The Ministry of Rural Development is the nodal agency for development and welfare activities in rural areas.  The Ministry has two departments: (i) rural development, and (ii) land resources.

The Ministry of Rural Development had the third highest ministry-wise allocation in the Union Budget 2017-18, of Rs 1,07,758 crore.  This is an increase of Rs 9,998 crore (10%) over the revised estimates of 2016-17.

The Department of Rural Development under the Ministry is responsible for implementation of all major schemes in rural areas.  These schemes are targeted at poverty reduction, employment generation, rural infrastructure, habitation development and provision of basic services.  In 2017-18, the Department has an allocation of Rs 1,05,447 crore, accounting for 97.8% of the Ministry’s allocation.

The Department of Land Resources is primarily responsible for undertaking land reforms.  It aims to increase productivity of land through the process of integrated watershed management and support states in the implementation of National Land Records Modernization Programme.  In 2017-18, the Department has an allocation of Rs 2,310 crore, accounting for 2.2% of the Ministry’s allocation.

This note presents the detailed budgetary allocations to the Department of Rural Development, and analyses various issues related to the schemes implemented by the Ministry.

Allocation to the Ministry in 2017-18

In 2017-18, the Department of Rural Development has witnessed a 9.7% increase in funds from revised estimates of 2016-17.  In 2016-17, the Department was allocated Rs 86,055 crore, which was revised upwards by Rs 10,005 crore in the revised estimates of 2016-17.

On the other hand, the Department of Land Resources saw a 36% increase in allocation in 2017-18, from revised estimates of 2016-17.  In 2016-17, the budgeted expenditure of Rs 1,709 crore was decreased by Rs nine crore in the revised estimates of 2016-17.

Table 1 shows the allocations to the Ministry of Rural Development over the past three years.

Table 1: Budgetary allocation to the Ministry of Rural Development (in Rs crore)

Sources: Demands for Grants 2017-18, Department of Rural Development, Ministry of Rural Development; PRS.

Over the past 10 years, the allocation to the Department of Rural Development has seen an annual average increase of 14%.  Except in 2011-12 and 2012-13, when the allocation was reduced in comparison to the previous year, funds allotted to the Department have seen an increase over the years.  The highest percentage increase of 99% was seen from 2007-08 to 2008-09.  A percentage decrease of -22% (the lowest over the years) was seen in 2012-13.

Figure 1: Expenditure by the Department of Rural Development over the years (in Rs crore)

Note: Values from 2007-08 to 2008-09 are revised estimates.  Values for 2016-17 and 2017-18 are revised estimates and budgeted estimates respectively.

Sources: Union Budgets 2007-08 to 2017-18; PRS.

Department of Rural Development

Table 2 represents the budgetary allocation for major schemes under the Department of Rural Development.

Table 2: Budgetary allocation to the Department of Rural Development (in Rs crore)

Sources: Demands for Grants 2017-18, Department of Rural Development, Ministry of Rural Development; PRS.

• The Rurban Mission, which aims to develop village clusters into economically and socially sustainable spaces, has seen the maximum increase of 233% in allocation this year, over the revised estimates of last year.
• National Rural Livelihoods Mission (NRLM), which aims to provide sustainable livelihood opportunities, has seen an increase of 50%.
• The housing scheme, Pradhan Mantri Awaas Yojana- Gramin (PMAY-G) has seen an increase of 44%.
• The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has seen an increase of 1% in allocation.
• The funds for the rural roads scheme, Pradhan Mantri Gram Sadak Yojana (PMGSY) and the welfare scheme, the National Social Assistance Program (NSAP) have remained unchanged.

Figure 2: Top expenditure heads in 2017-18, as a percentage of total departmental allocation

Sources: Demands for Grants 2017-18, Department of Rural Development, Ministry of Rural Development; PRS.

