9 788125 053927

India Rural Development

Report 2012|13
About the IDFC Rural Development Network
IDFC Foundation has partnered with three leading institutions to form the IDFC Rural Development Network.
IDFC Foundation
IDFC Limited (formerly Infrastructure Development Finance Company Limited) was incorporated in 1997 as
Indias frst specialised infrastructure fnancing intermediary in order to address the growing requirements of various
infrastructure sectors. In keeping with its mission of being the leading knowledge-driven fnancial services platform,
creating enduring value, promoting infrastructure and nation-building, in India and beyond, IDFC has carved out
its development agenda under the rubric of the IDFC Foundation. IDFC Foundations activities, which are aimed at
strengthening the delivery of public infrastructure services, include policy advocacy and research, programme support
and advisory services, capacity-building and community engagement programmes.
CESS
Te Centre for Economic and Social Studies (CESS), established in 1980 in Hyderabad, is a leading research centre
conducting interdisciplinary research in analytical and applied areas of social sciences, encompassing socio-economic
and other aspects of development. Te Centres research has developed expertise on themes such as rural development
and poverty, agriculture and food security, irrigation and water management, public fnance, demography, health
and environment.
IRMA
Te Institute of Rural Management Anand (IRMA), established in 1979 in Gujarat, is a leading institute
providing management education, training, research and consultancy support to co-operatives and rural development
organisations in India. IRMA has become a frontrunner in professionalising the development of Indias rural sector,
and prepares rural managers through its two-year diploma in rural management. IRMAs mission is to promote
sustainable, eco-friendly and equitable socio-economic development of rural people.
IGIDR
Te Indira Gandhi Institute of Development Research (IGIDR), established in 1987 in Mumbai, is an advanced
teaching-cum-research institute involved in development issues from a multi-disciplinary point of view. IGIDR has
been recognised as a Deemed University and aims to further develop as an institute of high international standing
and join the league of world-class centres of excellence in theoretically informed applied research and teaching in
development studies. Te institute brings out the periodic India Development Report.
India Rural Development
Report 2012|13
IDFC Foundation
Centre for Economic and Social Studies (CESS)
Institute of Rural Management Anand (IRMA)
Indira Gandhi Institute of Development Research (IGIDR)
IDFC Rural Development Network
INDIA RURAL DEVELOPMENT REPORT 2012|13
ORIENT BLACKSWAN PRIVATE LIMITED
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IDFC Foundation 2013
First Published by Orient Blackswan Pvt Ltd 2013
ISBN 978 81 250 5392 7
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Please cite this publication as: IDFC Rural Development Network. 2013. India Rural Development Report 2012|13.
Delhi: Orient BlackSwan.
The external boundary and coastline of India as shown in the maps in this book are neither correct nor authentic.
List of Tables, Figures and Boxes ........................................................................................................................... xi
Foreword by Shri Jairam Ramesh, Honourable Minister of Rural Development ........................................... xvii
Preface by Dr Rajiv B. Lall, Executive Chairman, IDFC Limited .................................................................. xix
Acknowledgements ................................................................................................................................................ xxi
List of Abbreviations ........................................................................................................................................... xxv
Glossary .............................................................................................................................................................xxxiii
PART 1
Chapter One: Rural Dynamics ........................................................................................................................3
1.1 Increased Blurring of Rural-Urban Boundaries...............................................................................3
1.2 Smallholder Farming Has Become the Bedrock of Rural Life .......................................................4
1.3 Increasing Agrarian Commercialisation and Risk ...........................................................................5
1.4 Rise in Rural Non-farm Employment: Distress or Opportunity?.................................................6
1.5 Te Declining Role of the Agrarian Economy: Social and Political Consequences ....................7
1.6 Exploitation of Natural Resources ....................................................................................................8
1.7 Contours of Regional Inequality and Social Deprivation .............................................................10
1.8 Te Gradual but Irrevocable Movement Towards Political Decentralisation ............................11
Bibliography .................................................................................................................................................... 13
Contents
vi CONTENTS
Chapter Two: Livelihoods .................................................................................................................................................... 17
2.1 Rural Income and Employment: Paradoxes, Challenges and Prospects .......................................................... 18
2.2 Features of the Agrarian Economy ....................................................................................................................... 18
2.2.1 Phases of Agricultural Growth and Policy Interventions ..................................................................... 20
2.2.2 Growing Fragmentation of Landholdings .............................................................................................. 21
2.2.3 Shift Towards Commercial Farming and Livestock ............................................................................... 22
2.2.4 Continued Prevalence of Dryland and Rainfed Farming ...................................................................... 23
2.3 Key Issues in Sustaining Farm Livelihoods ......................................................................................................... 24
2.3.1 Land ............................................................................................................................................................. 24
2.3.2 Access to Credit ......................................................................................................................................... 25
2.3.3 Lack of Productivity Breakthrough ......................................................................................................... 27
2.3.4 Increasing Cost of Cultivation .................................................................................................................. 27
2.3.5 Viability of Smallholder Farming ............................................................................................................ 28
2.3.6 Agricultural Marketing ............................................................................................................................. 29
2.4 Responding to a Changing Agrarian Economy .................................................................................................. 30
2.4.1 Sustainable Agriculture ............................................................................................................................. 30
2.4.2 Collective Farming ..................................................................................................................................... 31
2.4.3 Diversifcation: Growth of Livestock ....................................................................................................... 32
2.4.4 Insurance ..................................................................................................................................................... 33
2.5 Signifcance of the Rural Non-farm Sector ......................................................................................................... 33
2.5.1 Non-farm Sector is the Source of Most New Rural Jobs ..................................................................... 34
2.5.2 What is Driving Non-farm Growth? Te Debate ................................................................................. 34
2.5.3 Types of Non-farm Jobs and Key Trends ............................................................................................... 35
2.5.4 Te Marked Casualisation of the Labour Force ..................................................................................... 38
2.5.5 Te Evolving Social Dynamics of the Village ......................................................................................... 38
2.6 Barriers to Rural Non-farm Livelihoods ............................................................................................................. 39
2.6.1 Financial Exclusion .................................................................................................................................... 40
2.6.2 Marketing of Non-farm Products ............................................................................................................ 41
2.6.3 Skills ............................................................................................................................................................ 42
2.7 National Rural Livelihoods Mission (NRLM): Aajeevika ................................................................................ 43

Appendices ........................................................................................................................................................................ 46
Bibliography ...................................................................................................................................................................... 47
Chapter Tree: Inclusion ...................................................................................................................................................... 57
3.1 Growth, Poverty and Inequality ........................................................................................................................... 59
3.1.1 Growth in Real Consumption .................................................................................................................. 59
3.1.2 How is Growth Distributed? .................................................................................................................... 59
3.1.3 Trends in Inequality .................................................................................................................................. 59
3.1.4 Trends in Incidence of Poverty ................................................................................................................. 61
3.1.5 Depth and Severity of Poverty ................................................................................................................. 63
3.1.6 Poverty Across States ................................................................................................................................ 63
3.1.7 Poverty Among Social and Occupational Groups ................................................................................. 65
3.1.8 How Responsive is Poverty to Growth? .................................................................................................. 67
3.1.9 What Does the Recent Consumer Expenditure Survey 201112 Reveal? ........................................ 68
3.2 Human Development ............................................................................................................................................ 69
3.2.1 Human Development Index ..................................................................................................................... 69
CONTENTS vi i
3.3 Education ................................................................................................................................................................ 71
3.3.1 Progress ....................................................................................................................................................... 71
3.3.2 Demand for Private Education ................................................................................................................. 74
3.3.3 Learning Outcomes ................................................................................................................................... 74
3.3.4 What Afects Learning Outcomes? ......................................................................................................... 75
3.3.5 A Critical Review of Policies and Programmes ...................................................................................... 77
3.4 Food and Nutritional Security ............................................................................................................................. 78
3.4.1 Nutritional Status ...................................................................................................................................... 79
3.4.2 What Causes Poor Nutritional Outcomes Among Children ............................................................... 80
3.4.3 Nutritional Security Interventions .......................................................................................................... 81
3.5 Health ...................................................................................................................................................................... 81
3.5.1 Te State of Rural Health ........................................................................................................................ 82
3.5.2 Regional Disparities in Health Status ..................................................................................................... 84
3.5.3 Social Inequities in Nutrition and Health Outcomes ........................................................................... 87
3.5.4 Challenges in the Rural Healthcare System ........................................................................................... 89
3.5.5 Government Eforts ................................................................................................................................... 90
3.6 Social Protection .................................................................................................................................................... 92
3.6.1 Overview of Indias Social Protection System ........................................................................................ 92
3.6.2 Social Assistance Programmes ................................................................................................................. 95
3.7 Te Way Forward ................................................................................................................................................... 99
Annexure 3.1: Measurement of Poverty: Issues in Ofcial Methodology .................................................................... 101
Bibliography .................................................................................................................................................................... 105
Chapter Four: Infrastructure............................................................................................................................................. 115
4.1 Rural Infrastructure: An Overview .................................................................................................................... 116
4.2 Roads ..................................................................................................................................................................... 120
4.2.1 All-weather Rural Roads ........................................................................................................................ 121
4.2.2 Challenges ................................................................................................................................................. 122
4.2.3 Te Way Forward .................................................................................................................................... 124
4.3 Energy .................................................................................................................................................................... 126
4.3.1 Electricity .................................................................................................................................................. 126
4.3.2 Use of Biomass for Cooking ................................................................................................................... 130
4.3.3 Te Way Forward .................................................................................................................................... 132
4.4 Water and Sanitation ........................................................................................................................................... 133
4.4.1 Irrigation ................................................................................................................................................... 133
4.4.2 Drinking Water ........................................................................................................................................ 135
4.4.3 Sanitation .................................................................................................................................................. 139
4.4.4 Te Way Forward .................................................................................................................................... 143
4.5 Housing ................................................................................................................................................................ 145
4.5.1 Status of Rural Housing ......................................................................................................................... 145
4.5.2 Challenges in Building Permanent Housing......................................................................................... 145
4.5.3 Central and State Governments Contribution to Rural Housing ..................................................... 147
4.5.4 Te Way Forward .................................................................................................................................... 148
4.6 Telecommunications ............................................................................................................................................ 149
4.6.1 Status of Communications ..................................................................................................................... 150
4.6.2 Review of Government Programmes and Policies ............................................................................... 152
4.6.3 Te Way Forward .................................................................................................................................... 153
vi i i CONTENTS
4.7 Storage .................................................................................................................................................................. 153
4.7.1 Government Interventions ...................................................................................................................... 154
4.7.2 Policy for Private Sector Participation not Conducive to Competition ............................................ 155
4.7.3 Warehouse (Development and Regulation) Act, 2007 ....................................................................... 156
4.7.4 Te Way Forward .................................................................................................................................... 157
4.8 Conclusion ............................................................................................................................................................ 157

Appendix ....................................................................................................................................................................... 159
Bibliography .................................................................................................................................................................... 162
INSPIRING STORIES .................................................................................................................between 170171
Chapter Five: Sustainability .............................................................................................................................................. 174
5.1 Balancing Livelihoods and Natural Resource Conservation ........................................................................... 174
5.2 Land ....................................................................................................................................................................... 174
5.2.1 Declining Land Availability .................................................................................................................... 175
5.2.2 Land Degradation .................................................................................................................................... 175
5.2.3 Common Property Resources ................................................................................................................ 177
5.2.4 Alleviation Eforts .................................................................................................................................... 179
5.3 Forests .................................................................................................................................................................... 181
5.3.1 Changes in Forest Cover ......................................................................................................................... 181
5.3.2 Te Disenfranchisement of Forest Dwellers ........................................................................................ 182
5.3.3 Initiatives for Aforestation and Forest Protection .............................................................................. 184
5.3.4 Legislative Support for Community Management: PESA and FRA ................................................ 185
5.4 Water ..................................................................................................................................................................... 187
5.4.1 Water Resources: Imbalances in Availability and Use ......................................................................... 187
5.4.2 Surface Water ........................................................................................................................................... 188
5.4.3 Groundwater ............................................................................................................................................ 189
5.4.4 Alleviation Eforts .................................................................................................................................... 190
5.5 Fishery ................................................................................................................................................................... 192
5.5.1 Marine Fishery ......................................................................................................................................... 193
5.5.2 Inland Fishery ........................................................................................................................................... 194
5.6 Climate Change .................................................................................................................................................... 194
5.6.1 Impacts of Climate Change .................................................................................................................... 195
5.6.2 Government Action ................................................................................................................................. 195
5.6.3 Rural Adaptation to Climate Change .................................................................................................... 196
5.6.4 Funding Climate Change Projects ......................................................................................................... 197
5.7 Te Way Forward ................................................................................................................................................. 198
Bibliography .................................................................................................................................................................... 199
Chapter Six: PRIs for Local Self-Governance and Rural Development ................................................................... 209
6.1 Te Need for Bottom-up Governance ............................................................................................................... 210
6.2 Te Constitution (73rd Amendment) Act, 1992 ............................................................................................. 211
CONTENTS i x
6.3 Assessing Two Decades of PRIs Under the 73rd CAA................................................................................... 213
6.3.1 Implementing the Letter and Spirit of the Act ..................................................................................... 213
6.3.2 Challenges in PRI Functioning .............................................................................................................. 220
6.3.3 Assessing PRI Performance in Flagship Programmes ......................................................................... 224
6.4 Extending the 73rd CAA to Marginalised Populations .................................................................................. 227
6.4.1 Te Panchayats (Extension to Scheduled Areas) (PESA) Act, 1996 ............................................... 227
6.4.2 Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights)
Act, 2006 (FRA) ...................................................................................................................................... 228
6.5 Where Do We Stand Two Decades Later? ....................................................................................................... 230
6.6 Te Way Forward ................................................................................................................................................. 231
Bibliography .................................................................................................................................................................... 232
PART 2
Chapter Seven: Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme ......... 239
7.1 MGNREGA: A Vision for Employment Guarantee and Beyond ................................................................. 240
7.2 Te Letter and Spirit of the Act ......................................................................................................................... 240
7.3 Bottom-up Implementation Framework .......................................................................................................... 242
7.4 Nationwide Coverage and Efectiveness ............................................................................................................ 243
7.4.1 Registration and Issuance of Job Cards ................................................................................................. 245
7.4.2 Demand, Actual Participation and Unmet Demand ........................................................................... 246
7.4.3 Comparing Efectiveness Among Phase 1 and Phase 2 and 3 Districts ............................................ 249
7.5 On-the-Ground Insights on Implementation ................................................................................................... 250
7.5.1 Possible Reasons for Unmet Demand or Job Rationing ..................................................................... 251
7.5.2 Labour Standards and Worksite Facilities ............................................................................................ 252
7.5.3 Wage Payments ........................................................................................................................................ 253
7.5.4 Delays .................................................................................................................................................... 254
7.5.5 Livelihood Security .................................................................................................................................. 255
7.5.6 Leakages and Corruption ........................................................................................................................ 256
7.6 Assessment of the Schemes Broader Objectives and Teir Impact ............................................................... 257
7.6.1 Planning .................................................................................................................................................... 257
7.6.2 Creation of Durable Assets ..................................................................................................................... 258
7.6.3 Womens Participation............................................................................................................................. 260
7.6.4 Impact of MGNREGS Wages and Labour Markets .......................................................................... 262
7.6.5 Migration .................................................................................................................................................. 264
7.6.6 Promoting Decentralised Development and Grassroots Democracy ................................................ 264
7.6.7 Social Audits as Instruments of Transparency and Accountability ................................................... 265
7.7 Te Way Forward ................................................................................................................................................. 267
7.7.1 Addressing the Immediate Implementation Challenges ..................................................................... 267
7.7.2 Addressing Unmet Demand ................................................................................................................... 269
Appendix .............................................................................................................................................................................270
Bibliography .........................................................................................................................................................................278
Tables
2.1 Growth of NDP in Rural and Urban Areas (Per Cent Per Annum at
200405 Prices) ................................................................................................................. 19
2.2 Annual Rate of Growth of Employment (Per Cent) ..................................................... 19
2.3 Changing Distribution of Operational Holdings in India ............................................ 21
2.4 Cropping Patterns by Farm Size (2003) .......................................................................... 23
2.5 Access to Credit Amongst Farmer Class and Source of Credit, 2003 (Per Cent) ...... 26
2.6 Rural Workers Employed in Farm and Non-farm Sector (Millions)........................... 34
2.7 Sectoral Share in Rural NDP and Employment ............................................................ 35
2.8 Distribution of Rural Households with Non-farm as Major Source of
Income by Each Size Class of Land Owned (Per Cent) ................................................ 39
2.9 Progress in Financial Inclusion Trough the Banking System ..................................... 40
2.10 Client Outreach and Credit Portfolio of Microfnance .................................................. 41
A2.1 Marketable and Marketed Surplus of Paddy Out of Farm Production by
Size Category of Farmers in India, Triennium Ending 199899 ................................. 46
A2.2 State-wise Share of Non-agriculture in Total Rural Employment (Per Cent) ........... 46
A2.3 Key Features of SGSY and NRLM-Aajeevika ............................................................... 47
3.1 Growth Rates of MPCE in Major States of India ......................................................... 60
3.2 Annual Growth Rates of Per Capita Monthly Expenditure (Per Cent) ...................... 60
3.3 Gini Coef cient of Inequality Across Major States ........................................................ 62
3.4 Percentage Contribution to Overall Inequality ............................................................... 62
3.5 Levels and Rate of Reduction of Poverty Head Count Ratios Across States ............. 64
3.6 Percentage of the Severely Poor Across Major States .................................................... 65
3.7 Rural Poverty Among Social Groups Across Major States of India ............................ 66
3.8 MPCE, Poverty and Inequality, 200412 ....................................................................... 68
3.9 Sex-wise Rural Net Attendance Ratio (NAR) (Per Cent)............................................ 72
Tables, Figures and Boxes
xi i TABLES, FIGURES AND BOXES
3.10 Rural Net Attendance Ratio by Social Groups and Main Religious Groups,
200708 (Per Cent) ................................................................................................................................ 73
3.11 Learning Levels in Elementary Level of Education in Rural India
in 2012 (Per Cent) .................................................................................................................................. 75
3.12 State-wise Learning Levels of Children in Class Groups III and IIIV
Rural (Per Cent): 2012 ........................................................................................................................... 76
3.13 Malnutrition in India (Per Cent) ........................................................................................................... 79
3.14 State-wise Maternal and Child Health Indicators (Rural) ................................................................ 85
3.15 Indicator-wise States Share of Districts in Bottom and Top Quintile (Per Cent) .......................... 86
3.16 Major Central Social Protection Schemes............................................................................................ 93
4.1 Central Government Spending on Rural Infrastructure (200012)
(At 200607 Prices) .............................................................................................................................118
4.2 Infrastructure Subjects Entrusted to PRIs .........................................................................................118
4.3 Household Electrifcation Between 2001 and 2011..........................................................................128
4.4 Beneft Matrix of Options for Cooking Stoves ..................................................................................132
4.5 Major Sources of Drinking Water Among Rural Households (Per Cent).....................................136
4.6 Households by Distance from Drinking Water Source (Per Cent) ................................................137
4.7 Estimate of Rural Housing Shortage (Millions) ...............................................................................145
4.8 Foodgrain Warehousing Capacity .......................................................................................................154
A4.1A and B Central Government Spending on Rural Infrastructure (Rs Crore) ........................................15960
A4.2 Central Government Spending on Rural Development (Rs Crore) ................................................161
5.1 Use of Common Property Resources ..................................................................................................177
5.2 Ownership Rights of Indian Forests ...................................................................................................183
5.3 Water Availability ..................................................................................................................................187
5.4 Distribution of Estimated Usable Surface Water Across Major River Basins ...............................188
6.1 Status of Devolution of Funds, Functions and Functionaries to PRIs in States ...........................216
6.2 PRI Roles in Flagship Programmes ....................................................................................................224
7.1 Overview of MGNREGS ....................................................................................................................243
7.2 Unmet Work Demand Amongst Poor Rural Households ...............................................................249
7.3 Distribution of Sample Households Across Selected Villages ........................................................250
7.4 Households with Job Cards and Average Number of Days Worked Between
April 2011 to March 2012 ...................................................................................................................251
7.5 Household Response on Awareness of Various Provisions of MGNREGS .................................252
7.6 Household Responses to Employment-related Issues Under MGNREGS ..................................252
7.7 Household Response to Labour Standards at Worksites .................................................................253
7.8 Household Response on Issues Related to Employment Under MGNREGS .............................254
7.9 Average Annual Per Capita Income of Household and Contribution of MGNREGS
to Total Income FY 201112 ..............................................................................................................255
7.10 Spending Patterns using MGNREGS Income on Non-food Items During FY 201112 ..........256
7.11 Spending Patterns using MGNREGS Income on Consumer Durables During FY 201112 ......256
7.12 Works Completed and Activity-wise Percentage Expenditure Under
MGNREGS FY 200607 to FY 201112 .......................................................................................258
A7.1 Performance of the MGNREGS (National Overview) ...................................................................270
A7.2 Details Regarding the Location of Selected Sample Villages ...........................................................270
A7.3 Socio-economic Characteristics of the Households in Selected Villages .......................................271
A7.4 Comparison of Provisions of 2008 and 2013 MGNREGA Guidelines ........................................271
A7.5 Minimum Wage Rate for Agriculture, Range of Minimum Wage Rate for Unskilled
Workers and Notifed Wage Rate for MGNREGS .........................................................................275
TABLES, FIGURES AND BOXES xi i i
A7.6 Share of Women Participation in MGNREGS: Rural Workforce and Worker
Population Ratio in 200910 (Per Cent) ...........................................................................................276
A7.7 Expanded List of Works Allowed Under MGNREGS ...................................................................277
Figures
2.1 Percentage Share of Crops in Gross Value of Agricultural (Crop Sector) Output ......................... 22
2.2 Share of Small Farmers Production of Selected Commodities in 2003 ........................................... 23
2.3A Distribution of Outstanding Loan of Cultivator Households by Source (Per Cent) ..................... 26
2.3B Growing Credit Intensity in Agriculture Credit to Agricultural GDP (Per Cent) ......................... 26
2.4A and B Cost of Cultivation for Rice .................................................................................................................. 28
2.5 Non-farm Employment by Type (Per Cent of Total Non-farm Employment) ............................... 36
2.6 Shift of SC Agricultural Labour Households to Casual Labour as Main Source of
Income (Per Cent of Total SC Rural Households) ............................................................................. 39
3.1 Trends in Real Monthly Per Capita Expenditure (MPCE) (200405 Prices) ............................... 59
3.2 Trends in Inequalities ............................................................................................................................. 61
3.3 Trends in Poverty Head Count Ratio in Rural and Urban Areas ..................................................... 62
3.4 Trends in Poverty Gap (PG) Ratio ....................................................................................................... 63
3.5 Trends in Percentage of the Severely Poor ........................................................................................... 63
3.6 Poverty Among Social Groups (Rural) ................................................................................................. 66
3.7 Rural Poverty Among Occupational Groups ....................................................................................... 67
3.8 Poverty Elasticity and Poverty Levels in 199394 .............................................................................. 68
3.9 Changing Rural Poverty Scenario ......................................................................................................... 69
3.10A Progress in Gross Enrolment Ratio in Elementary Education (Per Cent) ....................................... 72
3.10B Net Enrolment Ratio at Primary and Upper Primary Levels (Per Cent) ......................................... 72
3.11 Wage Premiums in India ........................................................................................................................ 73
3.12 Dropout Rates in School Education in 200910 (Per Cent) ............................................................ 74
3.13 Share of Children under 3 YearsUnderweight, Stunted, Wasted by Social Groups
(200506) ................................................................................................................................................ 87
3.14 Early Childhood Mortality Rates by Social Group: Rural (200506)
(Per 1,000 Live Births) ........................................................................................................................... 87
3.15A Share of Women Having Institutional Deliveries (2005) .................................................................. 88
3.15B Share of Children Fully Immunised (200708).................................................................................. 88
3.16 Share of Mothers Receiving Ante-natal and Post-natal Check-ups (Per Cent) .............................. 88
3.17 Central Government Spending on Social Protection Programmes, 201112 (Per Cent) ............. 93
A3.1 District-wise Quintile Distribution of Rural Child Mortality Rate, 201112
(Per 1,000 Live Births) .........................................................................................................................103
A3.2 District-wise Quitile Distribution of Households with Tree Basic Facilities: Drinking
Water Within Premises, Latrine and Electricity, 2011 .....................................................................104
4.1 Central Government Spending on Rural Infrastructure ..................................................................117
4.2 Outcomes on Rural Infrastructure for 201112 ...............................................................................119
4.3 Distribution of Rural Households of On-premise Drinking Water, Latrines and Electricity
for Domestic Use, Over Time ..............................................................................................................119
4.4A and B Distribution of Rural Households by Tree Basic Facilities: Drinking Water Within
Premises, Latrine and Electricity by Monthly Per Capita Expenditure (MPCE) Quintile
Class and Social Group200809 ....................................................................................................120
4.5 All-India Habitation Connectivity (Per Cent of Total Habitations) ..............................................121
4.6 PMGSYPerformance Summary .....................................................................................................123
xi v TABLES, FIGURES AND BOXES
4.7 Progress in Providing Connectivity Under PMGSY by Habitation Size ......................................123
4.8 State-wise Number of Unelectrifed Villages as of April 2012 ........................................................128
4.9 Percentages of Rural Households with Electricity by Expenditure Group ....................................128
4.10 Percentage of Rural Households Using Electricity by Social Group, 200405 and 200809 ........129
4.11A and B Primary Fuel Sources Used for Cooking: Percentage Distribution of Rural Households
by MPCE and Social Group, 200405 ..............................................................................................131
4.12 Irrigation Coverage by State200809 ............................................................................................134
4.13 Households with Insufcient Drinking Water from First Source by Month and
Social Group (Per Cent) .......................................................................................................................137
4.14A and B Distribution of Households by Distance to the Source of Drinking Water for Each
MPCE Quintile and Social Group, 200809 ....................................................................................137
4.15 Percentage of Households with Latrine Facilities Within Premises ...............................................140
4.16 Percentage of Households without Latrine Facility Within Premises and Improvement
in Household Latrine Coverage from 2001 to 2011 .........................................................................140
4.17 Sanitation Coverage by Monthly Per Capita Expenditure (MPCE) Quintile and
Social Group, 200809 ........................................................................................................................141
4.18 Type of Housing Structure by Expenditure (MPCE) Group in 2002 and 2009 ..........................146
4.19 Type of Housing Structure by Social Group in 2002 and 2009......................................................146
5.1 Gross Cropped Area, Net Cropped Area and Irrigated Area ..........................................................175
5.2 Land Degradation .................................................................................................................................176
5.3 Share of Wastelands in Total Geographical Area ..............................................................................178
5.4 Distribution of Forest Cover as a Share of States Geographical Area, 2011 .................................182
5.5 Stage of Groundwater Development Across States ..........................................................................189
5.6 Trends in Fishery Production ..............................................................................................................192
5.7 Distribution of Fishing Crafts Across Maritime States ....................................................................193
6.1 Parallel Structure of Local Governance ..............................................................................................212
6.2 State-wise Actual Share of Women Representatives in PRIs ..........................................................213
6.3 State-wise Share of SC Representatives in PRIs ...............................................................................214
6.4 State-wise Share of ST Representatives in PRIs ...............................................................................214
6.5 Proposed Activity Mapping for Elementary Education ....................................................................218
7.1 Organisational Structure of Implementation .....................................................................................244
7.2A and B Registered Rural Households by Category and MPCE Deciles......................................................245
7.3 Percentages of Poor, SC/ST and MGNREGS-registered Households by State .........................246
7.4 Demand for Work and Actual Work Participation Across Socio-economic Groups
of Registered and Unregistered Rural Households ...........................................................................247
7.5 Demand for Work Among Registered and Unregistered Households
and Households Provided Work by State ..........................................................................................248
7.6 Participation Rate Across Socio-economic Groups ..........................................................................248
7.7 Efectiveness in Phase 1 and Phase 2 and 3 ........................................................................................249
7.8 Delays by Village Categories ................................................................................................................254
7.9 Peoples Perception Regarding the Quality of CPRs in Terms of Teir Use .................................260
7.10 Increase in Average Agriculture Wage Rate Following MGNREGS (Rs/day) .............................263
A7.1 Poor Households vs Unmet Demand for MGNREGS ...................................................................277
A7.2 Poor Households vs Total Demand for MGNREGS ......................................................................278
TABLES, FIGURES AND BOXES xv
Boxes
2.1 Tenancy Reform Under Operation Barga .............................................................................................. 25
2.2 Andhra Pradesh Farmers Declare a Crop Holiday ............................................................................. 28
2.3 Collective Farming Under Kudumbashree in Kerala .......................................................................... 32
2.4 Domination of Informal Labour ........................................................................................................... 37
2.5 Dalit Entrepreneurship ........................................................................................................................... 39
2.6 Himayat Programme in Jammu and Kashmir ..................................................................................... 44
3.1 Returns to Education in India ............................................................................................................... 73
3.2 Lessons from Tamil Nadus Public Health System ............................................................................. 82
3.3 Home-based Neonatal Care in Gadchiroli, Maharashtra .................................................................. 83
3.4 Innovations to Aid Healthcare Delivery to Rural India ...................................................................... 89
3.5 Streamlined Drug Procurement in Tamil Nadu .................................................................................. 90
3.6 Community Monitoring of Health Services in Maharashtra ............................................................. 91
3.7 Socio Economic and Caste Census 2011 ............................................................................................. 94
3.8 Lessons from Chhattisgarhs PDS ......................................................................................................... 96
4.1 PMGSY ..................................................................................................................................................122
4.2 Leveraging Rural Road Connectivity Trough Minibus Services ...................................................125
4.3 Rural Roads under BOT (Annuity) ...................................................................................................126
4.4 Defnition of Village Electrifcation ....................................................................................................127
4.5 Policy Interventions for Rural Electrifcation .....................................................................................127
4.6 Husk Power System (HPS) Low-Cost Business Model ..................................................................130
4.7 Electrifying Remote Areas ....................................................................................................................132
4.8 Delivering Government Subsidy in Irrigation ....................................................................................135
4.9 Mitigating Arsenic Contamination in Drinking Water ....................................................................138
4.10 Toilets in Schools ..................................................................................................................................142
4.11 Te Universal Service Obligation Fund (USOF) ..............................................................................152
4.12 Key Regulatory Constraints .................................................................................................................155
5.1 Watershed Transformation in Hiware Bazar, Maharashtra .............................................................179
5.2 Te Arabari Experiment, West Bengal ...............................................................................................185
5.3 Jamguda, Odisha, Sells Bamboo under FRA .....................................................................................186
5.4 Decentralised Rainwater Harvesting Eforts .....................................................................................191
6.1 Keralas Peoples Plan .............................................................................................................................223
7.1 Salient Features of MGNREGA, 2005 ..............................................................................................241
I
am pleased to introduce the frst edition of the India Rural Development Report. Tis Report,
prepared by the IDFC Rural Development Network, will be of interest to anyone looking to
understand the complex currents and transformations at play in rural India today.
Te Report is perhaps a frst of its kind in its sheer scopeit discusses in one place, the
multifarious dynamics of rural Indiafrom livelihoods to sustainability, social inclusion, infrastructure,
governance and participation. Trough inputs from its network partners, outside experts and a synthesis
of research and evaluation studies, this Report brings together a range of perspectives on rural India.
In covering these aspects, the Report takes an integrated view, recognising and highlighting the critical
interrelationships between various sectors. It asks for instance, how we canand we mustcreate
productive livelihoods, while protecting the natural resources that sustain us.
Te Report also highlights some key reasons why government programmes have not been as
efective in achieving their goals. Te one thing that is clear based on evidence is the important
role of greater decentralisation and peoples participation in improving the implementation of our
programmes. Tis is indeed the direction in which we are moving. We are introducing greater
fexibility in centrally sponsored schemes (CSSs) by giving state governments greater discretion in
adapting schemes to local needs. We are strengthening Panchayati Raj Institutions (PRIs) so that
they can play a bigger role in implementing and monitoring government programmes. To facilitate
this, we have decided to allocate one per cent of our Ministrys budget for capacity building of PRIs.
Te newly launched Direct Benefts Transfer (DBT) platform will ensure we remove several layers
of intermediaries in Government-to-Citizen (G2C) payments, including wage payments of the
Mahatma Gandhi NREGA and Pensions.
We also believe that we need to look more closely at evidence on an ongoing basis in informing our
policies and programmes. We are therefore setting up an independent Concurrent Evaluation Of ce
that will provide us continuous evaluation and feedback to help us improve all our rural programmes.
I am pleased to see the emphasis on data in this Report, especially the extensive compilation of
time series, state-wise data from various sources that should be invaluable to researchers as well as
citizens at large. We will make this data available on our website so that it is readily accessible by all.
Foreword
xvi i i FOREWORD
Finally, I thank the IDFC Rural Development Network for taking on this initiative. I also thank the Advisory
Council, chaired by Dr Mihir Shah, and comprising some of the foremost rural experts in the country, for providing
excellent guidance to the Report.
I hope this Report will become an annual feature that will help us refect and review; and where necessary, renew
and revamp our approach to rural development.
Jairam Ramesh
Minister of Rural Development
September 2013
T
he dynamics of political, economic and social change in rural India are complex and have been
gaining prominence. In this context, the India Rural Development Report aims to understand
these diverse forces and explore what can spur growth and development. Several challenges,
however, stand out. Commercialisat ion in agriculture has beneftted many farmers, but it
has also left out many small-holder or dryland farmers. Te move towards non-farm livelihoods is now
a reality, but it is usually on insecure terms. Te multiple dimensions of povertyhealth, education
and basic infrastructureare increasingly becoming concentrated in certain areas and amongst certain
socially excluded communities. Only a ffth of the rural population has access to all three basic services
drinking water within their premises, latrines and electricityand another ffth does not have access to
any of them. With rising rural consumption and aspirations, we can no longer fail to provide our rural
population basic services and opportunities to enhance their livelihoods.
Tis Report is unique in both its scope and process. Te IDFC Foundation has partnered with CESS,
IGIDR and IRMA, and involved other scholars and experts to undertake this project. Te Report takes
a wide and comprehensive sweep of rural issues over several decades, and is based on a rigorous analysis
of secondary data, our own feld survey, synthesis of literature and debates, government Working Groups,
and evaluations of on-ground initiatives by communities and state governments. Te Statistical Annex,
which accompanies the Report, provides an extensive database that covers the rural sector.
Te Report has also beneftted immensely from the guidance and inputs of its Advisory Council,
which comprises eminent academics and practitioners. Te Report is presented in two partsthe frst
is a review of the state of rural development while the second is an in-depth study of a particular area of
focus for the year. Tis years focus is on MGNREGA.
Te recurring themes that underpin this Report are sustainability, inclusion and governance.
Te sustainability of rural livelihoods often hinges on the sustainability of natural resources. Land
degradation and depletion of groundwater have directly impacted farm livelihoods. And, government-
led forest conservation has disenfranchised forest dwellers and Scheduled Tribes who traditionally
protected the forests and whose livelihoods depended on them. Implementation of recently enacted
legislation that acknowledges community management and rights of forest dwellers has been hesitant at
Preface
xx PREFACE
best. Ensuring that infrastructure assets, such as water supply projects, are built to last and are properly maintained
by the communities themselves is just as vital to livelihoods as to conservation.
MGNREGA, the topic of focus for this year, embodies the themes of sustainability, inclusion and governance
in its vision. Trough employment generation, the Act aims to create development-oriented assets that provide
communities sustainable benefts. And by mandating active gram sabha participation, MGNREGA seeks to
empower local governments. While it has reduced poverty, particularly amongst the most disadvantaged, it has also
faced several problems, ranging from unfulflled requests for work, corruption, a lack of planning capacity, and delays
in wage payments. Overall, performance has been weak in the poorer states.But where it has succeeded, MGNREGA
has demonstrated its true transformative potential to promote inclusive, participatory growth whose benefts can be
reaped and sustained over time.
Another underlying question throughout the Report is why, in six decades, have results fallen short in public
delivery of services and why have some states done better than others? Lack of accountability is clearly a key reason.
Social audits, increased use of performance-based incentives, and conditional cash transfers would signifcantly
improve outcomes. Administrative capacity too must be strengthened and institutional overlap and fragmentation of
responsibilities streamlined for efective delivery. Te greater democratic participation that was envisioned through
panchayats has not always materialised due to entrenched interests and poor capacity. But when it has worked,
community participation in planning, implementing and maintaining village infrastructure projects has promoted
sustainable and equitable use of the assets created. Yet, fundamental to all change lies the question of the political
economy, of the motivation of sarpanchs to release the stranglehold of caste and class inequalities and for them and
other rural development agencies to see past more myopic short-term gain.
I would like to congratulate those who contributed to the production of this Report, under the aegis of the IDFC
Rural Development Network.I also thank Dr Mihir Shah and the other Advisory Council members. It is my sincere
hope that this Report provides the inputs to catalyse a discussion on the various challenges and opportunities that lie
ahead for the rural sector.
Rajiv B. Lall
Executive Chairman
IDFC Limited
September 2013
P
reparing a Report on Rural Development of this scale is challenging and would not have been
possible without the contributions, insight and support of many. Te idea for the Report
came during discussions with Arvind Mayaram, Additional Secretary and Financial Advisor,
MoRD at the time, who suggested the need for a comprehensive review of the state of rural
development. Rajiv Lall, Executive Chairman, IDFC, with his deep interest in policy research, supported
the proposed study from the outset and encouraged us to take on this challenge. While we were exploring
setting up a network of partner institutions to prepare this Report, suggestions from Y. K. Alagh (former
Chairman IRMA), S. Mahendra Dev (Director, IGIDR), and S. Parsuraman (Director, TISS) helped
in identifying experts and issues to address in the Report. After setting up the network, we presented the
broad contours of the proposed study to the Ministry and received many useful suggestions, including
from B. K. Sinha, former Secretary, MoRD, who proposed that we include a sociologist on the team.
Above all, we sincerely thank Jairam Ramesh, Minister of Rural Development, for his thought-provoking
comments which defned some of the key questions and approach to the study. In fact, throughout, his
openness to ideas and critiques was stimulating.
An important outcome from the presentations was the need to set up an Advisory Council of
distinguished experts. We are especially indebted to the Chair of the Advisory Council, Mihir Shah,
Member Planning Commission, for his invaluable guidance and support, without which this Report
would not be what it is today. Amongst his many insightful suggestions, was his emphasis on weaving
in the theme of sustainability throughout the Report. We are grateful to the other eminent experts
on the CouncilK. L. Krishna (Chairman, MIDS), P. S. Vijayshankar (Director of Research, Samaj
Pragati Sahayog), Rammanohar Reddy (Editor, Economic and Political Weekly), Satish Deshpande
(Professor of Sociology, Delhi School of Economics), S. Vijay Kumar (Secretary, MoRD) and Rajiv
Lall (Executive Chairman, IDFC) for their guidance, thoughtful inputs and constant encouragement.
We especially thank P. S. Vijayshankar (Samaj Pragati Sahayog) for sharing his deep on-ground
knowledge and providing detailed comments and inputs that enriched the Report. Our sincere
appreciation also to Varad Pande (OSD to Minister of Rural Development) for taking an active
interest in the content of the Report, and also for his suggestions on making it more widely accessible.
Acknowledgements
xxi i ACKNOWLEDGEMENTS
We also thank C. R. K. Nair (Adviser, MoRD) for being supportive from beginning to end and for facilitating our
interactions with the MoRD.
We thank our partner institutions for their valuable inputsthe Center for Economic and Social Studies (CESS),
Hyderabad, the Institute of Rural Management Anand (IRMA) and the Indira Gandhi Institute of Development
Research (IGIDR). Inputs from CESS by C. Ravi (on agriculture and empirical analysis of poverty and MGNREGS),
Jyothis S. (on sustainability and conducting the feld work on MGNREGS, an important component of this Report),
Jeena T. S. (on sustainability), Venkatanarayana Motkuri (on agriculture), S. Galab and Revathi E. (on MGNREGS),
and Manoj Panda (on agriculture and MGNREGS) are deeply appreciated. From IGIDR we thank Shovan Ray (on
convergence), Srijit Mishra (on farmer suicides), and Tushar Agarwal (on returns to education). From IRMA, we
thank Jeemol Unni (on livelihoods and employment), Atulan Guha (on livelihoods), Rakesh Saxena (on poverty),
Sony Pellissery (on social security), Preeti Priya (on non-farm marketing), and Ravikiran Naik. We extend thanks
to Dipankar Gupta (Director, C-PACT, Shiv Nadar University) for his thoughtful discussion on rural dynamics.
During the course of the study, network partners exchanged ideas and even had occasional diferences of opinion, all
of which contributed to nuancing the fnal outcome. Our special thanks to Jeemol Unni, Manoj Panda and Shovan
Ray for leading their teams.
Tis Report brings together contributions from several other experts from academia, government, non-
government organisations and the private sector. We thank in particular Rajat Kathuria and Mansi Kedia (ICRIER)
for their inputs on the telecom sector; Shashank Bhide (NCAER) on housing; Madhusudan Ghosh (Visva-Bharati
University) on human development and convergence; Sumit Mazumdar (Institute for Human Development) on
human development; Pravat Kuri (University of Burdwan) and Narasimhan Srinivasan (independent consultant)
on fnancial inclusion; Ashok Pankaj (Institute for Human Development) on PRIs; Subrata Mukherji (Institute
of Development Studies Kolkata) on health; J. B. G. Tilak (NUEPA) on education; Ritu Dewan (University of
Mumbai) on gender and infrastructure, and Vivek Jha and Debajit Palit (TERI) on livelihoods. We also thank A. R.
Vasavi (Nehru Memorial Museum and Library) for her inputs on sustainable farming and J. Jeyaranjan (Institute of
Development Alternatives, Chennai) for his survey fndings on the non-farm sector.
We greatly appreciate the valuable inputs from P. K. Anand, Senior Advisor, Planning Commission; S. M.
Vijayanand, Additional Secretary, MoRD; Pankaj Jain, Secretary, Ministry of Drinking Water and Sanitation; Santosh
Mathew, Joint Secretary, MoRD; Savita Anand, Joint Secretary, MoRD; I. K. Pateriya, Director, NRRDA; Sidhil
Sasi, Jt. Director, MoRD; Manicka Raj, Head, Regional Mission Management Unit, NRLM, Jammu and Kashmir;
Yogesh Suri, Advisor, Planning Commission; Ravikiran Malik, NABARD; and K. L. Prabhakar, NABARD.
To the extent possible, we sought input from those working on the ground, closest to the issues this Report
examines. For their unparalleled insights we thank in particular: Popat Pawar (Sarpanch, Hiware Bazar); Sourabh
Singh (Innervoice Foundation); Amit Mundawala (Star Agri); George C. Varughese (Development Alternatives);
Suryamani Roul (Access Development Services); Pankaj Mishra and Kirti Mishra (MART); Balawant Joshi
(ABPS INFRA); Bikram Chatterjee (BDO, Nabadwip, West Bengal), Sujeet Verma (Programme Ofcer, Te
Hunger Project); Rajesh Gupta (SRIJAN, Madhya Pradesh); Anil Singh and Rajanish Trivedi (Paramarth, Uttar
Pradesh); Shantanu Sinha Roy (Foundation of Ecological Security, Rajasthan); Sunny George (Kerala Institute of
Local Administration); P. S. Easa (Kerala Forest Research Institute); Father Joy Karayampuram, Father Jose and
Father Kisku (Society of Jesus, Patna); Joseph Nedumpuram (Kerala), D. S. Srivastava (Nature Conservation
Society, Palamu, Jharkhand), Meetu Gupta (Conservation Core Society, Chhattisgarh) and M. K. Manjunath (GRS,
Shimoga, Karnataka).
I am ever grateful to our Policy Group teamSatish M. K., Pritika Hingorani, Tanvi Bhatkal, Protiva Kundu,
Sourabh Ghosh and Megha Maniarwho spent many late nights researching, analysing and writing sections of the
Report. Protiva conducted the statistical analysis very competently and Sourabh worked indefatigably to compile the
extensive database. Sambit Basu, who weighed in with insights, analysis, comments and review, has been a partner in
this endeavour throughout and has stood by us during the highs and lows. Ranesh Nair was an anchor for the team,
shouldering the responsibility of coordinating and managing the assignment, in addition to his research contributions,
until he moved on to pursue exciting opportunities overseas. Lavi DCosta and Bharati Sawant provided excellent
support in the production of this Report. I thank Lavi for providing superb research assistance, and for being deeply
involved in all aspects of the Report, including its presentation.
xxi i i
For his steady support, we thank Vikram Limaye, MD and CEO, IDFC. We thank Cherian Tomas, CEO, IDFC
Foundation, for always being there when we needed him. We also would like to thank Animesh Kumar, co-CEO of
IDFC Foundation. We appreciate contributions from Jyoti Gujral, Palash Srivastava, Kaushik Deb, Mashkur Ahmad
and Sourabh Anand from IDFC Foundation to certain chapters in the Report. We also really appreciate the critical
support extended by our colleagues Santosh Parab, Lakshmi R. N., Venkataraman K. V., Arun Raste, Rahul Samuel,
Babu Nambiar, Santosh Shinde, Gopal Mondal, and Rajeev Rawat.
We are indebted to Bina Sanghavi, our Consulting Editor, who was ready to take on the assignment on a very tight
timeline and worked tirelessly to complete each chapter ahead of our expectations. She was always available to review
and edit drafts and give interesting suggestions, such as highlighting inspiring stories.
Our special thanks are due to Orient BlackSwan, the publisher, for accommodating the sometimes exacting
demands placed on them.
While we have tried to acknowledge all who have helped us, any omissions are entirely unintentional.
Ritu Anand
On behalf of the IDFC Rural Development Network
ACKNOWLEDGEMENTS
AAY Antyodaya Anna Yojana
ABPS INFRA ABPS Infrastructure Advisory Private Limited
AEPS Aadhaar-enabled Payment System
AL Agricultural Labour
APL Above Poverty Line
APMC Agricultural Produce Marketing Committee
APO Additional Programme Of cer
ASHA Accredited Social Health Activist
ATMA Agricultural Technology Management Agency
AWC Anganwadi Centre
AYUSH Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy
BC Business Correspondent
BCM Billion Cubic Metres
BDO Block Development Of cer
BIMAROU Bihar, Madhya Pradesh, Rajasthan, Odisha and Uttar Pradesh
BKU Bharatiya Kisan Union
BOO Build-Own-Operate
BOT Build-Operate-Transfer
BPL Below Poverty Line
BRGF Backward Regions Grant Fund
BSNL Bharat Sanchar Nigam Ltd.
CABE Central Advisory Board of Education
CBO Community-based Organisation
CCEs Crop Cutting Experiments
CDB Community Development Block
CDM Clean Development Mechanism
CDP Community Development Programme
Abbreviations
xxvi ABBREVIATIONS
CEA Central Electricity Authority
CEGC Central Employment Guarantee Council
CESS Centre for Economic and Social Studies
CFT Cluster Facilitation Teams
CGWB Central Groundwater Board
CHC Community Health Centre
CLTS Community-led Total Sanitation
CMSA Community Managed Sustainable Agriculture
CPIAL Consumer Price Indices for Agricultural Labour
CPIIW Consumer Price Indices for Industrial Workers
CPR Common Property Resource
CRF Central Road Fund
CRSP Central Rural Sanitation Programme
CSC Community Sanitary Complex
CSOs Civil Society Organisations
CWC Central Warehousing Corporation
DAC Department of Agriculture and Cooperation
DBT Direct Benefts Transfer
DDG Decentralised Distributed Generation
DDP Desert Development Programme
DDS Deccan Development Society
DES Directorate of Economics and Statistics
DLHS District Level Household and Facility Survey
DPAP Drought Prone Area Programme
DPC District Planning Committee
DPEP District Primary Education Programme
DPH Directorates of Public Health
DRDA District Rural Development Agency
EAS Employment Assurance Scheme
EEZ Exclusive Economic Zone
EG Expert Group
EGA Employment Guarantee Assistant
FA Field Assistants
FAO Food and Agriculture Organization
FCI Food Corporation of India
FD Forest Department
FMCG Fast Moving Consumer Good
FPO Farmer Producer Organisation
FPS Fair Price Shop
FRA Forest Rights Act
FSI Forest Survey of India
FYP Five-Year Plan
GAP Ganga Action Plan
GBY Grameen Bhandaran Yojana
GCF Green Climate Fund
GDI Gender-related Development Index
GDP Gross Domestic Product
GEM Gender Empowerment Measure
GER Gross Enrolment Ratio
GIS Geographic Information System
ABBREVIATIONS xxvi i
GM Genetically Modifed
GMV Genetically Modifed Variety
GP Gram Panchayat
GPS Global Positioning System
GRS Gram Rozgar Sahayak
GS Gram Sabha
ha hectares
HBNC Home-based Neonatal Care
HD Health Department
HD Human Development
HDI Human Development Index
HLEG High Level Expert Group on Universal Health Coverage
HUDCO Housing and Urban Development Corporation
HYV High Yield Variety
IAP Integrated Action Plan
IAY Indira Awaas Yojana
ICDS Integrated Child Development Services
ICRIER Indian Council for Research on International Economic Relations
ICTs Information and Communication Technologies
IEC Information, Education and Communication
IGIDR Indira Gandhi Institute of Development Research
IGNDPS Indira Gandhi National Disability Pension Scheme
IGNWPS Indira Gandhi National Widow Pension Scheme
IHDR India Human Development Report
IHHL Individual Household Latrines
IMR Infant Mortality Rate
IRDP Integrated Rural Development Programme
IRMA Institute of Rural Management Anand
ISF Irrigation Service Fee
ISRO Indian Space Research Organisation
ITCs Industrial Training Centres
ITIs Industrial Technical Institutes
IWDP Integrated Wasteland Development Programme
IWMP Integrated Watershed Management Programme
JADS Jagrut Adivasi Dalit Sangathan
JE Junior Engineer
JFM Joint Forest Management
JFMC Joint Forest Management Committees
JLG Joint Liability Group
JRY Jawahar Rojgar Yojana
JSY Janani Suraksha Yojana
KCC Kisan Credit Card
km kilometre
KWA Kerala Water Authority
KYC Know Your Customer
LEB Life Expectancy at Birth
LFPR Labour Force Participation Rate
lpcd litres per capita per day
LR Literacy Rate
LSG Local Self-government
xxvi i i ABBREVIATIONS
MDG Millennium Development Goals
MDM Mid-day Meal
MF Microfnance
MFI Microfnance Institution
MGNREGA Mahatma Gandhi National Rural Employment Guarantee Act
MGNREGS Mahatma Gandhi National Rural Employment Guarantee Scheme
mha million hectares
MHUPA Ministry of Housing and Urban Poverty Alleviation
MIDS Madras Institute of Development Studies
MIS Management Information System
MKSP Mahila Kisan Sashaktikaran Pariyojana
MLA Member of Legislative Assembly
MMR Maternal Mortality Ratio
mmt million metric tonne
MNAIS Modifed National Agricultural Insurance Scheme
MoEF Ministry of Environment and Forests
MoRD Ministry of Rural Development
MP Member of Parliament
MPCE Monthly Per Capita Expenditure
MPDO Mandal Parishad Block Level Administrative Development Ofcer
MRP Mixed Reference Period
MSP Minimum Support Price
MTOE Million Tons of Oil Equivalent
NABARD National Bank for Agriculture and Rural Development
NAC National Advisory Council
NAIS National Agricultural Insurance Scheme
NAMP National Aquifer Management Programme
NAPCC National Action Plan on Climate Change
NAR Net Attendance Ratio
NAS National Accounts Statistics
NBA Nirmal Bharat Abhiyan
NBS Nutrient-based Subsidy
NBSS&LUP National Bureau of Soil Survey and Land Use Planning
NCAER National Council of Applied Economic Research
NCDC National Cooperative Development Corporation
NCEF National Clean Energy Fund
NCEUS National Commission for Enterprises in the Unorganized Sector
NDP Net Domestic Product
NFA No Frills Account
NFBS National Family Beneft Scheme
NFFW National Food for Work
NFHS National Family Health Survey
NFSA National Food Security Act
NGO Non-governmental Organisation
NGP Nirmal Gram Puraskar
NHG Neighbourhood Group
NIMF National Irrigation Management Fund
NLCP National Lake Conservation Plan
NMMI National Mission on Micro Irrigation
NNMB National Nutrition Monitoring Bureau
ABBREVIATIONS xxi x
NOAPS National Old Age Pension Scheme
NOFN National Optic Fibre Network
NPA Non Performing Asset
NPE National Policy on Education
NPHSFG National Policy on Handling and Storage of Food Grains
NP-NSPE National Programme of Nutritional Support to Primary Education
NPOF National Project on Organic Farming
NRCP National River Conservation Plan
NRDWP National Rural Drinking Water Programme
NREP National Rural Employment Programme
NRHM National Rural Health Mission
NRLM National Rural Livelihoods Mission
NRRDA National Rural Roads Development Agency
NSAP National Social Assistance Programme
NSDC National Skill Development Corporation
NSSO National Sample Survey Organisation
NTFP Non-timber Forest Products
NTP New Telecom Policy
NUEPA National University of Educational Planning and Administration
NWR Negotiable Warehouse Receipt
O&M Operations and Maintenance
OAEs Own Account Enterprises
OBC Other Backward Classes
ODF Open Defecation Free
OG Operational Guidelines
OL Other Labour
OOP Out of Pocket
OSD Ofcer on Special Duty
PCI Per Capita Income
PD Project Director
PDI Panchayat Devolution Index
PDO Panchayat Development Ofcer
PDS Public Distribution System
PEG Private Entrepreneurs Guarantee Scheme
PESA Panchayats (Extension to Scheduled Areas) Act, 1996
PG Poverty Gap
PHC Primary Health Centre
PIM Participatory Irrigation Management
PIU Programme Implementation Unit
PMGSY Pradhan Mantri Gram Sadak Yojana
PO Programme Ofcer
PPP Public-Private Partnership
PRI Panchayati Raj Institution
PSTN Public Switched Telephone Network
PTR Pupil-Teacher Ratio
R&D Research and Development
R&R Rehabilitation and Resettlement
RBC Rural Building Centre
RBI Reserve Bank of India
RD Rural Department
xxx ABBREVIATIONS
RGGVY Rajiv Gandhi Gram Vidyutikaran Yojana
RGPSA Rajiv Gandhi Panchayat Sashaktikaran Abhiyan
RIDF Rural Infrastructure Development Fund
RLEGP Rural Landless Employment Guarantee Programme
RMSA Rashtriya Madhyamik Shiksha Abhiyan
RNFE Rural Non-farm Employment
RRB Regional Rural Bank
RRR Repair, Renovation and Restoration
RSBY Rashtriya Swasthya Bima Yojana
RTE Right to Education
RVE Remote Village Electrifcation
SARC Second Administrative Reforms Commission
SBI State Bank of India
SC Scheduled Caste
SDP State Domestic Product
SEARCH Society for Education, Action and Research in Community Health
SECC Socio-economic and Caste Census
SEZ Special Economic Zone
SFAC Small Farmers Agri-Business Consortium
SGSY Swarnajayanti Gram Swarozgar Yojana
SHG Self-help Group
SIFPG Self-Initiated Forest Protection Group
SLWM Solid and Liquid Waste Management
SMC School Management Committee
SMF Small and Marginal Farmers
SMT Social Mobilisation Team
SoR Schedule of Rates
SRI System of Rice Intensifcation
SRIJAN Self-Reliant Initiatives through Joint Action
SRLM State Rural Livelihoods Mission
SRRDA State Rural Road Development Agency
SS Shetkari Sanghatana
SSA Sarva Shiksha Abhiyan
SSAAT Society for Social Audit, Accountability and Transparency
SSC Sector Skill Council
ST Scheduled Tribe
STP Sewage Treatment Plant
SWC State Warehousing Corporation
TA Technical Assistant
TERI Te Energy and Resources Institute
TF Task Force
TFC Technology Facilitation Centre
TISS Tata Institute of Social Sciences
TNMSC Tamil Nadu Medical Services Corporation
TPDS Targeted Public Distribution System
TRAI Telecom Regulatory Authority of India
TSC Total Sanitation Campaign
UEE Universal Elementary Education
UHC Universal Health Coverage
UN United Nations
ABBREVIATIONS xxxi
URP Uniform Reference Period
USOF Universal Service Obligation Fund
VC Village Community
VEC Village Education Committee
VHC Village Health Committee
VHSC Village Health and Sanitation Committee
VSA Village Social Auditor
VWSC Village Water and Sanitation Committee
WBCIS Weather-based Crop Insurance Scheme
WDRA Warehousing Development and Regulatory Authority
WSA Wage Seekers Association
WUA Water Users Association
YAP Yamuna Action Plan
ZP Zilla Parishad
Aajeevika A programme of the Government of India that aims to improve the
rural poors existing livelihood options, build marketable skills, and
nurture the self-employed and entrepreneurs for micro enterprises
Adivasi Tribal
Ahar-pyne Term used for local rainwater harvesting system in Bihar
Anganwadi Basic child-care and mother-care centre
Antyodaya Anna Yojana A scheme of the Government of India to provide foodgrains to the
poorest families at highly subsidised rates
Arhtiya Middleman
Azolla A type of aquatic fern
Basti A settlement inhabited by poor people
Bazaar Market
Bharat Nirman A time-bound plan for developing rural infrastructure by the
Government of India in partnership with the state governments
and Panchayati Raj institutions
Bharatiya Kisan Union Farmers organisation
Bori Bandh Small dam constructed using sand bags
Chaur Term used for waterlogged lowlands in Bihar
Chullah Stove
Dalit Term used traditionally for those belonging to lower castes
Dhan Laxmi and Ladli Schemes aimed at enhancing the social status of girl child
Dhara Term used for local rainwater harvesting system in the Himalayan
region
Erie Term used for local rainwater harvesting system in Tamil Nadu
Gola/Kodambbae Traditional food storage structure
Gram Panchayat Village Council (local self-government at village level)
Gram Rozgar Sahayak/Sevak Employment Guarantee Assistant
Glossary
xxxi v GLOSSARY
Gram Sabha Village Assembly (consisting of all the adult electorate)
Grameen Bhandaran Yojana A scheme of the Government of India to provide storage facilities for agricultural
commodities for the farmers
Haat Weekly market
Happa Term used for a small tank constructed on private farming plots for rainwater
harvesting in parts of West Bengal afected by continuous natural resource
degradation
Harren Traditional irrigation system prevalent in semi-arid areas of Rajasthan
Himayat A placement-linked skill-development initiative for training and placement of
youth of Jammu and Kashmir
Indira Awaas Yojana A scheme of the Government of India to provide housing for the rural poor
Jajman A landed higher caste patron
Jajmani A traditional system whereby the landless service classes provide services to the
landowning higher castes
Jalswarajya A water supply programme of the Government of Maharashtra
Jamabandhi An administrative mechanism introduced by the Government of Karnataka to
improve the functioning of Gram Panchayats
Jan Sunwai Public hearing
Janani Suraksha Yojana A safe motherhood intervention of the Government of India under NRHM
Jat A community in north India
Jati Class
Jhum Term used for shifting cultivation
Jowar/Bajra/Ragi Forms of millets (coarse grains)
Jyotigram A scheme of the Government of Gujarat to ensure availability of 24-hour power
supply to rural areas
Kachcha Temporary
Kameen A person belonging to the landless service class
Kapildhara A sub-scheme of MGNREGS to provide irrigation facility for SC/ ST/ BPL/
land reforms/IAY benefciaries
Karnataka Rajya Ryota Sangha Karnataka State Farmers Association
Kudumbashree A women-empowering programme launched by the Government of Kerala
for wiping out poverty from the state through community action under the
leadership of local self-governments
Mahila Sabha Womens Assembly (consisting of all the adult women electorate)
Mandi Market
Naka Spot market
Nirmal Bharat Abhiyan A programme of the Government of India to provide sanitation facilities in
rural areas
Nirmal Gram Puraskar An award-based incentive scheme of the Government of India for completely
sanitised and open-defecation free Gram Panchayats, Blocks, Districts and
States
Nistar Community rights to collect, use and dispose of non-timber forest products
Nyaya Mitra A personnel with a minimum qualifcation of a bachelors degree in law appointed
to assist the Groundwater Grievance Redressal Ofcer
Panchayat Samiti/Taluk Local self-government at the block level
Panchayat/Mandal
Parishad/Mandal Panchayat
Pani Panchayat Form of water-user association responsible for equitable distribution of water
Pradhan Mantri Gram A scheme of the Government of India to provide all-weather road connectivity
Sadak Yojana in rural areas
GLOSSARY xxxv
Pradhanpati Term used for the husband of the female elected head of Gram Panchayat
(Village Council)
Pucca Permanent
Rajiv Gandhi Gram A rural electrifcation scheme of the Government of India
Vidyutikaran Yojana
Rajiv Gandhi Panchayat A scheme of the Government of India to strengthen Panchayati Raj system
Sashaktikaran Abhiyan
Rashtriya Madhyamik A scheme of the Government of India to enhance access to secondary education
Shiksha Abhiyan and to improve its quality
Rashtriya Swasthya Bima Yojana A scheme of the Government of India to insure poor families against hospitalisation
costs
Rogi Kalyan Samiti Patient welfare committee responsible for the management of public hospitals
through community participation
Sarpanch/Mukhiya/Pradhan Elected head of Gram Panchayat (Village Council)
Sarva Shiksha Abhiyan A programme of the Government of India to universalise elementary education
Shetkari Sanghatana Farmers organisation
Sinchai Samiti Irrigation committee
Swajaldhara A rural water supply scheme of the Government of India
Swarnajayanti Gram A scheme launched by the Government of India to provide sustainable income
Swarozgar Yojana to the rural poor
Swavalamban A central government pension scheme for the unorganised sector workers
Talab Term used for local rainwater harvesting system in the Bundelkhand region
Tanka Term used for local rainwater harvesting system in Rajasthan
Zamindar Traditional landlord
Zamindari Te system of collecting taxes from peasants by traditional landlords
Zilla Parishad/Zilla Panchayat District Council (local self-government at the district level)
1
PART
Image credit: Karan Gokani, 2013
R
ural India is undergoing a
sweeping transformation.
Te narratives of this
transformation range from
exciting stories of rural resurgence and
rapidly expanding rural consumption
to acute agrarian distress and large
numbers of farmers committing suicide.
We hear that rural Indians are fghting
corporate takeover of their land and
that rural militancy poses the greatest
threat to internal security. Contemporary
rural India actually is vastly complex,
subject to several new forces of change,
and does not ft neatly into any of these
characterisations.
Tis chapter presents some of the most
striking and critical changes afecting
rural India through a series of empirically
grounded, yet broad hypotheses and
stories. While other chapters provide
more granularity to these broad stories
and shed light on the huge variations
among regions and even within states, this
chapter aims to present the broader trends
that defne the Indian rural landscape.
In so doing, it and the rest of the report
raise important questions
and issues that stakeholders
should deliberate, research
and act upon as a new rural
India emerges.
1.1 Increased
Blurring of Rural-Urban
Boundaries
Increasing Rural-Urban Interconnectedness
India, in efect, defnes rural as not urbanurban areas
are (a) Statutory towns, viz. those administratively
notifed, such as municipalities and cantonments;
and (b) Census towns, viz. those with: (i) a minimum
population of 5,000; (ii) at least 75 per cent of male
workers engaged in non-agricultural pursuits; and (iii) a
population density of at least 400 per sq. km (1,000 per
sq. mile). Areas that do not meet these criteria are rural.
Sixty-nine per cent of India833 million people
live in rural areas. Te growth rate of this rural population
has declined substantially to just 1.2 per cent during
200111 from 1.7 per cent per year during 19912001.
Urban population growth, in contrast, was about 2.8 per
cent per year during both periods (Census 1991; 2001;
2011). Te markedly lower rural growth rate is largely
due to a faster decline in rural fertility rates, rural-to-
Contemporary rural
India is vastly complex,
with too many new
forces of change to ft
neatly into any single
characterisation.
1
CHAPTER
Rural Dynamics
4 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Urban areas and
growing small towns
rely heavily on rural
labourers who either
commute daily or
migrate for short
periods of time.
urban migration and the reclassifcation of villages as
urban units. At the same time, the proportion of rural
persons under 14 is declining while that of people
of working age and, to a lesser extent, of the ageing,
is growing.
But rural India is far from homogeneous. Villages vary
widely in size: while almost 2,20,000 villages, including
some remote and isolated hamlets, had fewer than 500
people, over 54 per cent of the rural population lived
in 18,768 villages of over 2,000 people (Census 2001).
Tese larger villages are rapidly becoming classifed as
urban. Some of them have emerged as vibrant growth
poles organically linked to urban centres and host to a
range of occupations. Villages thus must be seen in the
context of their changing and varied relationships with
urban India.
Urban-rural relationships are multi-dimensional and
evolving. Te farm sector has long provided food for the
urban population but the composition of agricultural
produce has been changing in response to changing
urban consumption patterns. Agricultural surplus is
sold through commodity markets which, while always
central to Indias rural economy, have undergone-rapid
transformation in recent years. New commodities,
the modernisation of markets through commodity
exchanges, future trading and the emergence of
organised retail strongly linked to farming, have brought
the rural and urban closer.
Linkage of Urban-Rural Labour Markets
Another, arguably more important, linkage is that of
labour markets, facilitated in large part by expanded
transport and communication networkspucca roads
and mobile phones. Tis illustrates how infrastructure
can transform rural lives. Urban areas and growing
small towns rely heavily on rural labourers who either
commute daily or migrate for short periods. Agricultural
wages have risen as rural workers move to better paying
non-farm jobs, creating rural labour scarcity. Growing
rural-urban integration is gradually changing villagers
horizons and gender roles in rural areas in both positive
and negative ways. As men migrate to urban areas for
work, for instance, women
gain more independence
and freedom in running
their homes, farms and
businesses. At the same
time, as in Tripura and
elsewhere, practices like
dowry are spreading from
urban to tribal communities that had not followed
them earlier.
Growing Rural Purchasing Power and
Rising Aspirations
Greater exposure raises rural aspirations for a better
quality of life and arouses appetite for consumer
goods. Recent data show that rural monthly per capita
consumption expenditure (MPCE) grew at a rapid 5.5
per cent a year between 200910 and 201112 (NSSO
2012). While average rural MPCE remains about half
of urban, the growth in rural income and expenditure
is refected in a sharp drop in rural poverty to less than
26 per cent from 34 per cent in just two years. With its
growing purchasing power, the rural market is no longer
a residual retail market. Products are being designed to
cater specifcally to rural demand. Rural India is making
its presence felt.
Rural people are also increasingly looking at education
as a means of social mobility, as a way out from the
villages, and as a means to improving their livelihoods.
School enrolment has gone up with near universal
enrolment at the primary level and school attendance
rates are rising. While rural literacy today is only 69 per
cent compared to 85 per cent in urban areas, literacy in
rural India increased by 14 percentage points between
1991 and 2001 and 10 percentage points between 2001
and 2011double the increase for urban India in both
periods. Often, rural people spend way above what they
can actually aford, including for private schooling, to
make sure their children have much better prospects
than they had. But critically, the generally poor quality
of education ofered remains a serious concern. What
the future holds for young unskilled workers in rural
India remains on open question.
1.2 Smallholder Farming has
become the Bedrock
of Rural Life
Fragmentation of Landholdings
Agriculture remains at the heart of rural livelihoods even
though the agrarian economy has changed in several
fundamental ways. Te biggest shock to the traditional
village system came with the abolition of the zamindari
system and the introduction of land reforms. Ironically,
what land reforms did haltingly from the 1950s through
the 1970s because of political pressures, demography
and population increase accomplished somewhat
comprehensively. Inter-generational transfers and sub-
Rural Dynamics 5
division of holdings among children primarily drove
landholding fragmentation. By 201011, roughly 67 per
cent of landholdings were marginal (less than 1 hectare
or 2.5 acres), up from 51 per cent in 197071. Including
another 18 per cent of land held by small farmers (1 to 2
hectares) brings the total to 85 per cent of all land being
held by small and marginal farmers, or 44 per cent of
total operated area (MoA 2012).
As part of this process, the reach of large landowners
has also come down. Even as late as 197071, certainly
not the heydays of zamindars, big landowners controlled
31 per cent of total operated area. By 201011 this
declined to less than 11 per cent. And what is called
a large farmer in Indiaanybody with more than 10
hectaresis generous by international standards.
Need for New Collective Farming Arrangements
Te predominance of
smallholder farming has
several implications. Small-
holder farms tend to rely on
family labour and do not
need or cannot aford out-
side labour, except perhaps
during the peak harvesting
season. In fact, larger fami-
lies may choose to lease-in
land to better employ available family members or to
work on others farms. Small farms have proven to be
more efcient than large ones in using land and re-
sources, and especially in cultivating labour-intensive
crops or tending livestock, but the holdings are often
too small to generate sufcient income to support a
family. Crucially, small farmers sufer serious disad-
vantages in marketing and distribution. Teir smaller
outputs, fragmented landholdings and often distant
location from major markets deprive small farmers of
access to modern storage facilities for perishable items
and distribution networks.
Smallholder farmers thus cannot survive if they stand
alone. To ensure their vi-
ability, new arrangements
such as collectives or pro-
ducer organisationsmust
evolve and be encouraged.
State and private sector
support in building supply
chains and infrastructure
that cater to small farmers
is also critical.
1.3 Increasing Agrarian
Commercialisation
and Risk
Trend Towards Commercial Farming
Another important agrarian trend has been a shift away
from subsistence farming towards commercial and high
value-added crops, including horticulture. Te area
under cultivation of vegetables, fruits, spices and fowers
has grown signifcantly over the past decades as has that
of non-traditional crops like soybean. Tis move has
brought farmers greater prosperity. Te promised higher
proftability of certain genetically modifed (GM) cash
crops such as cotton has also attracted farmers, though
mainly larger ones.
Growing Importance of Livestock
Many farmers have also turned to livestock as an
additional source of household income and a bufer
against crop failure. All farm sizes and, in fact,
overwhelmingly smaller farmers, are diversifying their
output through livestock,
especially dairy and poultry.
Numerous studies in
developing countries have
shown that livestock serves
as an important road out of
poverty for smaller farmers
(see for instance Birthal et
al. 2013).
Risks of Commercial Farming
But commercial farming and commodity markets
carry risks. While cash crops like cotton, sugarcane
and soybean were always grown for markets, now even
staples like wheat, maize and rice are traded. As these
markets expand to reach previously untouched areas, a
signifcant portion of the rural population is exposed to
highly volatile commodity price movements, driven by
global and local factors. Today more than 50 per cent
of Indias crop output (rice, ragi and jowar) is marketed,
including as much as 45 per cent of even small farm
produce (GoI 2002).
Commercial farming, started under the green
revolution, relies heavily on commercial inputs such as
purchased seeds, chemicals, fertilisers and tube wells,
which increase cultivation costs. Being water-intensive,
commercial farming is particularly risky in rainfed and
dryland areas. Borrowing funds for inputs is risky in the
event of crop failure, particularly for small and marginal
Small farms are more
efcient, especially
in cultivating labour-
intensive crops or
tending livestock,
but landholdings are
too small to generate
sufcient household
income.
Many farmers have
turned to livestock as
an additional source of
household income and
a bufer against crop
failure.
Given the predominance
of smallholder farmers,
new arrangements
such as collectives
or producer
organisations
must evolve and be
encouraged to ensure
their viability.
6 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
farmers who lack investible surplus and access to
institutional credit, and must rely instead on extortionary
moneylenders, sometimes because they lack collateral or
clear land title. Tese farmers not only pay higher interest
but also face coercive loan recovery means.
Indebtedness and lenders confscating land were
the main causes of the estimated 1,98,000 farmer
suicides between 2001
and 2012, almost two-
thirds of which were in
Maharashtra, Andhra
Pradesh, Karnataka,
Madhya Pradesh and
Chhattisgarh (NCRB
n.d.). Tese issues persist. As borrowing increases,
whether to cover agricultural needs or marriage or
medical expenses, this remains a critical issue to
address, along with insurance and social security.
Need for New Farm Models
Because as much as 55 to 65 per cent of Indias sown
area is either dryland or rainfed, new models of
commercial farming better suited to such areas must
be developed. Cultivation of millet (jowar, bajra, ragi)
and other dryland crops must be encouraged to ensure
food, nutritional, and water
security, community self-
reliance, and bio-diverse
and ecologically sound
farming. Tis becomes even
more important with the
threat of climate change.
One way of encouraging
millet production is
through greater public procurement of milletwhich
is currently extremely limitedand distribution
through fair price shops. A successful and growing shift
towards sustainable, chemical-free, natural farming that
signifcantly decreases cultivation costs while sustaining
or raising yields, also holds promise.
1.4 Rise in Rural Non-farm
Employment: Distress or
Opportunity?
Rise in Rural Non-farm Employment
But rural livelihoods are not only agrarian. Te number of
households that depend on rural non-farm employment
(RNFE) as their primary source of income has increased
from nearly 32 per cent in 199394 to over 42 per cent
in 200910 (NSSO 2011).
Almost 40 per cent of rural
labour households own
land (MoLE 2011)rural
labourers, thus, are not just
the landless. A person who
farms his own land also
works as a wage labourer
on someone elses land,
rears cattle, and migrates in search of work after the
agricultural season ends. Such overlapping livelihoods
have become a marked feature of rural life as smallholder
farmers are forced to combine diferent occupations in a
desperate bid to survive.
Shrinking farm sizes, increasing cultivation costs
and declining returns have no doubt been factors in the
growth of non-farm employment. Surveys show that
cultivators are losing interest in agriculture because it is
not proftable or too risky (NSSO 2005). Te Census
2011 reports fewer cultivators than a decade ago in
almost all states (with Maharashtra, Rajasthan, Assam,
Himachal Pradesh and some of the north-eastern
states being exceptions). Te family farm is losing its
esteem as a precious gift to be passed on in perpetuity.
Growing aspirations for social and cultural mobility
have also played a role. With the prolonged agrarian
crisis starting from the mid-1990s, villagers believe that
one of the most reliable ways of escaping their rural
confnes is to seek alternative work in towns. Tat is
why villagers who migrate to cities are overwhelmingly
from the poorer, uneducated and unskilled groups. Tis
is simply because most poor farmers see little hope in
their traditional occupations.
Rural Non-farm Employment: Opportunity
or Distress?
Rural non-farm employment is not necessarily a sign
of distress. Often RNFE increases in areas of high
agricultural productivity. Highlighting the long-term
relationship between high productivity and high RNFE,
Chand (1996) argues that higher incomes increase
demand for products and services, which lead to
increased non-farm employment. RNFE also has other
pull factors. Urban growth, for example, increases the
demand for labour which rural workers meet, either by
short-term migration or daily commuting.
A marked feature of rising RNFE is that it is
dominated by casual labour, which ofers a better
wage than agricultural labour. Former agricultural
labourers, many of whom are from Scheduled Castes
Because as much as
5565 per cent of Indias
sown area is either
dryland or rainfed, new
models of commercial
farming better suited
to such areas must be
developed.
Indebtedness and
lenders confscating
land were the main
causes of the estimated
1,98,000 farmer suicides
between 2001 and 2012.
Overlapping livelihoods
have become a marked
feature of rural life as
smallholder farmers
are forced to combine
diferent occupations
in a desperate bid to
survive.
Rural Dynamics 7
There is a slow
breakdown of caste
hierarchies and
associated occupations.
(SCs), have switched to
non-farm casual work in
large numbers. RNFE
thus has given them social
mobility that they never
had before due to their
lack of social and fnancial
capital to start a business
or get a regular job in
the government or private sector. But casual labour
unfortunately ofers no job security or health, pension
and other employment benefts.
1.5 The Declining Role of
the Agrarian Economy:
Social and Political
Consequences
Are Caste and Gender Relations Showing Signs
of Change?
As long as village relationships pivoted around
agriculture, caste hierarchies played a signifcant role in
rural India. Te landed class in a village was at the top
and its whims determined the status of the other jatis in
the hierarchy (Gupta 2010). It was typical for the rich,
landed farmers to have poor Dalits and the landless work
as attached labour year-round, tied to them by a cycle
of indebtedness. As the size of landholdings shrank, it
became the era of the family farm and that too, with
many household hands available for work. As a result,
if outside labour became necessary at all, it was only for
short periods, typically during harvesting season. At the
same time, increasing alternate non-farm employment
opportunities have given agricultural labour an exit.
An important consequence of these changes has been
a gradual breakdown of the traditional hierarchies of
cultivators and indebted labour.
Tis change in social relations, for example, has been
reported in green revolution villages in Haryana ( Jodhka
2012). While the upper and locally dominant castes
(which include the upper layer of the other backward
castes) continue to control the agrarian economy, rela-
tions between them and the labour class have changed
considerably as the incidence of attached labour has
signifcantly declined. Even if they are hired, attached
labourers typically are from outside the village and the
relationship is more formal. With the proliferation of
family farms, and rising agricultural wages, the demand
for labour is also declining. And Dalits are increasingly
rejecting the subordination of agricultural labour jobs in
favour of government jobs,
entrepreneurship opportu-
nities or even casual labour.
All these represent a slow
breakdown of the corre-
spondence between castes and occupations, although
more studies from other parts of India would be re-
quired to confrm these results.
Te declining importance of agriculture is lowering
the power and prestige associated with land ownership
in rural areas. Land owner-
ship still counts in the rural
power structure but less so
as newer sources of power
emerge, including access to
education, urban jobs and
links with the urban elite.
As interest in agriculture
as a source of livelihood de-
clines, particularly amongst
the younger generation, the
rural elite move to urban
areas with the surplus earned from farming and often
lease out their land in parcels to smaller cultivators. Tis
may also mean that they switch to non-farm occupa-
tions, including the service sector. Many wealthier farm-
ers choose to have one son working in a city, for example,
while another works on the farm.
Relations between women and men also are
changing. As more men move towards non-farm jobs
outside the village there has been a feminisation of
agriculture. While agriculture still has fewer women
than men, 79 per cent of the rural female workforce
worked in agriculture in 200910 compared to 63 per
cent of the male workforce (NSSO 2011). Also, the
share of men working in agriculture has declined much
more compared to women since the 1980s, as men leave
farms in the care of their wives and parents and migrate
in large numbers in search of jobs, even for short
periods. But while women remain highly dependent
on agriculture, they own a disproportionately small
percentage of land.
With men leaving farms increasingly in charge of their
wives, the social status of women is gradually changing
in some areas. Tey have greater decision-making power,
even if decisions are coordinated with their husbands
by mobile phone. In conservative villages in Bihar, for
instance, studies show that while their workload has
increased as a result of male migration, women now
assume more visible roles and travel outside the village,
The declining
importance of
agriculture is lowering
the power and prestige
associated with land
ownership as newer
sources of power
emerge, including
access to education,
urban jobs and links
with the urban elite.
Former agricultural
labourers, many
of whom are from
Scheduled Castes have
switched to non-farm
casual work in large
numbers which has
given them social
mobility.
8 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
for example, to take children to a doctor or to go to the
market (Rodgers and Rodgers 2011). Tey assume
more responsibility for fnances and even do wage work
to supplement their income, which they would not have
done earlier, partly incentivised by the narrowing wage
gap between male and female labour.
Another development, the growth of self-help
groups (SHGs), is also contributing to the changing
role of women. SHGs, primarily composed of women,
empower them, potentially broadening their horizons
and expanding their capabilities (Shah et al. 2009),
including inculcating saving and banking habits. SHGs
have been growing in numbers and had nearly 57 million
members by 2012.
Shifs in the Character of Rural Caste Politics
Since the late 1970s, once the landed class began
declining, people who had earlier been subjugated
found it easier to raise their voices against past in-
justices, often caste oppression. Castes with similar
interests under the village power structure banded
together. Tis began with mobilisation of SCs and
then spread to other back-
ward classes (OBCs).
Communities that did not
eat or smoke the hookah
together thus frequently
united as a political inter-
est group. Te era of vote
banks for the old landed
class disappeared as the
landed class no longer had the power to determine
village economy, and the political power of SCs and
OBCs correspondingly grew.
Tis brought about a major shift in rural politics.
Earlier, agrarian unrest meant a face-of between
landlords and landless. But since the late 1970s, farmer
movements or agitations have been increasingly directed
at forces outside village boundaries, especially the State
and, more recently, corporate interests that impinge on
their survival (Lindberg 1994; Chatterjee 2008a). Now,
small, medium and large farmers demand lower input
costs, higher minimum prices for their produce, and
debt relief from the state. Teir central argument is the
existence of an urban bias encapsulated in the slogan
Bharat versus India. Some had strong charismatic leaders,
such as the Shetkari Sanghatana (SS) in Maharashtra
led by Sharad Joshi, the
Bharatiya Kisan Union
(BKU) in Uttar Pradesh
led by Mahendra Singh
Tikait, and the Karnataka
State Farmers Association
or Karnataka Rajya Ryota
Sangha (KRRS) led by
Nanjundaswamy.
Tey used various meth-
ods including demonstra-
tions, blocking of the food
transport system, denying ofcials access to villages, re-
fusing to pay outstanding bills and withdrawing crops
from local markets to raise prices (Brass 1994). While
they brought together peasants from diferent castes,
most commentators agree that these movements were
dominated by rich and middle-income farmers and paid
little attention to the conditions and needs of the rural
labourers (Brass 1994; Assadi 2002). Certain interest
groups also have specifc demandsfor example, land-
owning Jats demand power subsidies, while various caste
groups demand more job reservations. All these changes
in the character of rural politics and mobilisation are
important aspects of the rural transformation of India.
1.6 Exploitation of Natural
Resources
Another dimension to the shifting social order and
rising tensions is the natural resource context in rural
areas, which is closely linked to economic activities.
Much of the unrest in rural areas is due to lack of access
to basic resources to sustain livelihoods.
Competing Demands for Natural Resources
Natural resources are increasingly the subject of
confict. Land, the primary rural asset and livelihood
resource, is now subject to competing demands from
agriculture, industry and urban development. Land-
use decisions are not driven solely by market processes.
States often acquire land for public purposes, which
is broadly defned and has included a range of activities
from mining, dams and highways, to creating special
economic zones (SEZs), even industry. In the process,
many have been displaced and lost their livelihoods
without adequate compensation and resettlement.
1

