Miles to go

Adequate infrastructure is among the most critical physical requirements for attaining fast economic growth and for encouraging investment in the backward regions of the country. The Planning Commission has suggested that the total investment in infrastructure electricity, roads and bridges, railways, ports, airports, telecommunication, irrigation (including watershed development), water supply and sanitation, and storage and gas distribution will have to increase from the estimated 5.43 per cent of the gross domestic product (GDP) in 2006-07 to 9.34 per cent of the GDP by the terminal year of the Eleventh Plan (2011-12). However, the strategy envisaged by the Planning Commission to step up infrastructure investment in the country to more than 9 per cent of the GDP by 2011-12 relies heavily on greater investment by the private sector, which might remain elusive.

It is widely believed that India's level of public investment in infrastructure continues to be very low. But policymakers at the Centre do not seem to share the same view, perhaps because of their strong adherence to a conservative perspective on fiscal policy.

In this backdrop, the present article draws attention to a number of concerns pertaining to the policy priorities of the United Progressive Alliance (UPA) government for infrastructure sectors, in particular the neglect of the infrastructure development needs of rural India.

However, before we highlight the specific concerns of rural India, it is worth noting that UPA-I's record with respect to infrastructure in general had little to write home about. As is well known, after coming to power in 2004, the government set up a committee on infrastructure comprising members from different Ministries, which devoted a lot of time to the preparation of blueprints and model agreements for infrastructure projects.

However, five years down the line, all that showed up in UPA-I's track record on infrastructure were unfulfilled promises, stalled projects and long delays in the completion of projects. For instance, highways were ostensibly at the top of the shelf among the key infrastructure sectors being pursued by the government, but the 33,000 kilometres under the National Highway Development Programme (NHDP) remained stalled at the end of UPA-I's regime as private investors stayed away.

As regards UPA-II's performance, clearly the jury is still not out given that it has completed only the first year of its tenure. However, going by its overall record of governance, the UPA-II regime seems much less purposive compared with its predecessor in its overall functioning. And, with regard to infrastructure, it seems to be struggling much harder than UPA-I to get its act together.

Neglecting rural India

In India, where more than 80 per cent of the population lives in rural areas, development of rural infrastructure can play an important role in shaping the growth of the entire economy. It is evident that the development of villages will contribute towards an inclusive and sustained growth trajectory. When UPA-I came to power with several promises for rural India in its election manifesto, it was expected that it would do a lot for the betterment of the rural community in terms of providing rural connectivity and rural housing, creating other basic rural infrastructure, and so on. But these promises remained largely unfulfilled.

In its second tenure, the UPA government seems to have displayed a marked deviation from its pro-poor commitments (even at the level of rhetoric). In fact, the 2009 election manifesto of the Congress pays attention to the need for augmenting urban infrastructure but not rural infrastructure, which seems to be based on the premise that even though the bulk of the country lives and works in villages, India is rapidly urbanising!

Among the various infrastructural sectors mentioned, roads have a significant positive impact on both urban and rural populations. A study carried out by the International Food Policy Research Institute (Research Report No. 110, IFPRI, Washington D.C., 1999) on linkages between government expenditure and poverty in rural India revealed that an investment of Rs.1 crore in roads lifts as many as 1,650 poor people above the poverty line. Currently, the Union government is making investments in national highways through the Central Road Fund and the National Highways Authority of India.

The combined allocation for the construction of national highways has been increasing over the past three years from Rs.12,999.56 crore in 2009-10 (Revised Estimates) to Rs.15,938.27 crore in 2010-11 (Budget Estimates), that is, an almost 23 per cent increase compared with the previous year (Table 2). However, the allocations for the Pradhan Mantri Gram Sadak Yojana (PMGSY), which continues to be the main channel through which the Union government is investing in rural roads, have gone up by only 6 per cent in 2010-11 (BE) compared with the last year. It would hardly be an exaggeration to say that the overwhelming majority of Indians, living in the countryside, have seen little progress in their lives since the early 1990s. Probably the most alarming indicator of the crisis in India's countryside has been suicide by farmers on a large scale.