Figure 2 represents the composition of expenditure of the Department of Rural Development.  In 2017-18, 46% of the Department’s expenditure is estimated to be on the Mahatma Gandhi National Rural Employment Guarantee Scheme.  This is followed by the rural component of Pradhan Mantri Awaas Yojana (22%), and Pradhan Mantri Gram Sadak Yojana (18%).

Policy proposals in Union Budget 2017-18 The following provisions were made for the Ministry in the 2017-18 Budget speech:1 ·   Implementation of Mission Antyodaya, with an aim to bring one crore households out of poverty and make 50,000 gram panchayats poverty free by 2019; ·   Construction of 5 lakh farm ponds under NREGS; and ·   Complete construction of one crore houses by 2019 for the houseless and those living in kutcha houses.

The table below details out the policy proposals for rural development as highlighted in the budget speech of 2016-17 and the status of implementation of the same.^[1]

Table 3: Policy proposals mentioned in Union Budget speech 2016-17 for rural development and their implementation status

Sources: Implementation of Budget Announcements 2016-17; PRS.

Financial allocations to outcomes

Mahatma Gandhi National Rural Employment Guarantee Scheme

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was launched in 2005 through the Mahatma Gandhi National Rural Employment Guarantee Act, 2005.[2]  The primary objective of the Act is to provide guaranteed 100 days of wage employment per year to each rural household.  The Act specifies a list of works that can be undertaken to generate employment.  These are related to water conservation, drought proofing, land development, flood control and protection works, among others.  The scheme is being implemented since February 2006 and at present covers all districts of the country with the exception of those that have a 100% urban population.^[3]

90% of MGNREGS funds come from the central government.  The fund releases are made to the states after they submit their labour budgets, estimating the anticipated demand for works.[4]  A minimum of 50% of MGNREGS works are to be executed by gram panchayats.

Budgeted versus actual expenditure:  Figure 3 shows the expenditure on the scheme from 2007-08 to 2017-18.  For most of the years between 2007-08 and 2017-18, expenditure on the scheme has been more than 50% of the department’s budget.  In the past four years, allocation has ranged from 45% to 60% of the Department budget.

In 2017-18, MGNREGS has the highest allocation within the Department, of Rs 48,000 crore.  During 2016-17, budgetary allocation for the scheme was increased by 23%, from budget estimates of Rs 38,500 crore to Rs 47,499 crore at the revised estimates stage.

Figure 3: Expenditure on MGNREGS over the years (in Rs crore)

Note: Values from 2007-08 to 2008-09 are revised estimates.  Values for 2016-17 and 2017-18 are revised estimates and budget estimates respectively.

Sources: Union Budgets 2007-08 to 2017-18; PRS.

It may be pertinent to note that since the implementation of the scheme in 2006, every year the allocation at the revised estimates stage is reduced from that at budget estimates stage.  The actual expenditure is even less.  However, in the last two years, the revised estimates were increased by Rs 2,268 crore in 2015-16 and Rs 8,999 crore in 2016-17.

Table 4 shows the trends in allocation and actual estimates of expenditure on NREGS over the past eight years.

Table 4:  Budgeted versus actual expenditure on MGNREGS (in Rs crore)

Note: The ‘utilised’ figure for 2016-17 is a revised estimate.

Sources: Union Budgets 2009-10 to 2016-17; PRS.

Delayed payments:  MGNREGS stipulates that wage payments must be made within 15 days of the date of closure of the muster roll.³  Delays in payments are calculated from the 16^th day onwards.  Table 5 below shows the percentage of delayed payments out of the total payments for the past five years.  It also indicates the number of days that payments were delayed by.  As can be seen in the table, the proportion of delayed payments had increased from 39% in 2012-13 to 73% in 2014-15, but has reduced since then.  In 2016-17, till February, 55% of the payments were delayed, amounting to Rs 14,446 crore.  Of these total delays, 41.7% had been delayed for over 30 days, and 28.5% by over 90 days.

Table 5: Trends in delayed payment of wages under MGNREGS

Note: Data for 2016-17 is updated till February 20, 2017.

Sources: NREGS MIS Reports from 2012-13 to 2015-16; PRS.

It has also been observed that non-payment of unemployment allowance (if employment is not provided within 15 days of application) is high across states.  Currently under the NREGA, non-employment allowance is paid from state government funds.²  Non-sharing of unemployment allowance by the central government puts an additional burden on the states.⁵  It has been suggested that the Ministry of Rural Development should consider partial reimbursement of unemployment allowance.⁵

Demand for work:  The Comptroller and Auditor General (CAG) of India in 2013 carried out a performance audit of the scheme.^[5]  It highlighted a significant decline in per rural household employment generation, from 54 days in 2009-10 to 43 days in 2011-12.  Although in 2012-13, average employment reached 50 days, it reached a record low of 40 days in 2014-15.  Similarly, in 2016-17, till February, the average days of employment provided per household was 40.  Note that this is significantly lower than the 100 days of employment that the Act mandates.

Table 6: Average days of employment provided per household under NREGS

Sources: NREGS MIS Reports from 2012-13 to 2016-17; PRS.

Figure 4: No. of households provided employment (as a % of households that demanded employment)

Note: Data for 2016-17 is updated till February 20, 2017.

Sources: NREGS MIS Reports from 2012-13 to 2016-17; PRS.

MGNREGS is a demand driven scheme.  The proportion of households that demanded employment saw an increase of 15% from 2014-15 to 2015-16, and an increase of 1% from 2015-16 to 2016-17.  However, the proportion of households that received employment has seen a decrease, from 97% in 2012-13 to 86% in 2016-17.

Other issues:  The Standing Committee on Rural Development in 2013 examined the implementation of the scheme.^[6]  It found several issues with the implementation of the scheme, including (i) fabrication of job cards, (ii) delay in payment of wages, (iii) non-payment of unemployment allowances, (iv) a large number of incomplete works, (v) poor quality of assets created, (vi) several instances of malpractices and corruption, and (vii) insufficient involvement of Panchayati Raj Institutions.

Pradhan Mantri Awaas Yojana- Gramin

This housing scheme, previously known as Indira Awaas Yojana, got the second highest allocation in the Department’s budget this year.  The funds allocated to the scheme comprise 22% of the Department’s finances.

IAY was launched in May 1985 as a sub-scheme of Jawahar Rozgar Yojana.[7]   Since January 1, 1996, it is being implemented as an independent scheme.  Under IAY, financial assistance of Rs 70,000 in plain areas and Rs 75,000 in hilly areas is provided to rural BPL households for construction of a dwelling unit.  Under PMAY-G, this has been enhanced to Rs 1,20,000 in plain areas and Rs 1,30,000 in hilly areas.  The cost of unit assistance will be shared between the centre and state in the ratio of 60:40 in plain areas and 90:10 in hilly states.  Additionally, the size of a dwelling unit is being increased from 20 square meters (sq. M) to up to 25 sq. M.

In 2016-17, the scheme saw an increase in allocation, with 17% of the department allocation.  However, the scheme has seen an increase of 44% (from revised estimates of 2016-17 to budget estimates of 2017-18) this year. 

Figure 5: Expenditure on PMAY over the years (in Rs crore)

Note: Values from 2007-08 to 2008-09 are revised estimates.  Values for 2016-17 and 2016-17 are revised estimates and budget estimates respectively.

Sources: Union Budgets 2006-07 to 2016-17; PRS. 

Targets in construction of houses:  The expenditure involved in implementing the project from 2016-17 to 2018-19 is Rs 81,975 crore.  In a span of these three years, the government intends to provide assistance to one crore households for construction of pucca houses.  Note that in the last 30 years (from 1985-86 to 2015-16), approximately 3 crore 50 lakh houses have been constructed.[8]  This implies that 11 lakh houses have been constructed on average, each year.  In spite of the enhanced financial allocation, to achieve the objective set out by government, approximately 33 lakh houses still need to be constructed per year.