Once the landed class
began declining, people
who had earlier been
subjugated found it
easier to raise their
voices against past
injustices, often caste
oppression.
Earlier, agrarian unrest
meant a face-of
between landlords
and landless. But since
the 1970s, farmer
agitations have been
increasingly directed at
forces outside village
boundaries, especially
the State and, more
recently, corporate
interests.
1
In fact, an unofcial estimate indicates that, in the period from Independence up to 2004, of the people displaced, 40 per cent were
tribals, 20 per cent SCs and another 20 per cent OBCs. And, only one-third of displaced persons of planned development have been resettled
(Fernandes 2008).
Rural Dynamics 9
The pressure on natural
resources has placed a
great degree of stress
on the countryside,
with deep economic
consequences and a
high degree of social
and political strife.
Forests have been another issue of keen confict in
tribal areas. Te mineral resources of the country happen
to be mostly located in areas which are forested and
the exploitation of these resources calls for disruption
of the livelihoods and displacement of the forest-
dwelling tribal communities. So, the corporate quest
for minerals, timber and land has led to land alienation
and widespread discontent, and pitted rural populations
in direct confict with industry. Another dimension of
tribal alienation has been as a result of forest reservation
by the government, which curtailed the customary rights
of the forest-dwelling communities for grazing, shifting
cultivation and so on, thereby afecting their livelihoods.
Water has also been a source of contestation, with a
spate of serious struggles over the construction of large
dams which displace many people, access to water by
diferent groups and the sharing of river waters among
states. Growing urban and industrial water demands are
often met by sourcing water from rural areas, depriving
rural communities of irrigation water and sometimes
even basic drinking water.
As a result, rural populations in some places have
come together to protest being displaced and to demand
their entitlements. Te movement against dams on
the Narmada, for instance, epitomises the growing
opposition to large dams and mega irrigation projects,
which continues even though some dams have already
been constructed. In addition, recent farmer protests in
Nandigram against the West Bengal governments forced
acquisition of their land and protests by Mahuva farmers
against corporate takeover of village wetland in Gujarat
are examples of peasants pitted against corporations and
the State and the success of the locals in these instances
may portend a slow shift in the power balance. Similar
struggles in many parts of rural India over forest rights
are now redefning rural politics, and the left-wing
extremism is partly a manifestation of this tension.
Tese various conficts have brought issues of re-
settlement of, and compensation for, people afected
by development projects to
the fore. Teir challenges
have slowly been recognised
and their rights have been
provided some legislative
support. Recent legisla-
tionsuch as the Pan-
chayats (Extension to
Scheduled Areas) Act
(PESA) and Scheduled
Tribes and Other Tradi-
tional Forest Dwellers (Recognition of Forest Rights)
Act (FRA)has granted communities rights to
live in forests and collect and use minor forest pro-
duce, and prevent alienation of land in Scheduled
Areas. But the actual implementation of these Acts
has been hesitant and incomplete. Yet, the success of
tribal protests against bauxite mining in the Niyama-
giri hills in Odisha, with all twelve gram sabhas (GSs)
rejecting the mining proposal in AugustSeptember
2013 under PESA, is a sign of their empowerment.
Te new Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation
and Resettlement Act is also trying to redress the
power imbalance by providing the displaced with
better compensation and, in addition, resettlement
and reallowance in the form of land-for-land, housing,
and employment or annuity payments. Te Act also
provides for those who may not own the acquired land
but depend on it for their livelihoods.
Overexploitation of Resources
Rural agrarian livelihoods depend heavily on natural
resources, but a vicious cycle of over-exploitation and
degradation of resources has set in which negatively
impacts livelihoods and health.
Te severe degradation of land is a key concern, with
57 per cent of the total land area degraded on account
of environmental and man-
made reasons, such as soil
erosion due to water run-
of and loss of vegetative
cover, over-use of chemicals
in agriculture, and more
intensive cultivation.
India is also facing an
impending water crisis
which threatens the availability of safe drinking water.
While large surface irrigation projects continue to face
resistance, the mode of irrigation has undergone a
signifcant shift in the last 40 yearsgroundwater has
replaced surface water as the major source of irrigation,
now accounting for over 60 per cent of gross irrigated
area. From a modest number of around 2,00,000 in
1960, the number of pump sets to extract groundwater
exploded to over 20 million in 2009. Tis dramatic
rise has been driven by green revolution policies and
subsidies on irrigation pumpsets and electricity, as well
as the greater control that groundwater gives farmers
over timing and quantity of water. High levels of
extraction have amounted to virtual groundwater mining
While recent
legislationssuch as the
Panchayats (Extension
to Scheduled Areas) Act
and Forest Rights Act
(FRA)have granted
communities rights
over forests, actual
implementation of these
Acts has been hesitant
and incomplete.
10 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
in many places, and the Central Groundwater Board
has designated one-third of districts in the country as
unsafe (districts in which gross annual groundwater
withdrawn exceeds 70 per cent of net annual recharge),
up from 9 per cent in 1995 (Vijayshankar et al. 2011).
Groundwater over-exploitation also has led to
intrusion of arsenic and fuoride, with severe health
and environmental consequences. Indiscriminate
contamination of our water sources due to untreated
wastewater from industry, agriculture and households is
putting strains on the countrys already limited usable
water resources. More than 70 per cent of Indias surface
water is unsafe for drinking and farming (MoEF 2009).
In the future, rural development strategies clearly
cannot ignore the issue of natural resources and must
address both their conservation and sharing. An
appropriate balance must be struck between enhancing
livelihoods and protecting natural resources.
1.7 Contours of Regional
Inequality and Social
Deprivation
Poverty is multidimensional and encompasses, apart
from income poverty, deprivation of rights and freedoms
including education, health, safety and access to basic
amenities that support and foster human capability and
empower people. In terms of consumption, poverty has
declined rapidly over the past decade and, in particular,
in the last couple of years. An important factor has been
agricultural productivity and growth since the mid-
2000s. Urban growth has also contributed signifcantly
to reducing income poverty, not only in urban areas but
also in nearby rural areas. Multidimensional poverty
measured by the Multidimensional Poverty Index or
MPI (which looks at multiple deprivations households
face in education, health and standard of living) has
also reduced, though not sufciently rapidly.
2
But, the
aggregate trends should not mask the ever-widening
regional disparities.
Widening Regional Disparities
Tere has been an impressive decline in rural income
poverty at the aggregate level, from 42 per cent in
200405 to 26 per cent in 201112. But a marked
feature of the trend in poverty is its growing regional
concentration. In 1993
94, Uttar Pradesh, Bihar,
Assam, Jharkhand, Odisha,
Chhattisgarh and Madhya
Pradesh accounted for 50
per cent of the rural poor, and this share increased to
65 per cent by 201112.
Even beyond income, these seven poor states along
with Rajasthan generally fare worst on social indicators
such as health, nutrition and education and have the
poorest penetration of basic infrastructure such as
drinking water, sanitation and electricity. And, in fact,
between 1999 and 2006 poor states such as Bihar,
Madhya Pradesh, Rajasthan and Uttar Pradesh, made
the smallest improvements in multidimensional poverty
measured using the MPI (Alkire and Seth 2013).
Another indicator is the concentrated lack of basic
services in large areas of these states. If all the districts
in the country are grouped into quintiles according to
their households access to basic services (drinking water,
sanitation and electricity) in rural areas, then almost
all of the bottom two quintile districts are in Bihar,
Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha,
Rajasthan and Uttar Pradesh.
Tere are regions of
deprivation even within
more developed states. For
instance, Andhra Pradesh,
Karnataka and Maharashtra
too have districts in the
lowest quartile in the
country in terms of both
poverty and social indicators
such as health, nutrition and
education. Many of these regions are located in drought-
prone rainfed areas.
A major concern is that disparities are growing
inter-state, intra-state, and even intra-district. Poor
states have recorded high economic growth rates
recently, but per capita income disparities between states
have continued to rise. Over time, the inter-district
disparities in per capita income have also increased in
most states, including the poor states of the northern
and central belt which have some pockets witnessing fast
growth (Planning Commission 2013). And even within
districts there are wide variations in poverty rates, with
2
Alkire and Seth (2013) fnd the reduction in poverty measured by the Multidimensional Poverty Index between 1999 and 2006 was greater
than that of income poverty. But even Indias best-performing states, Kerala and Andhra Pradesh, progressed just over half as fast as Nepal or
Bangladesh.
A marked feature of the
reduction in poverty
is its growing regional
concentration.
Inter-district disparities
in per capita income
have increased in
most states and within
districts the blocks
with higher shares of
Scheduled Tribes often
have much higher
poverty.
Rural Dynamics 11
blocks with higher shares of STs often having a much
higher incidence of poverty.
Caste and Gender Exclusion Remain
a Stark Reality
Caste and gender inequalities, rooted in traditions,
continue to perpetuate social exclusion. Dalits or SCs
and adivasis or STs comprise close to 30 per cent of
Indias rural population (18.5 per cent are SCs and 11.3
per cent are STs (Census 2011)). Tese groups face high
deprivation and oppression, although their challenges
are somewhat diferent. Being integrated into the fabric
of rural life, at the lowest rung, SCs face almost daily
discrimination by upper castes, while STs sufer due to
their often remote locations, although this ofers them
some degree of autonomy.
Of all social groups, STs have the highest level of
poverty at close to 50 per cent followed by SCs at 42
per cent. Despite progressive legislation and political
mobilisation, they continue to face severe discrimination
which not only limits their participation in the economic,
social and political spheres but also their access to
education, healthcare and other social goods.
STs are by far the most deprived of most public
services due to which they have the worst education and
health outcomes. SCs are also often deprived in essential
services and are still discriminated against in employment
and wages, in setting up their own businesses and in
access to village resources such as common land or
fair price shops. Upper castes within the village or the
administration often violate the civil rights of these
marginalised groups by denying them access to justice
and even physically assault them where they attempt to
assert their rights (Planning Commission 2008). STs
sufer political exclusion, often due to a lack of fnances
to contest elections or, like SCs, are rendered token when
they are appointed to reserved panchayat seats.
Te subjugation of and discrimination against wom-
en is another pervasive aspect of the social inequities.
Tough numerous legislations ensure formal equal-
ity with men, women continue to be discriminated in
terms of property rights, wages and political repre-
sentation and even in access to basic services such as e
ducation, healthcare and nutrition. In particular, SC
and ST women routinely face harassment, sexual
exploitation and violence
without provocation or
merely for using public
lands (Planning Commis-
sion 2008). Lower caste
women often fnd even the
process of fling a complaint at a police station to be
fraught with danger. Sadly, socially degrading prac-
tices like manual scavenging, the devadasi system, and
trafcking of women and children continue (Planning
Commission 2008).
1.8 The Gradual but
Irrevocable Movement
Towards Political
Decentralisation
Te State is seen as both benefactor and adversary in
rural lives. Te central government, on the one hand, has
recently focused on improving the assets, capabilities and
livelihood security of the rural population, with increased
public spending in rural areas (estimated at around Rs
1 lakh crores in 201213) through centrally-sponsored
programmes.
3
Te central government has increasingly
adopted a rights-based approach, guaranteeing fve
critical rights to the poor over the past decaderight
to information, to work, to education, forest rights to
tribals and other traditional forest dwellers, and more
recently the right to food. But there have been numerous
implementation challenges that have prevented the
translation of these rights into improving outcomes and
empowering populations on the ground.
In many instances, the states track record of
providing adequate compensation and rehabilitation
to those displaced by land acquisition and in protecting
the rights of vulnerable forest dwellers has not been
encouraging, notwithstanding legislation (PESA and
FRA) to that efect. Te failure to adequately address
and alleviate landlessness and discrimination against
Dalits and tribals has led to the emergence of insurgent
groups such as the Naxals, fghting for the rights of these
marginalised populations.
Since 200910, the government has stepped
forward to increase investment in areas afected by left-
wing extremism through the Integrated Action Plan
3
Tese include Bharat Nirman, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Rural
Livelihoods Mission (NRLM), Rajiv Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA), Pradhan Mantri Gram Sadak Yojana (PMGSY),
Integrated Watershed Management Programme (IWMP), National Rural Drinking Water Programme (NRDWP), Nirmal Bharat Abhiyan
(NBA) (formerly Total Sanitation Campaign), and National Rural Health Mission (NRHM).
Caste and gender
inequalities, rooted in
traditions, continue
to perpetuate social
exclusion.
12 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
(IAP) that focuses on building basic infrastructure.
Besides this and other special area programmes,
the government also addresses regional inequalities
through favourable norms of fnancial assistance in
the centrally sponsored schemes, but this has not
resulted in desired outcomes in part due to their weak
institutional and governance structures.
Failure in Public Provision of Vital Social Services
Overall, the impact of government interventions has
fallen short often due to poor delivery, resulting in
inadequate basic infrastructure, poor health outcomes
and low learning levels among school children. Over
half the students in class V could not read a class II text
and three quarters could not do simple division in 2012.
And learning levels have worsened since 2010 when the
Right to Education became efective, partly because it
has been input focused addressing the underlying causes
of poor outcomes (ASER 2013).
Rural health outcomes, as judged by child and maternal
mortality rates and the high levels of malnutrition, are
also alarming. Forty-eight per cent of children under fve
are stunted (too short for their age), indicating half the
countrys children are chronically malnourished (IIPS
and Macro International 2007). While the maternal
mortality rate halved over the past 30 years, it still remains
unacceptably high, and India has the highest percentage
of anaemic pregnant women in the worlda staggering
87 per cent (Planning Commission 2011). Improving
outcomes requires providing food and medical care and,
equally importantly, ensuring environmental hygiene
and also providing safe water and sanitation. But despite
increased fund allocations to rural infrastructure,
access to and the quality of infrastructure has been
disappointing. Twenty per cent of rural households have
none of the three basic servicessafe drinking water,
sanitation and electricityand only 18 per cent have
access to all three.
Te failure of public services has, in most places
led to a growing dependence on private providers for
social services. While barely 3 per cent of rural school-
going children in 1993 attended private schools, today
about 28 per cent of rural
primary school age children
attend private schools and
23 per cent receive private
tuitions (NCERT 1998;
ASER 2012). Given the
abysmal state of public
health provision, private
healthcare entities have mushroomed and about two-
thirds of rural households obtain healthcare from
private providers.
What are the underlying causes of the poor public
services? Among the main causes for poor service
delivery is lack of accountability. Te system of public
delivery of services is plagued by corruption across
sectors and at all levels. Lack of accountability in the
provision of vital social services is also refected in the
high rate of absenteeism among government teachers
and healthcare providers and even those that attend put
in very little efort. In the case of infrastructure too there,
government programmes have, until recently, followed a
top-down approach with little community involvement
and weak monitoring and accountability. And where the
government has tried to focus on the most vulnerable,
efective targeting has been a challenge and there have
been signifcant inclusion and exclusion errors where
non-poor households have beneftted and genuinely
poor households have been neglected.
Recognising the importance of well-defned
monitoring and evaluation of programmes, the
government is setting up a Concurrent Evaluation
Ofce at the MoRD to help learn how well programme
objectives are achieved and whether programme
design or policy needs to be modifed. In addition, to
improve benefciary selection it has undertaken a socio-
economic and caste census (SECC) 2011, for the frst
time collecting data on the multiple social and economic
deprivations that constitute poverty. Te census results
will be verifed by GSs and be used to identify potential
benefciaries of diferent welfare and entitlement-based
schemes, regardless of whether they have a (below
poverty line) BPL card.
Te government is also trying to introduce
mechanisms to ensure greater transparency and
accountability through initiatives such as social audits,
wall painting and other transparency safeguards, as well
as the use of technology for improving delivery. Much of
the accountability rests on community involvement, and
hence there is increasing emphasis on decentralisation
in implementation and monitoring of government
programmes.
Te Move Towards Political Decentralisation
A major change in the governance structure that could
transform rural life is the gradual but irrevocable
movement towards political decentralisation since the
enactment of the 73rd Amendment to the Constitution.
Local self-government or panchayati raj institutions
With a breakdown in
government delivery of
vital serviceshealth
and educationrural
households increasingly
turn to the private
sector.
Rural Dynamics 13
(PRIs) now play a major
role in the implementation
of most centrally-sponsored
development programmes.
More functions and funds
are being transferred to
PRIs.
But while their decision-
making power seems to be
rising, PRIs in many parts of the country are ill-equipped
to serve in the roles entrusted to them. Recently, the
Ministry of Rural Development (MoRD) allocated
1per cent of its budget to the Ministry of Panchayati Raj
to strengthen infrastructure, build capacity and monitor
PRIs. An underlying aim of a number of programmes,
MGNREGS and NRLM-Aajeevika in particular, is to
strengthen the voice of people so that they can demand
greater accountability and results from local and state
administration. PRIs thus serve as important platforms
for political mobilisation and grievance redressal. Teir
severe lack of capacity needs to be addressed immediately
for them to be agents of transformation. So, one plank
of the government approach is to build the capacity of
PRIs and incentivise greater devolution to develop and
implement plans in a participatory way.
Another plank is to give greater fexibility to state
and local governments in the use of funds in centrally-
sponsored schemes (CSSs). Te Central government
has also recently set up a Rural Development Flexi-
Fund, which is intended to give state governments the
fexibility and additional resources to address state-
specifc needs especially for innovative social sector
services, and empowering PRIs.
In Conclusion
Te many facets of rural India are complex and the ones
discussed above are by no means all. Rural transformation
varies across regions in manner and pace and its impact
on pre-existing caste-community-class confgurations is
also highly varied. Subsequent chapters will attempt to
shed light on the regional diversity within the broader
stories outlined here. Tis India Rural Development
Report attempts to bring together and share certain
lessons and experiences of rural development and
provide the big picture of rural India.
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Image credit: Karan Gokani, 2011
Summary
T
he structural transformation
of the Indian economy from
agriculture has been slow.
Although agriculture as a
share of Gross Domestic Product (GDP)
has dramatically declined to under 15 per
cent, half of the country still works in
agriculture. While the rural labour force
has grown, urban absorption of labour,
particularly in the manufacturing sector,
has not grown much. At the same time,
the rural economy itself has changed in
several fundamental ways and has grown
to encompass both farm and, increasingly,
non-farm sources of livelihood.
With the inter-generational transfer
and sub-division of lands, 85 per cent of all
farmers are small and marginal cultivating
44 per cent of the land in the face of imm-
ense challenges. Many cannot obtain formal
credit and must rely on moneylenders.
Tey have dif culties leasing in land due
to restrictive tenancy regulations in many
states. Tis has encouraged short-term
unrecorded tenancies on insecure terms.
At the same time, the growing demand for
competing, non-agricultural land use, and government
land acquisition for public purposes has alienated
farmers from their land.
Many small and marginal farmers are diversifying to
commercial cropping. Due to their low holding power
and poor access to modern supply chains, they are often
compelled to sell soon after harvest, to local traders at
low prices. While this has benefted many, it increases
risk due to price volatility and lack of storage facilities.
Cultivation costs also have risen sharply and, coupled
with no new breakthrough in crop yields, are eroding the
viability of farming on smaller parcels of land.
Tese conditions are accentuated for farmers in
dryland and rainfed areas which constitute 5565
per cent of the cultivated land. Agrarian policies,
however, have not adequately addressed their concerns.
For instance, the green revolution which saw the
country transition from subsistence to water-intensive
commercial farming bypassed many, particularly farmers
in dryland areas. Yet no new agricultural models have
been developed to suit their more specifc needs.
But there have been certain encouraging responses to
these challenges. Smaller farmers have formed collectives
to farm on a larger scale and jointly access markets and
fnance. A small but growing number of farmers are
moving to non-chemical farming, building on traditional
knowledge, while reducing costs of cultivation and
improving sustainability. Tis has resulted in increased
2
CHAPTER
Livelihoods
18 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
incomes, better soil health and improved yields. Tese
initiatives point to the steps that must be taken going
forwardaddressing the scale issues of small farmers,
investing in technology breakthroughs and promoting
crop models suitable to dryland, rainfed conditions.
Over the past two decades, rural livelihoods have
become increasingly non-farm based. Te prolonged
period of agrarian distress from the mid-1990s through
the mid-2000s led farmers to diversify into livestock
and shift towards non-farm employment to enhance
their incomes. Many farmers combine work on their
own land, with livestock rearing; they also work as
labour on anothers farm and migrate for non-farm
work in the of-season. Increasingly, male members of
the household commute to nearby towns or migrate
seasonally as unskilled labour. With 43 per cent of rural
households relying on non-farm income as their major
source of income, the non-farm sector has substantially
contributed to reducing rural poverty.
While much of the diversifcation into non-farm
employment was due to a push from agricultural
distress, recently there are also signs of a pull, particularly
from opportunities stemming from urban growth. Rural
manufacturing was the largest non-farm employer but
recent growth in non-farm employment is largely driven
by trade, construction and transportation sectors.
Tese shifts have positive mobility implications for
the socially disadvantaged. As much as two-thirds of
the increase in non-farm employment now is in the
form of casual wage labour. Tese are often the landless
or Scheduled Castes (SC) who worked as agricultural
labour but now get better wages as casual labour. Te
opportunity to exit from traditional village social and
economic hierarchies has been a boon for them. But
casual labour provides no job security or benefts and
more secure formal employment has barely grown.
And too many impediments to improving rural
livelihoods persist. Te most signifcant appear to
be a lack of capital, difculty in accessing markets for
produce and a lack of skills, particularly vocational skills.
Previous government skill programmes lacked market
links that could provide trainees placement possibilities.
To address this critical gap, the government launched
Aajeevika to help the poor develop sustainable farm
and non-farm livelihoods, through mobilising and
supporting self-help groups (SHGs) with technical
and marketing knowledge and fnance; engaging with
the private sector for placement linked skill training;
and nurturing entrepreneurs for micro enterprises. Te
results of Aajeevika remain to be seen.
2.1 Rural Income and
Employment: Paradoxes,
Challenges and Prospects
Indias GDP grew at its fastest rate ever in the frst decade
of the twenty-frst century. Tis drew world attention
and India became known as one of the worlds BRICS
emerging economies (with Brazil, Russia, China and
South Africa). But it also brought paradoxes. While the
economy grew, employment growth declined. Even with
declining employment growth, poverty rates declined.
And rural income and employment grew fastest in the
frst half of the decade even during widespread agrarian
distress.
Tis chapter explores these paradoxes and looks
for plausible explanations as rural India undergoes a
transformation. Te development path of many countries
refects the declining role of agriculture in employing
people and sustaining livelihoods as manufacturing and
services assume greater importance. Tis is also usually
associated with increasing urbanisation. In India,
this structural transformation has been slow. While
agriculture as a share of GDP dramatically reduced
to under 15 per cent in 200910, half the countrys
workforce still worked in agriculture in that period
(NSSO 2011). Te rural labour force grew but was
not absorbed into the urban economy and especially
the manufacturing sector. How have rural people coped
with these circumstances?
This chapter looks at the changing agrarian
economy and its implications for livelihoods. It then
attempts to explain the role of the non-farm economy
in rural livelihoods. A holistic approach must address
not only activities but also the assets (physical and
social), capabilities and access available to rural
households. The chapter thus touches on these
aspects, particularly in the context of barriers to non-
farm employment because they largely determine
the types of activities that households can undertake
in the first place. Finally, the chapter discusses the
National Rural Livelihoods Mission (NRLM)
Aajeevika, the recent government initiative that
adopts a holistic approach to livelihoods by focusing
on building capabilities and institutional frameworks
that enable more productive activities.
Rural Income and Employment
To what extent do rural incomes refect the growth in
GDP? Net domestic product (NDP) in rural areas
has generally grown slower than in urban areas, and
Livelihoods 19
Net domestic product
(NDP) in rural areas has
generally grown slower
than in urban areas,
and especially in the
1980s and 1990s when
urban income growth
accelerated. But in 2000s
rural income growth
accelerated.
especially in the 1980s and
1990s when urban income
growth accelerated.
But rural income growth
accelerated in the 2000s (see
Table 2.1). Rural income as a
share of total income (NDP)
thus declined over three
decades from 62 per cent in
197071 to 48 per cent in
19992000. In the period 19992000 to 200405, rural
income growth accelerated even while urban income growth
decelerated, so both growth rates were similar, and the rural
share of NDP stayed level at 48 per cent in 200405.
Paradoxically, the period from 19992000 to 2004
05 when rural income and employment grew the fastest,
was also a period of prolonged agrarian distress. How
did rural income grow if agricultural productivity did
not grow much? Te answer is non-agricultural or non-
farm income and employment.
While it has grown since the 1970s, non-farm income
grew the fastest in the frst half of the last decade. By
200405 (the last year for which data are available),
it accounted for 61 per cent of rural NDP. However,
growth in non-farm employment, has been slower. In
200405, non-farm employment was 27 per cent of
total rural employment and by 200910 the non-farm
sector employed 32 per cent of the rural workforce.
Overall, employment in India has grown very
slowly (see Table 2.2). Te post-liberalisation fast
growth period, 199394 to 19992000, has been
characterised as having a jobless growth. Te most
recent quinquennium recorded an even lower growth in
employment. How can income growth be so high and
employment growth so low? Te nature of growth in the
last two decades has been such that the share of proft in
value added has increased sharply and so has inequality
(Himanshu 2011; see also Section 2.5.3 and Chapter 3).
Rural employment increased the fastest in the frst
half of the last decade, leading to hopes that it marked
the beginning of sustained growth in rural income and
employment. But in the second half of the decade,
200405 to 200910, there was an absolute decline in
employment, particularly of women in agriculture.
Many now believe that rural employment grew in the
frst half of the decade due to temporary distress rather
than as a response to sustained productive opportunities
TABLE 2.1 Growth of NDP in Rural and Urban Areas
(Per Cent Per Annum at 200405 Prices)
Periods Rural Urban All India
197071 to 198081 2.4 3.8 2.9
198081 to 199394 4.7 6.1 5.3
199394 to 199900 4.2 8.3 6.2
199900 to 200405 5.7 5.8 5.7
Note: Assessing annual rural income growth, other than agricultural
growth, is difcult because the National Accounts Statistics (NAS) does
not report the ruralurban composition of NDP on an annual basis.
It generally reports the rural component only when there is a series
change in GDP estimation.
Source: *National Accounts Statistics 2007 and 2010 (http://mospi.nic.
in/MospiNew/Admin/publication.aspx, accessed on 31 August 2012).
TABLE 2.2 Annual Rate of Growth of Employment (Per Cent)
1983 to 199394 to 19992000 to 19992000 to 200405 to
199394 19992000 200910 200405 200910
Rural 1.72 0.47 1.11 2.67 0.43
Male 1.91 0.78 1.63 2.17 1.10
Female 1.39 0.11 0.05 3.58 3.37
Urban 3.10 2.70 2.88 3.57 2.19
Male 3.04 2.98 2.98 3.25 2.69
Female 3.36 1.65 1.91 4.82 0.89
Total 2.01 0.98 1.56 2.89 0.25
Male 2.19 1.37 2.02 2.48 1.57
Female 1.64 0.15 0.45 3.78 2.76
Note: Includes principal plus subsidiary workers.

