Centre’s rural spending doubles amid Covid-19 pandemic

Prime Minister Narendra Modi on June 30 announced the extension of the provision of free rations to 800 million people until November.

The rural and agriculture sectors have seen higher government spending in April and May because of cash transfers, free LPG cylinders and food grains, apart from new allocation for the rural job guarantee scheme, expenditure data of central departments from the Controller General of Accounts (CGA) shows. The higher spending comes amid a robust monsoon, higher sowing and has helped revive rural jobs.

Prime Minister Narendra Modi on June 30 announced the extension of the provision of free rations to 800 million people until November. The package was announced in March to help the poor when the lockdown to check the Covid-19 pandemic spread was announced. The government in March announced free cooking-gas cylinders to 83 million poor families, a one-time cash transfer to 30 million senior citizens, and money transfers to about 200 million poor women for three months. An additional ~40,000 crore was in May allocated for the federal job guarantee programme, Mahatma Gandhi National Rural Employment Guarantee Scheme, as demand for work surged after lockdown left daily wagers jobless.

In the first two months of the current fiscal year–April and May–the total expenditure of the agriculture and rural affairs ministries more than doubled in comparison to the corresponding months a year ago.

Despite a sharp drop of up to 40% in revenue collection, agriculture, food and rural affairs ministries saw the highest spending, while expenditure on defence, education, among others, lagged, the data released by the CGA shows.

In April, the first month of 2020-21, the agriculture ministry spent ~25,717 crore, or 18% of its annual budget estimates of ~1,42,762.35 crore. In May, the farm ministry spent ~31,742, or 22% of the budget estimates. Over the two months, it spent a total of ~57,459 crore.

The rural affairs ministry, which funds MGNREGS, in April spent ~38,059 core, or 31% of its budget estimates of ~122398 crore. In May, it spent ~59611 crore, or 49% of its total budget estimates.

Together, the rural and agriculture ministries spent ~155128 crore over the two months, more than double the spending of ~45000 crore in the same months of the previous year.

The food ministry, which is offering free subsidised food grains to two-thirds of the population, spent ~66290 crore in the two months, which is also twice the amount it spent in the corresponding period last year.

“The big gain in employment is happening in rural India. And, it may see bigger gains in the months to come or at least sustain the current gains,” said Mahesh Vyas of the Centre for Monitoring of Indian Economy (CMIE).

The government had initially budgeted ~60,000 crore for MGNREGS for 2020-21. In May, it increased allocation to a total of ~1 lakh crore.

Compared to the rural sector ministries, the human resources department has seen lower spending of 10% of its total budget estimates over April and May. Similarly, defence services spending was 15%, compared to the previous year’s 22%.

“Aggressive use of the MGNREGS scheme, timely rains and enhanced sowing activities seem to have helped engage rural India and bring the unemployment rate down,” Vyas of CMIE wrote in a note