The Comptroller and Auditor General (CAG) of India carried out a performance audit of the scheme for the period from April 2008 to March 2013.[9]  The audit observed following irregularities in the implementation of the scheme.

• Identification and selection of beneficiaries: Housing shortage, essential for identification of beneficiaries had not been assessed in 14 states. Additionally, several ineligible beneficiaries had been selected.  The assistance given to 87,949 ineligible beneficiary families amounted to a loss of Rs 279 crore.
• Construction of houses: During the period from 2008-13, the Working Group on Rural Housing under the Planning Commission fixed the target for construction of 170 lakh houses.[10]  However, 129 lakh houses were constructed, completing 76% of the Working Group target.  Also, an expenditure of Rs 150.22 crore was made on 61,293 houses in nine states which were not completely constructed within the two-year timeframe.  The audit also highlighted poor quality of construction and use of substandard material for construction.
• In August 2016, the Standing Committee on rural development observed that between 2012 and 2016, the number of houses constructed fell short of the target by 440 lakh units.¹¹ The number of houses that were not constructed were 8.8 lakh in 2013, 8.6 lakh in 2014 and 2.7 lakh in 2015.
• Financial management: Due to the slow pace of utilisation of funds by the states, there has been a deduction of Rs 2,451 crore from the central allocation.  Correspondingly, the states have contributed Rs 810 crore to compensate this deduction.  This has resulted in denial of assistance to seven lakh targeted beneficiaries.  With regard to fund management, select districts and blocks of six states have bank accounts in multiple banks for keeping the IAY funds against the provision of maintaining a separate and exclusive savings account for this purpose only.
• Issues such as insufficiency of funds, significant gaps between allocation and releases, and under-utilisation of released amount in the last few years has also been observed.[11] For example, from 2012-13 to 2014-15, budget outlays were significantly reduced at the revised estimates stage.
• Monitoring mechanism: The current monitoring and evaluation mechanisms for the scheme were weak and not effective.

Pradhan Mantri Gram Sadak Yojana

Pradhan Mantri Gram Sadak Yojana was launched in December 2000 and seeks to provide all-weather road connectivity to all eligible unconnected habitations, existing in the core network in rural areas of the country.  The scheme got the third highest allocation in the Department’s budget this year.  Expenditure on PMGSY accounts for 18% of the Department’s expenditure in 2017-18.

As Figure 6 indicates, over the past ten years, the highest allocation was in 2010-11 at Rs 27,386 and has decreased to Rs 19,000 crore in 2017-18. 

Figure 6: Expenditure on PMGSY over the years (in Rs crore)

Note: Values from 2007-08 to 2008-09 are revised estimates.  Values for 2016-17 and 2017-18 are revised estimates and budget estimates respectively.

Sources: Union Budgets 2007-08 to 2017-18; PRS.

Table 7 shows the provision and utilisation of funds under the scheme from 2010-11 to 2014-15.

Table 7: Provision and utilisation of funds under PMGSY (in Rs crore)

Sources: CAG Audit report of PMGSY; PRS.

Inconsistency in budgetary allocation:  Standing Committees over the years have highlighted substantial reduction of funds at the revised estimates stage in this scheme.[12]^,[13]  Due to this short-fall in financial allocation, targets (habitations connected and road length constructed) have not been met over the years.  In 15 years of the implementation of the scheme, out of the 1,78,184 unconnected habitations, so far 1,12,550 (63%) have been connected.  States are yet to complete the roads to provide connectivity to the remaining 37% of the habitations.  The reasons given by the department include: (i) inadequate institutional capacity and limited contracting capacity in some states, (ii) non availability of sufficient qualified technical personnel including engineers contractors, and (iii) non-availability of construction materials, limited working season and adverse climate conditions in some states.

Mismatch between targets and achievements:  The CAG conducted an audit of the PMGSY for the period from April 2010 to March 2015.[14]  It submitted its report in August 2016.  It noted that the achievements under the scheme from 2010-11 to 2014-15 was more than the target set for those years.  It reasoned that the targets were not realistically fixed.  CAG also observed that despite a lower allocation at the revised estimates stage, achievements continued to be higher as compared to the targets.