Computed after adjusting for the population in corresponding population censuses.

Source: Adapted from Unni and Raveendran (2007); NSS Unit level data for 66th Round on Employment and Unemployment in India, 200910,
Natural Sample Survey Ofce.
20 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Non-farm employment
is emerging as an
irreversible trend. One
simply cannot eke out
a living from the small
farms upon which over
80 per cent of rural
households depend.
(see for instance Abraham 2009; Himanshu 2008). Due
to the widespread crisis in the agriculture sector between
199798 and 200304 and stagnation in wages and
farm earnings, households were forced to look for other
sources to supplement their income. As men turned to
non-farm activities, women, previously engaged solely
in domestic work, and older family members, began
working on family farms. Tis surge in workforce
participationparticularly older people, especially
older womenthen reverted back to earlier levels in
the second half of the decade when economic conditions
recovered (Abraham 2009; Himanshu 2011). It is a
common feature of distress employment that there is
an increase in female labour force participation (LFPR)
as well as unemployment rates since not all women
who seek jobs at times of distress get employment
(Himanshu 2011).
Non-farm employment is emerging as an irreversible
trend. One simply cannot eke out a living from the
small farms upon which over 80 per cent of rural
households depend. From 199394 to 200910, the
share of rural households dependent on agriculture
as their main source of income thus declined from 68
per cent to less than 58 per cent (NSSO 2011). Tis
decline can be attributed largely to those self-employed
in agriculturealmost 6
percentage points. Tis
transformation appears to
be an important contributor
to declining rural poverty
both directly through
employment generation,
and indirectly through
its impact on agricultural
wages (Himanshu et al. 2011). Because non-farm wages
tend to be higher than farm wages, studies show that
they exert upward pressure on agricultural wage rates
(see for instance Lanjouw and Murgai 2008).
In light of these changing dynamics, the rest of this
chapter focuses on the key drivers of growth in the farm
and non-farm sectors. Who beneftted and who did not?
To understand rural livelihoods we begin with their
agrarian roots.
2.2 Features of the Agrarian
Economy
Agriculture lies at the heart of rural livelihoods. Despite
its declining share in the total GDP, agriculture continues
to engage around half the countrys total workforce
and over two-thirds of the
rural workforce. Most of
Indias poor also depend
on agriculture, making the
agricultural sector a vital
focus area in attempts at
alleviating poverty.
2.2.1 Phases of Agricultural Growth
and Policy Interventions
While the share of agriculture in GDP declined
steadily from 55 per cent in 195051 to around 15 per
cent in recent years, the sector has seen phases of both
growth and decline. After a period of deceleration in
the 1960s, the green revolution that began in the late
1960s sparked two decades of dynamic agricultural
growth. New seed technology, sustained public sector
investment and expanded access to water and other
farm inputs signifcantly drove up yields and bettered
terms of trade. By the end of the 1980s though, as
public investment decreased, yields began to stagnate
and over-exploitation of soil and water resources began
to take their toll. Te agriculture sector thus entered
a prolonged period of distress until around 200405,
but, at the same time, the livestock sector experienced
robust growth; by 201011 it accounted for 27 per
cent of the value of agricultural output, up from 20 per
cent in the 1970s.
Since 200405, the agriculture sector has been
recovering, driven by favourable terms of trade, higher
public and private investment, increased use of certifed
seeds, fertiliser and pesticides and credit expansion
(Chand and Parappurathu 2012).Tis recovery was
associated with renewed dynamism in rainfed areas,
with Jharkhand, Chhattisgarh, Rajasthan, Gujarat,
Maharashtra, Karnataka and Andhra Pradesh being the
best performing states at 5 per cent plus average annual
growth between 200506 and 201112. Rainfed area
crops, mainly coarse cereals (bajra, jowar, maize and
ragi), oilseeds and cotton had higher yield growth. Tis
yield growth came mainly from better seed quality,
higher seed replacement and better practices rather
than new crop technology or more irrigation (Planning
Commission 2012a).
Agricultural extension, primarily driven by civil
society organisations (CSOs), farmer producer
organisations (FPOs) and agri-business companies,
helped disseminate better practices. Tese organisations,
composed of local community members often acting
as agents of agricultural extension, became important
Despite its declining
share in the total GDP,
agriculture continues to
engage around half the
countrys total workforce
and over two-thirds of
the rural workforce.
Livelihoods 21
especially as public sector support weakened. Specifc
public initiatives like the 2007 Agricultural Technology
Management Agency (ATMA) programme of setting
up farm schools, training, demonstration and exposure
visits in most districts also helped. ATMA works at
the block level and in 2010 introduced a farmer friend
system for every two villages. Critically, ATMA provides
rain-fed areas funds for extension services proportionate
to a districts actual rainfed area. Small and marginal
farmers must also have 50 per cent representation at
farm schools. Tis marks a change from the top-down
agricultural extension system of the 1970s that was
geared toward promoting green revolution technologies,
of little relevance to poor farmers in rainfed areas
(Ferroni and Zhou 2012; Anderson et al. 2006).
Various phases of government interventions in land
policies also played a role. In the frst two decades after
Independence, land reforms were at the forefront
both tenancy reform (confrm tenants rights and
regulating rents of leased land) and land redistribution
to landless households. But both had limited impact.
Land redistribution was concentrated in a few states,
particularly West Bengal, and the land often was
uncultivable without substantial investments. During
the second phase (197285), roughly the same time
as the green revolution, attention shifted to bringing
uncultivated land under cultivation. Where surface water
irrigation systems had limited reach, farmers, encouraged
by government subsidies for tube wells and electricity
to operate them, turned to groundwater. Between
1985 and 1995, water and soil conservation gained
importance. But to what extent these land development
programmes improved the productivity of land and
the well-being of the people living of the land remains
debatable. Since 1995, land-policy debate has focused
on how best to draft land legislation, improve land
revenue administration and, in particular, bring greater
clarity to land records (Deshpande 2003; Reddy 2006).
Two farm-sector trends of the past decades that
had a defning impact on rural livelihoods are: growing
fragmentation of farm holdings and a transition from
subsistence to commercial farming.
2.2.2 Growing Fragmentation of
Landholdings
Landholdings have become increasingly fragmented over
the years, mainly due to rising population pressure, sub-
division within families, and a slow occupational shift
from agriculture to non-agriculture. While the total area
under cultivation of around 160 million hectares has
remained stable, the number of holdings almost doubled
from 70 million in 197071 to 130 million in 200506.
Concurrently, average landholding sizealready low at
2 hectares in 197071fell to 1.2 hectares by 200506
(see Table 2.3).
Te slow pace of diversifcation out of agriculture
means that more people are supported on smaller
and smaller land plots. Marginal and small farms
predominate85 per cent of all operational holdings
are marginal or small, with between under 1 hectare
TABLE 2.3 Changing Distribution of Operational Holdings in India
Total Distribution of holdings (%) Distribution of operated area (%)
Year Holdings Area Avg Marginal Small Semi- Medium Large Marginal Small Semi- Medium Large
no. (000) size medium medium
(000) ha ha
1 2 3 4 5 6 7 8 9 10 11 12 13 14
197071 71011 162178 2.3 51.0 18.9 15.0 11.2 3.9 9.0 11.9 18.5 29.7 30.9
198081 88883 163797 1.8 56.4 18.1 14.0 9.1 2.4 12.0 14.1 21.2 29.6 23.0
199091 106638 165507 1.6 59.4 18.8 13.1 7.1 1.6 15.0 17.4 23.2 27.0 17.3
200001 119931 159435 1.3 62.9 18.9 11.7 5.5 1.0 18.7 20.2 24.0 24.0 13.2
200506 129222 158323 1.2 64.8 18.5 10.9 4.9 0.8 20.2 20.9 23.9 23.1 11.8
201011 137757 159181 1.2 67.0 17.9 10.0 4.3 0.7 22.2 22.1 23.6 21.2 10.9
Note: Marginal (<1 ha); Small (12 ha); Semi-medium (24 ha); Medium (410 ha); Large (10 and above ha): hahectare; Operational holdingAll
land which is used wholly or partly for agricultural production and is operated as one technical unit by one person alone or with others without
regard to the title, legal form, size or location; Operated areaThis includes both cultivated and uncultivated area, provided part of it is put to
agricultural production during the reference period. Figures may not add up exactly to 100 due to rounding of.
Source: All India Report on Number and Area of Operational Holdings, Agriculture Census, 201011, Ministry of Agriculture, 2012, website (http://
agricoop.nic.in/imagedefault/whatsnew/Agriculture%20Census.pdf ).
22 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
and 1 and 2 hectares
respectively (see Table
2.3). What is more, this 85
per cent cultivates just 44
per cent of operated area.
In fact, most of the landholdings are extremely small,
as much as 67 per cent are marginal holdings, most
with less than 0.4 ha (1 acre). Te major trends and
policy interventions in the sector thus need to be
examined through the lens of their impact on small
and marginal farmers.
2.2.3 Shif Towards Commercial Farming
and Livestock
Te shift from subsistence farming to commercial
farming is another key trend that has had a critical
impact on rural livelihoods. Farmers have been
changing the composition of the agricultural output to
meet shifting consumer demands. Allied agricultural
activities, particularly livestock, have gained prominence
with growing demand for eggs, milk and meat. Tese
not only supplement crop-production income but also
help mediate annual income fuctuations.
Te shift from sub-
sistence farming to com-
mercial farming is visible
in two ways: increasing
marketed surplus and a
shift towards cultivating
higher value crops. Even
small holdings now increasingly generate marketable
surplus of foodgrains. By the late 1990s, for instance,
more than half the total production of paddy, the most
staple food crop, was available for sale (marketable sur-
plus) (see Appendix Table 2.1). Forty-four per cent of
paddy produced even by small farmers was marketed
(MoA 2002).
As cropping patterns shift to commercial, high value
crops and horticulture,
the area under foodgrains
is declining and the area
under non-foodgrain
crops growing. Although
the area under wheat and
rice has steadily grown, the area under coarse cereals
and pulses has continuously declined, except for an
increase in pulses since 201011. In fact, coarse cereals
declined dramatically after the green revolution, from
an average of 44 million hectares in the early 1970s to
28 million hectares in the late 2000s (MoA 2012b).
At the same time, the area under oilseeds, fruits and
vegetables and other horticulture crops increased. Te
area under horticulture crops has, in fact, increased to
more than one-tenth of the countrys total cropped area.
Tese changes mostly refect demand-side factors such
as consumer food basket diversifcation and inelastic
demand for foodgrains as incomes rise.
Relative values of crop output show a similar trend.
Te share of cereals in total value of crop output increased
until the 1990s but then declined (see Figure 2.1),
while the share of pulses declined steeply throughout.
At the same time, the share of fruits, vegetables and
fbres rose and the share of oilseeds remained steady.
Most worrisome, though, the declining share of pulses
The area under coarse
cereals declined
dramatically after the
green revolution.
FIGURE 2.1 Percentage Share of Crops in Gross Value of Agricultural (Crop Sector) Output
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1950s 1960s 1970s 1980s 1990s 2000s
1950s 1960s 1970s 1980s 1990s 2000s
Cereals Oilseed Fruits & Veg
Pulses
Spices
Fibres
Kitchen Garden
Note: 1. Value of agricultural output excluding livestock sector.
2. Decadal averages.
Source: National Account Statistics Back Series 195051 to 199899, http://mospi.nic.in/mospi_wo_rept=pubs.htm, accessed on 15 December 2012.
The transition from
subsistence to
commercial farming
is manifest in high
marketed surplus and
high value crops.
P
e
r