According to the Central government's own estimate, around 1,83,000 farmers killed themselves between 1997 and 2007, and there has been no let-up from this macabre dance of death in the subsequent period too. Over the last two decades, as the Centre has tried consistently to push forward neoliberal economic policies, the rural areas of the country have been affected adversely.

In fact the rural economy in general has not got the attention that many had expected from the UPA government. Although UPA-I had stepped up investments in the rural economy in the last couple of years of its tenure, UPA-II has not maintained the same level of priority (for the rural economy) in its two Union Budgets. The Union government's total expenditure on the rural economy (which includes expenditure on agriculture and allied activities, rural development, special area programmes, irrigation and flood control and village and small industries) registers a decline from 3.34 per cent of the GDP in 2008-09 (Actuals) to 2.59 per cent of the GDP in 2010-11 (BE).

Coming specifically to rural infrastructure, there can be little doubt that improvement in this sector is crucial for broad-based inclusive growth of the economy and for bridging the rural-urban divide in the country. However, even after ten Five-Year Plans, huge gaps persist in rural infrastructure across the country.

UPA-I initiated an umbrella programme called Bharat Nirman, an amalgamation of several ongoing schemes of the Centre, for the upgrading of rural infrastructure. Its objectives were based on the gaps persisting in rural infrastructure in the country, as reported by government agencies. These gaps were significant 1,25,000 villages and 23 million rural households without any access to electricity; 66,802 rural habitations without all-weather roads; at least 1,46,185 km of new rural roads needed; 55,067 rural habitations without access to safe drinking water; 10 million hectares of agricultural land in need of irrigation coverage; and 66,822 villages without telephone connectivity.

Acknowledging these major gaps in rural infrastructure, the Planning Commission recommended in 2007 that a total public investment of Rs.4,39,392 crore (by the Centre and the States) would be required for rural infrastructure in the Eleventh Plan period (2007 to 2012).

However, the share of rural infrastructure in the total public investment recommended for infrastructure in the Eleventh Plan period (Rs.14,40,602 crore) was a meagre 30.5 per cent. This indicates a continued neglect of the infrastructure needs of rural India as compared with that of urban India by policymakers at the Centre.

After the disastrous record of the National Democratic Alliance (NDA) government with regard to addressing the needs of rural India, which in fact had been among the main factors that brought the UPA to power in 2004, much was expected from the UPA. However, the UPA's performance has been well below the expectations and the needs on the ground. The following is a brief stocktaking of the UPA's inadequate commitments in the recent years with respect to rural infrastructure, and to illustrate this some of the major flagship schemes have been taken into account.

Pradhan Mantri Gram Sadak Yojana

The Bharat Nirman programme envisaged a massive scaling up of habitation connectivity coverage in rural India. To achieve the targets of the programme, 1,46,185 km of rural roads were proposed to be constructed to benefit 66,802 hitherto unconnected habitations in the country. In respect of the hill States (the northeastern region of India, Sikkim, Himachal Pradesh, Jammu and Kashmir and Uttarakhand) and the desert areas, the objective was to connect habitations with populations of 250 people and more.

It also proposed to upgrade nearly 1.94 lakh km of existing rural roads. According to the Outcome Budget of the Ministry of Rural Development, the PMGSY has shown considerably better utilisation of funds and achievement of physical targets compared with all other schemes. While the scheme got a big fillip in allocation in the 2009-10 Budget, the percentage increase in allocation in 2010-11 has been disappointing; a large number of habitations are yet to be covered under the scheme. The situation is not much different in several other infrastructural programmes in rural areas.

Indira Awaas Yojana

The rural housing scheme is one of the major initiatives of the Ministry of Rural Development. The scheme got a strong impetus in 2008-09 with an increase of 127 per cent over the previous year's budget allocation. With the Eleventh Five Year Plan overtly targeting 150 lakh houses for the rural poor during the Plan period, it was expected that the impetus would continue. However, the allocation for the scheme for 2008-09 and 2009-10 remained the same with a marginal increase in the Union Budget 2010-11. The current Budget also saw an increase in the unit cost of provisioning rural housing for both plain areas and hilly areas. However, the lack of concomitant increase in the total quantum of allocation for the scheme effectively scales down the physical targets for rural housing in this financial year.