The CAG audit observed that from 2010-2012, states did not fully utilise the central assistance, which led to a substantial reduction of funds at the revised estimates stage from 2012-2015.  The Department also reasoned that the reduction at the revised estimates stage was due to the availability of unspent balances from previous years with the states and the slow pace of implementation of the scheme.

Table 8 and 9 give details of length of roads constructed and habitations connected in the last ten years, under the scheme.

Table 8: Length of road constructed under PMGSY (in KM)

Note: Data for 2016-17 is updated till February 2017.

Sources: Pradhan Mantri Gram Sadak Yojana Online Management, Monitoring and Accounting System (OMMAS), Ministry of Rural Development; PRS.

Table 9: Habitations connected under PMGSY

Note: Data for 2016-17 is updated till February 2017.

Sources: Pradhan Mantri Gram Sadak Yojana Online Management, Monitoring and Accounting System (OMMAS), Ministry of Rural Development; PRS.

In 2015, the government brought forward the completion date of PMGSY from 2022 to 2019.  The government plans to achieve the target at an earlier date by providing enhanced financial allocation and modifying the funding pattern of the scheme.  The sub-group of Chief Ministers on Rationalization of Centrally Sponsored Schemes has recommended that fund sharing pattern of PMGSY should be in the ratio of 60:40 between the centre and states.[15]  The existing centre-state sharing is in the ration 75:25.  This recommendation has been accepted by the Ministry.  The allocation to the scheme was enhanced in 2016-17, but has been kept unchanged in 2017-18.  It remains to be seen how in the absence of an implementation plan, 37% of the target will be achieved within three years instead of the initially planned six years. 

National Social Assistance Program

NSAP is a welfare program which comprises of a number of sub-schemes that primarily aim to provide public assistance to citizens in case of unemployment, old age, sickness and any form of disability.  The scheme has been in existence since 1995.  NSAP got the fourth highest allocation under the Department’s budget.  The funds allocated to the scheme comprise 9% of the Department’s finances.

Table 10 below shows the budget estimates, revised estimates, and actual expenditure by states under the scheme from 2012-13 to 2015-16.

Table 10: Expenditure under NSAP (in Rs crore)

Sources: Standing Committee on Rural Development 2016-17; PRS.

The Standing Committee examining the scheme noted that there was a huge shortfall of funds between the revised estimates and actuals stage.¹³  It said that this impacts the implementation of the scheme and also affects the beneficiaries.  The table below shows the number of beneficiaries under the various sub-schemes of NSAP.

Table 11: Number of beneficiaries under the various sub-schemes of NSAP (in crores)

Note: Data for 2015-16 is updated till December 2015. 

Sources: Unstarred question No. 2047, answered on December 10, 2015, Ministry of Rural Development; PRS.

As can be observed, the number of beneficiaries has fallen by 36% in the last two years, from 2014-15 to 2015-16.

National Rural Livelihoods Mission

National Rural Livelihoods Mission (NRLM) aims at creating efficient and effective platforms for the rural poor and in the process, increase their household income.  The mission aims to achieve this through sustainable livelihood enhancements and improved access to financial services.  The scheme has been in existence since July 2011.  The scheme got the fifth highest allocation under the Department’s budget.  The funds allocated to the scheme comprise 4% of the Department’s finances.

NRLM has been renamed as Deen Dayal Antyodaya Yojana.  Under the programme, one woman from each poor household is brought into Self Help Groups (SHGs).  The programme envisages universal coverage of all 8-9 crore rural poor households to be organised into 70-75 lakh SHGs and their federations at the village and cluster level by 2024-25.

Table 12 below shows the budget estimates, revised estimates, and actual expenditure by states under the scheme from 2012-13 to 2015-16.

Table 12: Expenditure under NRLM (in Rs crore)

Note: From2015-16, allocation to start-up village entrepreneurship program has also been included.