C
e
n
t
P
e
r

C
e
n
t
Over two-thirds of
landholdings are now
less than 0.4 hectare or
1 acre.
Livelihoods 23
The green revolution,
which made India self-
sufcient in foodgrain,
was ill-suited.
has led to a steep rise in its relative price which needs
urgent policy attention because the Indian staple diet
has traditionally been a mix of cereals and pulses.
Tis shift to commercial crops appears widespread,
but the question remainsto what extent have small
farmers beneftted? Studies fnd that marginal and small
farmers enjoy an efciency advantage over large farmers
in growing certain high-value crops such as vegetables
(Birthal et al. 2013). Tis is because growing vegetables
is more labour-than capital-intensive and small farms
tend to have access to more family labour. Vegetables
also give faster and more regular returns than other
high-value crops such as fruits and spices, which
require more start-up capital and yield slower returns.
Marginal and small farmers thus grow 70 per cent of
the nations vegetables on just 41 per cent of the total
cultivated area (ibid.). But because they lack adequate
market access and storage facilities for perishable items,
marginal and small farmers still allocate a large portion
of land to safe crops such as rice and wheat (ibid.; see
Figure 2.2 and Table 2.4).
2.2.4 Continued Prevalence of Dryland
and Rainfed Farming
Te green revolution, which made India self-sufcient
in food, was largely concentrated in irrigated areas.
Traditional commercial
crop models promoted
during the green revolution
were water-intensive and
thus ill-suited to rainfed
areas that lack irrigation
infrastructure. But rainfed areas constitute 5565 per
cent of the countrys total net sown area and are home
to two-thirds of the countrys livestock and 40 per cent
of its people (NRAA 2012). Te green revolution thus
bypassed a signifcant portion of the country.
Te application of commercial crop models to
rainfed and dryland conditions is a risky practice that
has led to expensive failures and severe farmer distress,
given the high costs of commercial crop inputs. In
Bidar district in Karnataka, for instance, the state
government introduced and promoted hybrid varieties
of cotton and pulses in the 1960s and 1970s. But over
the years drought or monsoon delays led to sizeable
losses. Tat farmers lacked knowledge and experience
in dealing with the failure of commercial crops and
state governments did not adequately disseminate
relevant information, particularly to smaller farmers,
compounded the problem.
Much of the increase in green revolution wheat
and rice crops, as well as commercial crop area has
come from areas in which traditional rainfed crops
were grown. But raising traditional rainfed crops,
coarse cereals in particular, has fallen sharply due to
changing food preferences, stigma of being considered
a poor mans crop, and emphasis on rice and wheat
in the public distribution system (PDS). Yet, if
grown under traditional methods, rainfed crops are
hardy and can even grow in poor and degraded soil,
they require less water, and are not dependent on
FIGURE 2.2 Share of Small Farmers Production
of Selected Commodities in 2003
100%
80%
60%
40%
20%
0%
P
e
r

C
e
n
t
V
e
g
e
t
a
b
l
e
s
P
a
d
d
y
F
r
u
i
t
s
C
o
a
r
s
e

c
e
r
e
a
l
s
W
h
e
a
t
S
p
i
c
e
s
P
u
l
s
e
s
M
i
l
k
Small Medium Large
Source: Birthal et al. (2013).
TABLE 2.4 Cropping Patterns by Farm Size (2003)
Type of Crop Small Medium Large All
(<2 ha) (410 ha) (10 + ha) (ha)
Paddy 35.0 24.7 13.4 25.8
Wheat 19.0 15.6 12.8 16.3
Coarse cereals 16.5 19.4 18.3 17.7
Pulses 8.0 11.0 14.6 10.8
Oilseeds 7.2 12.0 14.0 10.4
Fruits 1.2 1.4 0.9 1.2
Vegetables 3.5 2.0 1.0 2.4
Condiments and spices 1.0 1.2 1.0 1.1
Sugarcane 2.6 3.5 2.5 2.8
Cotton 2.1 4.8 15.4 6.9
Other crops 3.9 4.4 6.0 4.7
Total 100 100 100 100
Note: Figures may not add up exactly to 100 due to rounding of.
Source: Birthal et al. (2013).
120%
24 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Regulatory restrictions
have encouraged
unrecorded tenancies
mostly afecting
marginal and small
farmers who depend
on leasing-in small plots
on insecure terms for
short periods.
chemical fertiliser and
pesticides. Tere is thus
an urgent need to actively
develop and promote
production of dryland
crops such as millet to
ensure food and water
security, community self-reliance and bio-diverse and
ecologically sound farming.
2.3 Key Issues in Sustaining
Farm Livelihoods
As farm-based livelihoods continue to support a
signifcant share of the rural population, this section
explores some key farming issues. Also, given the
preponderance of small and dryland farmers, whose
needs and constraints have not been addressed by the
green revolution, this section pays particular attention
to their challenges.
2.3.1 Land
Land, arguably, is the most important rural asset. People
living of the land must be able to lease, buy, sell, and
leverage land. In this section, we discuss leasing and
acquiring land, both of which strongly impact the
livelihoods of small and marginal farmers.
Land tenure: A logical response to predominantly small
farms and the insufcient income they generate would
be to lease-in land to create operationally larger farms.
But this is difcult. Land records and ownership rights
over land are often unclear and the land leasing laws of
most states restrict the leasing-in of land to increase
cultivable area.
1
Such regulatory restrictions have encouraged
unrecorded tenancies. Tis mostly afects marginal and
small farmers who depend on leasing-in small plots on
insecure terms for short periods, sometimes for only one
season (Planning Commission 2011a). While ofcial
fgures show a decline in tenancy as a percentage of
the total number of operated holdingsfrom roughly
25 per cent in 197071 to 10 per cent in 200203
unofcial estimates are at about 30 per cent. Te most
prevalent forms of tenancy are fxed rent (cash or kind,
Traditional rain-fed
crops can even grow in
degraded soil, require
less water, and are not
dependent on chemical
fertilisers and pesticides.
i.e. produce) in irrigated
areas, and share-cropping in
dryland areas. In the absence
of an insurance mechanism,
fxed-rent tenants are more
vulnerable to crop failures
due to drought or foods, or
to pest attacks than share-
cropping tenants. Tenancy
reform in the early post-
Independence era emphasised occupancy and possession
rights for tenant farmers, but did not actually work, with
a few notable exceptions (see Box 2.1).
Unrecorded tenancies, in particular, leave tenant
farmers exposed to eviction and without institutional
support such as credit or subsidies. A regulatory
mechanism for fxing rents and providing institutional
support for tenant farmers, thus, may prove more
benefcial than possession rights. Andhra Pradesh,
for instance, has a scheme that entitles identifed
tenant farmers to directly access credit and avail
benefts related to farm production, especially
agricultural subsidies, circumventing their landlords.
2

Notwithstanding the practical problems in identifying
tenant farmers, other states could tailor such a policy
to their needs and circumstances. To reduce the
transaction cost of maintaining tenancy records, the
instrument of leasing-in land should be simplifed and
the possibility of registration at the panchayat level
explored. Overall, a better land administration system
including transparent and fair tenancy laws could
enhance agricultural growth.
Land acquisition: Rising industrialisation, infrastruc-
ture development and urbanisation have also increased
demands on land. To date, the process of land acquisi-
tion based on the 1894 Land Acquisition Act, has been
fraught with difculties, with many households losing
access to lands and livelihoods as a result of poor com-
pensation and inadequate resettlement. In 2011, the
Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Bill
(LARR), was introduced to replace this Act and, after
several amendments, was passed by the Lok Sabha in
August 2013 and the Rajya Sabha in early September
1
Most states restrict land leasing; only Odisha, Rajasthan, Haryana, Punjab (tenant may purchase land after 6 years of continuous
occupation) and Andhra Pradesh (the Andhra area, not Telangana, has restrictions) do not. Others restrict who may lease or permit leasing but
not the right to purchase land. Kerala, Jammu & Kashmir, and Manipur completely prohibit leasing (Planning Commission 2011a).
2
Te Jayati Ghosh Commission in the advent of agrarian distress witnessed in the state recommended such a policy and fnally it was
implemented on the recommendation of the Koneru Rangarao Committee.
Livelihoods 25
BOX 2.1 Tenancy Reform Under Operation Barga
Operation Barga, a project initiated by the West Bengal government in the late 1970s to protect the rights of share-cropping
tenants, i.e. the Bargadars, is deemed successful. Share-cropping tenants were registered, assured protection against
eviction, given inheritable quasi property rights, and guaranteed their due crop share. By giving them priority rights if
owners sold their land, it also facilitated the conversion of tenants to land owners. By 1990, around 1.5 million tenants were
registered under Operation Barga; various estimates put it at between 48 to 65 per cent of the states total tenant farmers.
This initiative changed the conditions of tenants, brought economic stability among farmers and contributed to the states
agricultural growth. As in the rest of India, supportive measures such as access to institutional credit for these resource-
poor tenant farmers, however, were not ensured.
Source: Author.
2013. As the frst national law to integrate land acqui-
sition with rehabilitation and resettlement (R&R), the
Act aims to facilitate the process of acquiring land in
a transparent and fair manner. Te Act defnes pub-
lic purpose, i.e. when the government can acquire
land without consent,
3
and mandates that in cases
where public purpose does not apply, 80 per cent of
the project-afected households have to provide their
consent through a formal process, while public-pri-
vate partnerships (PPPs) require 70 per cent consent.
Moreover, it requires compensation be provided of up
to four times the market value of land in rural areas and
double in urban areas. In addition, R&R is to be provided
in the form of housing, livelihood provision, and other
means such as developed land or stock in company.
Te land acquisition and R&R processes have several
transparency safeguards to ensure accountability. Tese
include a social impact assessment by the central or state
government in consultation with the village panchayat
(or municipality in urban areas) which is to be examined
by an independent expert
group, public hearings in
those gram sabhas (and
municipalities) where more
than 25 per cent of the
land is being acquired, the
creation of various bodies to
ensure accountability at the central, state and local levels,
and making all land acquisition and R&R documents
publicly available.
If this landmark Bill is efectively implemented,
it should ensure sustainable livelihoods for those
dependent on acquired land. Some, however, have
criticised the lengthy process, the broad defnition
of public good, and ambiguity in the employment for
livelihood losers. Tere is also some concern that the
various levels of oversight lack defned powers and
responsibilities, making accountability difcult to
enforce. Land records and rights need to be clarifed to
enable better governance and facilitate land transactions
from acquisition to leasing, including: guarantee of
ownership/security of tenure, property taxation, security
for credit, development of land markets, protection of
state lands, reduction of land disputes and facilitation
of land reform.
2.3.2 Access to Credit
Farmers access to credit for investments and operations
that raise farm productivity remains a signifcant
constraint. Many farmers still rely on informal sources
of credit, including extortionary moneylenders.
Following the governments eforts to expand the reach
of institutional credit, formal credit grew sharply in the
1970s (see Figure 2.3) after banks were nationalised
and a mandatory priority sector bank lending target to
agriculture was introduced. Regional rural banks were
also started in 1975 to promote the rural economy
and serve small and marginal farmers, agricultural
labourers and rural artisans. In 1982, the National Bank
for Agriculture and Rural Development (NABARD)
was created, essentially to refnance agricultural and
rural development agencies and banks. Institutional
credit thus doubled from 32 per cent of total credit
to farmers in 1971 to 63 per cent in 1981 (see Figure
2.3a). In the 1990s, the share of institutional credit
declined, mainly because of a contraction in commercial
banks rural branch network due to viability concerns.
During this period, the share of long-term credit also
3
Strategic security, public infrastructure, projects for project-afected people, planned development, educational and research institutions
and residential projects for calamity-afected people.
The LARR Act is frst
national law to integrating
land acquisition with
R&R, and in a fair,
transparent way.
26 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Many farmers still
rely on informal
sources of credit,
including extortionary
moneylenders.
fell as investment in agriculture slowed down. Several
policy measures were introduced to step up credit to
farmers. Whether these measures increased the share of
institutional credit would only be known when the next
All-India Debt and Investment Survey is out. But there
are indications that this may be so, as the early 2000s
saw a quantum jump in the intensity of institutional
credit to agriculture (see Figure 2.3b).
Yet, the increasing credit intensity in agriculture
does not necessarily mean that farmers have greater
credit access. First, because banks could not meet the
agricultural credit target of 18 per cent of total lending,
the Reserve Bank of India (RBI) allowed indirect credit
to agriculture (e.g. for agro-processing, agricultural
inputs and storage) to be counted towards the target.
Tis led to a huge increase in indirect lending essentially
to agri-related enterprises, not to farmers. Direct credit
to farmers fell from 85 per cent of total agricultural credit
in the 1970s to 55 per cent
in the 2000s. Second, even
including indirect credit,
by end March 2012, 15
of 26 public-sector banks
and 11 of 22 private sector
banks failed to meet targets.
Rather than taking on the high risk of lending to farmers,
they preferred paying shortfall penalties in the form of
deposits to the Rural Infrastructure Development Fund
(RIDF), which the RIDF administrator then invests in
rural development.
Access to formal credit correlates directly with farm
size. Smaller farmers, who tend to have less investible
surplus are most afected and continue to be excluded
from formal credit and rely on moneylenders and
traders, while large farmers have disproportionate access
to formal credit. Only 40 per cent of marginal farmers
have institutional credit, whereas over two-thirds of
medium and large farmers do (see Table 2.5). Te
Expert Group on Agricultural Indebtedness emphasised
this inadequacy in meeting the requirements of an
increasingly modern and commercial agriculture (MoF
2007). In 2003, the last year for which data are available,
about 49 per cent of farmer households had access to
credit and 58 per cent of them availed formal credit,
implying that just 30 per cent of all farm households had
access to formal credit for agriculture (see Table 2.5).
100
75
50
25
0
7
93
19
81
32
68
63
37
66
31
61
39
1951 1961 1971 1981 1991 2001
80
60
40
20
0
%

