[Analysis]:The Challenge of Alleviating Rural Poverty

Posted on April 2, 2012 in Specials

By Dr. Amrit Patel:

Since Independence, the Government has accorded top priority in its policy and planning approach and allocated significant resources to alleviate rural poverty. After several piecemeal efforts, the concept of the Integrated Rural Development Program (IRDP) was first proposed in the Union Budget of 1976-77 to provide self-employment opportunities to the rural poor (specifically agricultural and landless labourers, small and marginal farmers and rural artisans) through capital subsidy and bank credit, so as to help them acquire productive assets and appropriate skills to cross the poverty line on a sustained basis. In 1978-79, with some modifications, the program initially covered 2300 blocks and focused on family as a unit rather than compositional of individuals. With the addition of 300 blocks during 1979-80, it covered 2600 blocks identifying 53 lakh families for assistance as on 31 March 1980.

Integrated Rural Development Program (IRDP)

From October 2, 1980, IRDP was extended to all blocks in the country stipulating targets for SCs/STs and Women beneficiaries and emphasizing on primary, secondary and tertiary sectors of the rural economy. The District Rural Development Agencies were specifically established to plan and implement IRDP. Between 1980-81 and November 1999, about 535.22 lakh beneficiaries (including 44.7% SC/ST & 25.4% women) were provided Rs.11796.01 crore capital subsidies & Rs.21336.63 crore bank credits. Though the program was comprehensive in scope and sought to secure through a process of block-level planning, fuller exploitation of the local growth potential to significantly alleviate poverty; in practice, the program was merely reduced to a subsidy-giving program short of any planned approach to the development of the rural poor as an inbuilt process in the development of the rural poor, the area and its resources.

Swarnjayanti Gram Swarozgar Yojana (SGSY)

Since 1st April 1999, the “Swarnjayanti Gram Swarozgar Yojana (SGSY)” for the self-employment of the rural poor has been under implementation after restructuring and merging the erstwhile IRDP and its allied programs. The program aims at bringing the assisted BPL families above the Poverty Line through —

(i) Organizing rural poor into Self-Help-Groups (ii) establishing micro-enterprises in rural areas based on the ability of the poor and potential of each area. (iii) provision of credit linked subsidy to help beneficiaries acquire income generating assets (iv) training of beneficiaries in group dynamics and skill development for managing micro-enterprises (v) marketing support with focus on market research, upgradation and diversification of products, packaging, creation of marketing facilities (vi) provision of infrastructure development fund to provide missing critical links.

Between April 1, 1999 and January 31, 2010, the number of SHGs formed were 36, 78,746, of which women accounted for 68.32%. A total of 1, 32, 85,688 Swarozgaris were assisted with subsidy of Rs10091.96 crore and bank credit of Rs20822.29 crore. Share of women, SCs/STs, Minorities and disabled assisted Swarozgaris was 57.63%, 46.76%, 9.47%, 1.48% respectively, as against mandated 40%, 50%, 15% and 3% respectively. Percentage of fund utilization was of the order of available (73.82), allocation (92.66), subsidies (65.88), revolving fund (10.31), infrastructure 16.24), training/skill (149.09) and credit (60.43) demonstrating low utilization.    

The SGSY suffered from major deficiencies, such as —

(i) weaknesses in the planning and implementation process, in the formation, nurturing and working of SHGs (ii) the subsidy acted as a tempting factor rather than enabling one to acquire income generating assets through bank credit resulting in unsatisfactory loan repayment as compared to SHG-Bank Linkage Program (iii) estimated income was not generated because of lack of effective coordination and systematic monitoring of SGSY implementation (iv) heavy concentration on agriculture and that too milk animals (v) inadequate use of funds earmarked for capacity building and skill development training, infrastructure development and marketing support. Deficiencies were observed in varying degrees in all States but were more pronounced in States of North-East region, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Rajasthan, Madhya Pradesh, Chhattisgarh, Bihar, Jharkhand, Orissa and West Bengal in particular.

Implementation of IRDP till November 1999 and SGSY since April 1999 could not alleviate rural poverty as expected, as according to the NSS round (2004-05), 41.8% of the rural population had a monthly per capita expenditure of Rs.447, which some economists consider as indicator of being Below Starvation Line instead of BPL. Besides, according to Multidimensional Poverty Index (MPI) worked out by UNDP & Oxford University, July 2010, about 645 million people (55%) in India are poor. As against 410 million MPI poor in 26 of the poorest African countries, eight Indian States (Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal) have 421 million MPI poor. The MPI reveals a vivid spectrum of challenges facing the poorest households. MPI considers 10 sharp indicators, namely, Education (child enrolment and years of schooling), Health (child mortality and nutrition) and Standard of living (electricity, drinking water, sanitation, cooking fuel, flooring and assets). A global report on poverty eradication of the U.N. Secretary-General (2010) shows that economic growth is evident for the progress in China in reducing extreme poverty and raising living standards, whereas India is expected to be home to more than 300 million in poverty out of 900 million people predicted to be in extreme poverty, in 2015.

