Budget and Inclusive Development

K.R. Sudhaman**

High growth is no doubt good for the development of the economy but in a country like India where sizeable percentage of the population is poor and in rural areas, growth is meaningless if it does not percolate downwards.

Growth has to be inclusive, which has rightly become the mantra of the Government led by Prime Minister Dr. Manmohan Singh. India lives in its over six lakh villages. If the fruits of development and growth do not become visible and touch the people in rural areas, the very purpose of economic progress is defeated.

Reforms have to push up growth which in turn has to travel beyond major cities in the country. Conscious of this fundamental philosophy, the Finance Minister, Shri Pranab Mukherjee has taken a slew of measures in the 2010-11 budget to give a push to inclusive development. These measures are crucial to channelise growth which is expected to clock 8-8.5% in 2010-11

For the Government, inclusive development is an act of faith, Shri Mukherjee said in his Budget presentation. After making right to work a reality through National Rural Employment Guarantee Act which provides for 100 days work to at least one member of each and every poor family, the Government has followed up with right to education through a legislation in 2009-10.

As a next step, the Finance Minister said in his Budget speech “we are now ready with the draft Food Security Bill. The bill which has recently been approved by Empowered Group of Ministers will soon go before Cabinet for approval. The bill is expected to be introduced in Parliament when it meets again after recess in mid-April, the second phase of the Budget session.

As part of the Food Security, the Government proposes to give 25 Kg of food grains per month to each and every family identified as below poverty line, in all the states of the country at Rs 3 per Kg.

To fulfill these commitments, Shri Mukherjee said the spending on social sector has been gradually increased to Rs 1,37,674 crore, which was 37 per cent of the total plan outlay of Rs 3,73,000 crore in 2010-11. The plan outlay itself has been stepped up by Rs 48,000 crore from Rs 3,25,000 crore in 2009-10, an increase of nearly 15%.

According to an estimate, there are 37.2% of the population below poverty. But the below poverty people in rural India is 41.8% as against 25.7% in urban India. The National Rural Employment Guarantee Scheme, which has completed four years, has now been extended to all districts covering 4.5 crore poor households. The allocation for the scheme has been stepped up to Rs 41,000 crore in 2010-11.

Under the scheme wages for 100 days work to create permanent assets like roads is paid to the persons employed. To ensure the money is transferred to the employed persons besides providing insurance cover, there is also a need to ensure that banking services reach the ‘aam aadmi’.

Shri Mukherjee announced in the Budget that it has been decided to provide appropriate banking facilities by March 2012 to habitations having in excess of 2000. Reserve Bank under its outreach programme has already started working overtime to move towards what comes to be known as financial inclusion of poor and rural people. “It is also proposed to extend insurance and other services to the targeted beneficiaries. These services will be provided using the Business Correspondent and other models with appropriate technology back up. By this arrangement, it is proposed to cover 60,000 habitations,” the Finance Minister said in his Budget speech.

Financial inclusion fund and financial inclusion technology fund to reach banking service to unbanked areas was set up in 2007-08. The Minister provided additional Rs 100 crore each to these funds in the budget to give momentum to financial inclusion.

Apart from taking care of the poor through the NREGA programme and financial inclusion, the Government had to step up development activities in rural areas. In line with the Government’s stated position to give top priority to rural infrastructure, the Finance Minister provided Rs 66,100 crore for rural development. If internal and extra budgetary support of Rs 10,000 crore is taken into account, the allocation for rural development works out to Rs 76,100 crore for 2010-11. Rural development gets 46% of the outlay for infrastructure development in the budget.

The projects to be taken up included integrated wastelands development programme, drought prone areas programme and desert development programme. The schemes will include Provision for Urban Amenities in Rural Areas (PURA).

PURA aims to meet gaps in physical and social infrastructure in identified rural clusters to further growth potential. This would also help in stemming migration from rural to urban areas.

There are allocations for rural transport, irrigation programmes and other infrastructure facilities.

The Minister also raised unit cost to Rs 48,500 from Rs 45,000 under rural housing scheme for weaker sections named Indira Awas Yojana. The allocation under the scheme has been increased to Rs 10,000 in 2010-11.

As part of the strategy to bridge the infrastructure gap in backward districts, the allocation for backward region grant fund has been increased by 26% to Rs 7,300 crore in 2010-11 from Rs 5,800 crore in 2009-10.

Allocation to micro, small and medium enterprises, located mostly in rural and semi-urban areas, has been stepped up to Rs 2,400 crore n 2010-11. An ADB loan of $ 150 million for comprehensive Khadi reform programme is to be spent for revamping 300 selected khadi institutions located mostly in rural areas.

Outlay for social security schemes in unorganised sector and skill development have also been stepped up. The fact that the Finance Minister had to do a tight-rope-walk in the Budget to balance fiscal consolidation efforts and increased allocations to rural programmes, he has done well to give a push to rural development by finding the necessary resources.

With the Government’s determination to bring down fiscal deficit to 5.5% of GDP in 2010-11 from 6.7% of GDP in 2009-10, the Minister’s hands were tied to substantially step up expenditure. Yet Shri Mukherjee has done well considering he had constraints on revenue mobilisation efforts as he only partially rolled back the tax sops given in the last two years to mitigate the ill effects of global recession on growth.

K.R. Sudhaman**

**Economic Affairs Editor, Ticker Plant News

Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC.