Why government is looking to boost rural spending next fiscal year

In what should be good news for FMCG and auto companies, the central government may increase rural spending by nearly 50% to Rs 2 trillion ($24.51 billion) next fiscal year, a Reuters report has said.

This, as the country seeks to boost jobs and affordable housing before the national elections.

As government spending in rural India goes up, that should put more expendable money in the hands of the people in villages and small towns, thereby raising rural demand. 

When is the next union budget due?

Finance Minister Nirmala Sitharaman is likely to present the 2023-24 budget on Feb. 1, the last full budget before the 2024 national elections. 

What was India’s outlay for rural spending in the last budget?

The government had allocated Rs 1.36 trillion towards the rural development ministry for the current fiscal year but it could end up spending more than Rs 1.60 trillion, the report said. 

What will the increased spending be for?

The report said the increased spending will mainly be to address pandemic-driven stress in rural areas that has driven up demand for the country's only minimum job guarantee scheme, which pays $2 to $3 a day.

How did the pandemic impact rural India?

As India emerged from the pandemic, its rural areas were under pressure from rising prices and limited non-farm job opportunities, forcing more people to sign up for the government's job scheme - the Mahatma Gandhi National Rural Employment Guarantee Scheme, or MNREGA.

How do rural unemployment numbers look like?

The rural unemployment rate has remained above 7% for most of the months in the current fiscal year, according to data from the Centre for Monitoring Indian Economy (CMIE), a private think-tank.

The rural unemployment rate was 8.04% in October, according to CMIE.

For the current year, the government had initially budgeted Rs 73,000 crore for the job scheme and Rs 20,000 crore for the housing scheme. It has already spent Rs 63,260 crore on the jobs programme.