National Rural Livelihoods Mission (NRLM)

Acknowledging the fact that out of the estimated 70 million rural BPL households as per 2010 projections, as many as 45 million households still need to be organized into SHGs and the existing SHGs need further strengthening and intensive financial support, the Government has approved the restructuring the SGSY as the National Rural Livelihoods Mission (NRLM) to be implemented in a mission mode across the country. It has already been launched in Rajasthan in June 2011. However, past experiences of planning, implementation and monitoring of IRDP & SGSY suggest initiating enabling measures to achieve expected results under NRLM viz.

(i) NRLM should initially be intensively pilot tested in each of three Blocks (high, moderate & low growth), in three districts (high, moderate & low growth) in each State of the country to understand and develop modalities of planning, implementation & monitoring before it is launched throughout the country (ii) Planning and implementation of NRLM should be integrated with ongoing programs of health, education, drinking water, sanitation, housing, fuel, transport and communication (instead NRLM being implemented in isolation) so as to create impact on the quality of life of rural households in terms of human development index (iii) Functions and responsibilities of all stakeholders involved in the planning and implementation of NRLM need to be well-defined so as to ensure that BPL Swarozgaris manage their assets efficiently and earn sufficient to come out of poverty within three years (iv) Potential Linked Plan being formulated annually by NABARD for each district should serve as resource document for preparing village, Block and District level NRLM plans, incorporating formation of SHGs, their needs for training, skill development and capacity building, utilization of funds to support infrastructure development, technology and market and make economic activities bankable (v) The initiative of Rural Self-Employment Training Institutes should, among others, focus on capacity building and empowering SHGs to –

(a) involve members to identify income generating activities totally based on their occupational skills, local resources, markets and economic viability; obtain bank credit and Government subsidy on time and use them to generate expected level of income, repay credit on time and improve their standard of living, (b) share among SHGs within a Block/District their experience of success and failures to continuously improve the project planning and implementation, (c) take full advantage of new technology to improve quality of products, enhance business opportunities, and explore markets for their products, (d) fully utilize the allocated and available funds for Revolving Fund Assistance, infrastructure development, marketing initiatives, training for skill development and forming SHGs Federations to create enabling environment and enhance credit absorption capacity that can impact on program outcomes, and (e) prepare quality bankable loan proposals in consultation with banks (vi) Banks having considerable experience in formulating, implementing and monitoring the Service Area Credit Plans since April 1989 should incorporate bankable economic activities covering more secondary and tertiary sectors rather than primary sector. Financial literacy and Credit counselling must be an integral part of NRLM to educate BPL Swarozgaris.

(vii) The NRLM should benefit from (a) District Rural Industries Projects successfully promoted by NABARD in 106 districts since 1993-94 that provide valuable insight in exploring and exploiting the unfathomable potential of rural industries (b) schemes of NABARD to promote and support rural non-farm sector including schemes for women (viii) Resourceful and experienced Institutions, such as District Industries Centres, Khadi & Village Industries, Boards of Handicrafts, Handlooms, Sericulture and Coir working since long should help Swarozgaris enhance product quality and link activities with marketing (ix) Performance of NRLM must be systematically and in detail monitored quarterly at Block, District and State level to improve quality of planning and implementation and achieve enshrined objectives. Performance at Block level should be monitored village-wise; at District level Block-wise and State level district-wise Academic institutions operating in a district/State must be involved to evaluate the impact of NRLM including repayment of bank credit on a yearly basis (x) Progress including deficiencies in implementation along with recovery of credit as revealed in quarterly monitoring and yearly impact evaluation must be released in local print and electronic media quarterly to seek feedback and improve program quality. Website of Ministry of Rural Development should have comprehensive MIS including recovery of bank credit (xi) NRLM would need comprehensive half yearly monitoring-cum-concurrent evaluation in each district right from the beginning of the Twelfth Five Year Plan period.

Needless to say, every program adopted by the government encounters various challenges of its own. An effective administering of the programs’ outreach and implementation would do a great deal of good to the economy in order for the country to inch closer to its goal of Poverty Alleviation.