under NITI Aayog), Delhi; Dr. Mitali Gupta is Senior Policy Analyst with Centre for Budget and Governance Accountability (CBGA), New Delhi; Ujala Kumari is Policy Analyst with CBGA, New Delhi. Views expressed are personal
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