Sources: Union Budgets 2012-13 to 2016-17; PRS.

The Standing Committee examining the scheme noted that substantial reduction at the revised estimates stage affects the implementation of the scheme.¹³  It has been observed that one of the major issues under the scheme is lack of awareness resulting in ineffective social mobilisation and institution building.  Another issue that has been pointed out is the lack of experienced and trained professionals at state, district and block levels to mentor and train the Self Help Groups.

It has been recommended that baseline surveys for beneficiary identification should be fast tracked for better implementation of the scheme.¹³

 

[1] Budget Speech 2016-17, http://unionbudget.nic.in/ub2017-18/impbud/impbud.pdf.

[2] The National Rural Employment Guarantee Act, 2005, http://nrega.nic.in/amendments_2005_2016.pdf.

[3] Mahatma Gandhi National Rural Employment Guarantee Act, 2005, Operational Guideline 2008, http://nrega.nic.in/Nrega_guidelinesEng.pdf.

[4] “Planning for works and preparation of Labour Budget under MGNREGA”, Department of Rural Development, Ministry of Rural Development, http://nrega.nic.in/netnrega/writereaddata/Circulars/1850Planning_for_works_and_Preparation_of_Labour_Budget.pdf.

[5] “Report No. 6, Performance Audit of Mahatma Gandhi National Rural Employment Guarantee Scheme”, Comptroller and Auditor General of India, 2013, http://www.cag.gov.in/sites/default/files/audit_report_files/Union_Performance_Civil_Ministry_Rural_Development_6_2013.pdf.

[6] 42^nd Report, Standing Committee on Rural Development  (2012-13): ‘Implementation of Mahatma Gandhi National Rural Employment Guarantee Act, 2005’, Lok Sabha, August 14, 2013, http://164.100.47.193/lsscommittee/Rural%20Development/15_Rural_Development_42.pdf.

[7] Pradhan Mantri Awaas Yojana- Gramin, last accessed on February 27, 2017, http://iay.nic.in/netiay/about-us.aspx.

[8] Lok Sabha Unstarred Question No. 319, answered on February 25, 2016, Ministry of Rural Development,  http://164.100.47.190/loksabhaquestions/annex/7/AU319.pdf.

[9] “Report No. 37, Performance Audit of Indira Awaas Yojana, Comptroller and Auditor General of India”, 2014, http://saiindia.gov.in/sites/default/files/audit_report_files/Union_Performance_Indira_Awaas_Yojana%20_37_2014.pdf.

[10] Working Group on Rural Housing for XII Five Year Plan, Planning Commission, http://planningcommission.nic.in/aboutus/committee/wrkgrp12/rd/wgrep_iay.pdf.

[11] “Pradhan Mantri Awaas Yojana”, Standing Committee on Rural Development, August 31, 2016, http://164.100.47.193/lsscommittee/Rural%20Development/16_Rural_Development_26.pdf.

[12] Demand for Grants (2015-16), Ministry of Rural Development (Department of Rural Development), Standing Committee on Rural Development (2014-15), http://164.100.47.193/lsscommittee/Rural%20Development/16_Rural_Development_6.pdf.

[13] Demand for Grants (2016-17), Ministry of Rural Development (Department of Rural Development), Standing Committee on Rural Development (2014-15), http://164.100.47.193/lsscommittee/Rural%20Development/16_Rural_Development_21.pdf.

[14] “Report No. 23, Performance Audit of Pradhan Mantri Gram Sadak Yojana”, Comptroller and Auditor General of India, August 12, 2016, http://www.cag.gov.in/sites/default/files/audit_report_files/Union_Civil_Rural%20Development_Report_23_2016_Performance_Audit.pdf.

[15] Report of the sub-group of Chief Ministers on Rationalization of Centrally Sponsored Schemes, NITI Aayog, October 2015, http://niti.gov.in/writereaddata/files/Final%20Report%20of%20the%20Sub-Group%20submitter%20to%20PM.pdf.

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