National Rural Drinking Water Programme

Under Bharat Nirman, the funds utilised for rural water supply were Rs.4,098 crore in 2005-06, Rs.4,560 crore in 2006-07, Rs.6,441.69 crore in 2007-08 and Rs.7,276.29 crore in 2008-09. In 2009-10, the Union government made a budgetary provision of Rs.8,000 crore. The goal is to cover all water-quality-affected habitations with safe drinking water by the end of 2011 (Economic Survey 2009-10).

However, a Comptroller and Auditor General (CAG) audit for the rural water supply programme (Accelerated Rural Water Supply Programme) revealed that 10 States were not able to provide matching grants to the tune of Rs.2773.14 crore. There was underutilisation of 45 per cent to 75 per cent of financial assistance from the Centre to the States for the water supply scheme between 2002 and 2007. Further, technology considerations, sustenance of Nirmal Grams, and ineffective and insufficient monitoring for outcome measurement are some other issues that need to be tackled. In addition, concerns for inclusion, equity and gender relations are not articulated clearly in the policy guidelines of the sector.

Allocation in the National Rural Drinking Water Programme shows an overall increasing trend. However, the Union government's expenditure on rural water supply and sanitation, as a proportion of total expenditure from the Union Budget, is only 0.85 per cent, which is lower than in the earlier periods (Table 3).

Keeping in view the fact that there are only two years for the Eleventh Five Year Plan to end, it is pertinent to look at whether the Plan allocations laid out by the Union government at least measure up to the proposed outlay for the Eleventh Plan. As Table 4 shows, the Union government allocation for rural water supply is around 78 per cent and for rural sanitation it is around 68 per cent in comparison with what was proposed in the Plan. These figures are clearly not too far behind the targeted trajectory, but the proposed outlays themselves remain areas of concern given the extent of relevant deficits.

Even though the UPA government, in its second tenure, has accorded high priority to urban infrastructure, its policies have not translated into any substantial benefits for the poor in urban areas. Rather, it is believed that the infrastructure investments in the urban areas are primarily benefiting the privileged classes.

For instance, as a recent study brings out vividly, Delhi has witnessed evictions and demolitions of informal settlements and slums in the run-up to the Commonwealth Games (CWG). A lot of evictions are being carried out to construct roads, bridges, stadia and parking lots, or under the guise of city beautification, ostensibly to create a world class city.

The authorities are clearing street vendors, rickshaw pullers, and other workers in the informal sector off the roads, and destroying livelihoods of the urban poor. Beggars and homeless citizens are rounded up, arrested and arbitrarily detained under the Bombay Prevention of Beggary Act 1959 (see The Commonwealth Games: Whose Wealth? Whose Commons?, Housing & Land Rights Network, 2010).

The above-mentioned study also points to rampant exploitation of workers at CWG construction sites low pay, unsafe working conditions, lack of housing, use of child labour, non-registration of workers, and denial of social security benefits.

There can be little doubt about the need to step up public investment in infrastructure in the country. However, the conservative fiscal thinking of the policymakers at the Centre does not leave much scope for pursuing such an agenda.

The heavy reliance of the policymakers on the private sector for stepping up infrastructure investment could be misplaced. More importantly, the Central government needs to accord much greater priority to the development of rural infrastructure instead of presuming that rapid urbanisation in the country is diluting the need for augmenting rural infrastructure.

Moreover, the policy framework underlying the infrastructure projects in urban areas should also include the poor, instead of catering to the demands of the privileged sections of the urban population. In this context, UPA-II perhaps needs to do a substantial revamp of its assumptions, strategies and policy priorities for infrastructure.

Praveen Jha is on the faculty of the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. He is also the Honorary Economic Adviser to the Centre for Budget & Governance Accountability (CBGA), New Delhi. This piece draws on CBGA's analysis of the Union Budget 2010-11.