o
f

a
g
r
i
c
u
l
t
u
r
a
l

G
D
P
1
9
7
1

7
2
1
9
7
3

7
4
1
9
7
5

7
6
1
9
7
7

7
8
1
9
7
9

8
0
1
9
8
1

8
2
1
9
8
3

8
4
1
9
8
5

8
6
1
9
8
7

8
8
1
9
8
9

9
0
1
9
9
1

9
2
1
9
9
3

9
4
1
9
9
5

9
6
1
9
9
7

9
8
1
9
9
9

0
0
2
0
0
1

0
2
2
0
0
3

0
4
2
0
0
5

0
6
2
0
0
7

0
8
2
0
0
9

1
0
Non Institutional Institutional
Direct credit Indirect credit
Note for Figure 2.3B: Data on credit from cooperatives available only up to 200708, hence 200809 to 201011 fgures are based on simple three
years moving average.
Source (2.3A): All India Debt and Investment Survey, RBI, NSSO (1998; 2005b) and adapted from Mohan (2006).
Source (2.3B): RBI (201112).
FIGURE 2.3B Growing Credit Intensity in
Agriculture Credit to Agricultural GDP (Per Cent)
FIGURE 2.3A Distribution of Outstanding Loan
of Cultivator Households by Source (Per Cent)
TABLE 2.5 Access to Credit amongst Farmer Class
and Source of Credit, 2003 (Per Cent)
Source
Type of Access to Govern- Money- Relatives
farmer credit ment, Co- lender, and
(%) operative trader others
banks
Marginal 45.0 39.6 41.1 19.3
Small 51.0 57.6 30.1 12.2
Semi-medium 58.2 65.1 28.1 6.9
Medium 65.1 68.8 22.8 8.3
Large 66.4 67.6 27.8 4.6
All sizes 48.6 57.7 30.9 11.5
Note: Figures may not add up exactly to 100 due to rounding of.
Source: NSSO (2005).
Livelihoods 27
Several factors impede extension of credit to farmers
ranging from credit risk and collateral requirements
to cumbersome loan appraisal and documentation
procedures. Many of the impediments raise the
transaction costs to both farmers and banks, some
of them prohibitively. One innovation to mitigate
transactions costs and smoothen credit delivery is the
Kisan Credit Card (KCC), a revolving credit with
appraisal required only the frst time it is issued. All
farmers, including tenant farmers, oral lessees, SHGs,
and Joint Liability Groups are eligible to apply. Launched
in 1999, it has progressively expanded to reach over 20
million farm households. Recent enhancements, based
on technology, provide greater fexibility to the farmers
in using it for operations through ATMs, business
correspondents, and mobile-based transfer transactions.
2.3.3 Lack of Productivity Breakthrough
Since land available for cultivation is limited, improvement
in farming techniques and land productivity is critical.
Green revolution technology and its associated inputs,
along with better irrigation infrastructureentirely
supported by the public sectorbrought a remarkable
improvement in yields, especially for high yield variety
(HYV) crops such as wheat and rice. But since then there
has been little improvement in yields of cereals and non-
cereals or non-food crops except cotton. Tere is said
to be a technological stalemate in agricultural research
and development. Te emerging genetically modifed
variety of seed technology in the form of Bt. technology
is mainly driven by the private corporate sector and the
Bt. seeds market, especially of cotton, is fourishing in
India. But the long-term consequences on health and
bio-diversity of Bt. technology and on the development
of a monopoly in the seed market have been seriously
debated. Te concern is that, while the Bt. gene helps
control destruction by a specifc set of actors e.g. pests,
it provides no additional beneft to the soil by way of
nutrition, which traditional agriculture does (Vasavi and
Swaminathan 2010). As a consequence of these debates,
a moratorium has presently been placed on Bt. Brinjal.
Two problems have now emerged with respect to
irrigation, a key factor in green revolution, both of
which limit cropping intensity and yields. First, there
are limitations to tap surface water through large dams
and the neglect of minor irrigation systems (see Chapter
5). Second, groundwater has been overexploited with
deleterious consequences. Water management and
productivity is also very poor. Use of micro-irrigation,
such as drip and sprinkler systems is limited and expensive,
and Indian agriculture is signifcantly less water-efcient
even than other developing country counterparts.
2.3.4 Increasing Cost of Cultivation
Te cost of cultivationfor both labour and non-labour
inputshas been rising steadily over the years. Tere are
many contributing factors. Dependence on hired labour
and mechanised cultivation is increasing with commercial
farming which, in turn, is raising the cultivation costs.
Besides, unregulated seed, fertiliser and other inputs
in the black market increase costs, as do groundwater
irrigation systems. Tat the cost of irrigation, both fxed
investment and operating costs, is a factor that led to the
agrarian crisis that resulted in farmer suicides in various
parts of India is well documented. Te high cost of deep
submersible pumps to extract groundwater and the debt
undertaken to fnance them, for instance, led to tragic
suicides (Vaidyanathan 2006), particularly in dryland
areas of Andhra Pradesh, Maharashtra and Karnataka,
where low rainfall drives increased dependence on
groundwater (Mitra and Shrof 2007).
Whereas in the 1970s and 1980s, increased cultiva-
tion costs were surpassed by increases in yields, in the
1990s yields have not kept
up with increases in costs
of labour, inputs, water and
so on. Part of the reason is
inadequate investment; pro-
ductivity generally increases
with investment, but when
proftability is low, farmers
will not invest, which leads
to a vicious circle of stagnat-
ing yields.
Until recently, minimum support prices (MSPs) for
crops failed to rise fast enough to compensate farmers
for increased cultivation costs, particularly for rice
(Dev and Rao 2010). Farmers, thus, were increasingly
exposed to market price volatility, a major factor in
eroding farming viability. Rice cultivation costs, for
instance, rose since the 1990s (see Figure 2.4a), while
the ratio of gross output value to cultivation cost, an
indicator of proftability, declined (see Figure 2.4b).
Several other crops show a similar pattern. When
higher costs erode the proft margin, farmers are not
motivated to step up investments.
Since cultivation costs vary across regions, a nationwide
MSP benefts some regions but hurts others where it
may not even cover the cost of production. Te recent
crop holiday declared by rice farmers in Andhra Pradesh
Whereas in the 1970s
and 1980s, increases in
cultivation costs were
surpassed by increases
in yields, in the 1990s
yields have not kept up
with increases in costs
of labour, inputs and
water.
28 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
refects the gap between their production cost and
their sale price or the MSP (see Box 2.2; GoAP 2011).
Moreover, MSP-based procurements are concentrated
in particular states and regions, and do not necessarily
cover all the major producing states and regions.
2.3.5 Viability of Small-holder Farming
Te relationship between farm size and productivity has
been widely debated. Some researchers (Chand et al.
2011) argue that productivity inversely correlates with
farm size because small farms tend to be more resource-
efcient and productive due to extensive cropping
(Birthal et al. 2013). Others (Ghose 1979; Deolalikar
1981) argue that this inverse relationship holds only
at lower levels of technology; as with more advanced
technology large farms are more efcient. In contrast,
Rao (1975) and Subbarao (1982) found a positive
relationship between farm size and productivity due
to the higher use of fertilisers and other cash-intensive
inputs on larger farms. More recent evidence from
NSSO has shown that smaller farm holdings do indeed
have higher productivity than larger farms. Birthal et
al. (2013) cite evidence from Collins (1995) and others
which suggests that while small farmers may have lost
their competitive advantage in the production of wheat,
sugarcane, cotton and other crops that beneft from
mechanisation, they have a clear advantage in production
of high value crops such as vegetables that require
constant monitoring, careful weeding and other care.
What is clear is that even if small farms may have
higher total productivity, their per capita productiv-
ity tends to be low. Poverty is more common amongst
small farmers (Chand et al. 2011), the vast majority
of whom cannot generate enough income to sustain
Note: C2CoC: Cost of cultivation including imputed value of family labour; GVO: Gross value of output; A2CoC: Cost of cultivation excluding imputed
value of family labour.
Source: Adapted from Dev and Rao (2010).
FIGURE 2.4A and B Cost of Cultivation for Rice
Cost of cultivation of rice/ha Ratio of gross value of output to cost of cultivation of rice
25
20
14
10
5
0
3
2.5
2
1.5
1
1
9
8
1

8
2
1
9
8
3

8
4
1
9
8
5

8
6
1
9
8
7

8
8
1
9
8
9

9
0
1
9
9
1

9
2
1
9
9
3

9
4
1
9
9
5

9
6
1
9
9
7

9
8
1
9
9
9

0
0
2
0
0
1

0
2
2
0
0
3

0
4
2
0
0
5

0
6
1
9
8
1

8
2
1
9
8
3

8
4
1
9
8
5

8
6
1
9
8
7

8
8
1
9
8
9

9
0
1
9
9
1

9
2
1
9
9
3

9
4
1
9
9
5

9
6
1
9
9
7

9
8
1
9
9
9

0
0
2
0
0
1

0
2
2
0
0
3

0
4
2
0
0
5

0
6
C2CoC A2CoC C2CoC GVO/A2CoC
BOX 2.2 Andhra Pradesh Farmers Declare a Crop Holiday
The recent crop holiday declared by farmers in Andhra Pradesh is an unusual phenomenon in agrarian history, but is
symptomatic of a larger agricultural crisis. Farmers in the East Godavari district covering 85,050 acres declared a crop
holiday, refusing to cultivate their land during the 2011 kharif season. This had a spiralling efect in the state and country.
Around 3 lakh acres of land went uncultivated. A Committee constituted by the Government of Andhra Pradesh (GoAP),
in the wake of this declaration, found that neither the market price nor the MSP covered the higher cultivation costs.
The Committee found that an inefective procurement system, inadequate storage capacity, crop failures on account of
frequent cyclones, improper maintenance of the drainage system, late release of canal waters, non-availability and high
cost of labour and lack of suitable farm machinery are among the major reasons for high cost of cultivation and subsequent
declaring of a crop holiday.
Source: GoAP (2011).
Livelihoods 29
Even if small farms
may have higher total
productivity, their per
capita productivity
tends to be low.
their households. A Situa-
tion Assessment Survey of
Farmer Households con-
ducted by NSSO in 2003
showed that 94 per cent of
farming households that
own less than 4 ha of land, earn less from all sources
than their monthly consumption expenditure, making
it difcult for them to continue in agriculture (NSSO
2005a). It also revealed that 40 per cent of the farmers
reported they would quit farming if given an option.
But the lack of alternative opportunities compels them
to continue in farming activity.
2.3.6 Agricultural Marketing
Farmersparticularly small and marginal farmers
often face immense difculties in marketing their produce.
Tey tend to have small quantities of marketable surplus
and low holding power due to extreme poverty. As a
result, they sell of most of their produce in local markets
at very low prices, immediately after the harvest (distress
sales). Because rural markets
often also are dominated by
interlinked transactions,
farmers are obliged to
sell to moneylenders and
traders from whom they
have taken credit for inputs and consumption. Ensuring
remunerative prices for produce, thus, would go a long
way in helping small farmers survive.
Over the decades, the government has intervened to
assure farmers fair prices, both as regulator and buyer,
but with limited success. Since the mid-1950s, through
Agricultural Produce Marketing Committees (APMCs),
state governments set up regulated markets to sell certain
notifed agricultural products by a transparent open
auction in the presence of a market committee ofcial.
At a time when private trade was underdeveloped and
exploitative, this helped eliminate several malpractices
in agricultural markets, created transparent marketing
conditions and ensured fairer deals to farmers (Acharya
2004). But because they were not sufciently spread
out, farmers could not reach the regulated markets
or would need to travel long distances to reach them.
Over time, facilities became inadequate as the markets
failed to modernise. As
corruption, inefciency and
bureaucratic control took
hold, auctions no longer
remained transparent or
fair. By preventing private
investment in agricultural
markets, these regulated
markets or mandis stifed competition and guarded
the interests of middlemen. Informal private markets
persisted. Farmers continued dependence on arhtiyas, or
middlemen and traders for their credit needs continues
to force them to market their produce where these
moneylenders are, at unattractive prices.
In the last decade, the government has moved to
remove the states marketing monopoly power and to
allow private sector participation. Te new Model State
Agricultural Produce Marketing (Development and
Regulation) Act 2003 permits direct purchase of produce
from farmers, setting up of private wholesale markets
and making contract farming legal while specifying
mandatory and optional provisions of contracts. Most
states and union territories have either fully or partly
adopted the Model Act. But apart from contract farming,
progress has been slow mainly due to lack of enthusiasm
on part of the states for the Model Act and reluctance
to change the existing mandi systems. A number of
large private national and multi-national corporations
4

have entered into contract farming arrangements with
farmers. But except for Karnataka, Tamil Nadu and
Andhra Pradesh, where private frms work with small
farmers for crops that require careful cultivation, most
private frms work with large and medium farmers
(Planning Commission 2011a; Singh 2012). Most
projects also are in agriculturally developed states and
not in eastern and north-eastern states that have large
numbers of small and marginal farms. Contract farming
often occurs without enforceable agreements. Buyers
routinely procure only a limited portion of the growers
crop, without a frm commitment and without sharing
the risk (Singh 2012). Farmers, thus, receive no benefts
of contract farming, such as assured markets and prices
and access to support services.
Te central and state governments are also substantial
buyers (mainly wheat and rice) for the PDS and
Small and marginal
farmers face immense
difculties in marketing
their produce.
Over the decades,
the government has
intervened, both as
regulator and buyer, to
assure farmers of fair
prices, but with limited
success.
4
MNCs like Cadbury in cocoa; PepsiCo in potato, chilly and groundnut; Unilever in tomato, chicory, tea and milk; ITC in tobacco, wood
trees and oilseeds; and Cargill in seeds. Domestic corporates like Ballarpur Industries, JK Papers and Wimco in eucalyptus and poplar trees;
Green Agro Pack, VST Natural Products, Global Green, Intergarden India, Kempscity Agro Exports and Sterling Agro in gherkins; United
Breweries in barley; Nijjer Agro in tomato; Tarai Foods in vegetables; M Todd in mint; and Namdhari Seeds in seeds.
30 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
strategic food security bufers. Te Food Corporation
of India (FCI) is the largest buyer and has traditionally
concentrated in states like Punjab, Haryana and
western Uttar Pradesh for wheat and Andhra Pradesh
for rice while bypassing poorer, often rainfed states.
In 199798 the central government encouraged
decentralised procurement by state governments in
order to extend the MSP to non-traditional states
and increase efciency in procurement. A decade later,
Madhya Pradesh, a signifcant wheat producer with
historically low central procurement and insufcient
allocation from the central PDS, undertook successful
decentralised wheat procurement (Krishnamurthy
2012). State agencies now successfully purchase,
store and distribute Madhya Pradesh wheat, known
for its high quality. Tis has beneftted farmers as
well as consumers. Chhattisgarh has also taken up
decentralised procurement for paddy and both states
have emerged as major regional players in the public
procurement of their respective crops.
Adequate and afordable decentralised storage
facilities and other post-harvest infrastructure also play
a crucial role in providing small and marginal farmers
holding power and linking to organised markets and
FPOs could play a signifcant role. Since smallholder
producers typically have small quantities of marketed
surplus, an FPO would aggregate produce from a large
number of producers to reach substantial volumes and
store it until it is sold. In the interim, warehouses could
issue warehouse receipts against the value of the stored
produce to satisfy farmers
credit needs. Many NGOs
use warehouse receipts to
fnance aggregation and
marketing operations. To
promote small farmers
linkage with markets, bank
interest rates for fnancing
against warehouse receipts
should be at levels the FPO
can aford. Also, traditional
local food storage methods,
such as Golas or Kodambbaes,
5
that have long been
efective and proven to be ecologically sensitive can
be explored.
In 2013 the government decided to provide FPOs
matching equity from support organisations like the
Small Farmers Agri-Business Consortium (SFAC) up
to a limit of Rs 10 lakh. Although the rules and norms
for new organisational forms like FPOs are still evolving,
they hold tremendous potential for ensuring small and
marginal farmers access to organised markets.
2.4 Responding to a Changing
Agrarian Economy
Small and marginal farmers have responded to these
challenges in various ways, sometimes supported by
CSOs and state governments:
Some adopted improved cultivation practices as an
alternative to green revolution-driven techniques.
Tese should be more widely disseminated both in
traditional green revolution areas and even more so
in rainfed areas.
Marginal and small farmers formed collectives or
farmer producer organisations to pool small plots
of land and purchase inputs, share labour and
machinery, and market output as a group. Even the
landless can participate in such collectives by leasing
land.
A large number of farmers diversifed into livestock,
which also serves as a natural insurance to some extent,
but is no substitute for the formal insurance that should
be extended to small and marginal farmers.
Te changing agrarian economy has thrown up new
challenges, particularly small and marginal farmers
who have been forced to adapt and innovate. In some
cases, they have received support from CSOs and
state governments, yet in others they have tackled the
problems on their own. Tis section explores some of
the key responses of small and marginal farmers, to the
changed milieu.
2.4.1 Sustainable Agriculture
A few initiatives have been introduced in diferent parts
of the country that aim to move away from ecologically
harmful green revolution cultivation methods towards
more sustainable practices, while preserving or
increasing yields, and reducing costs. Tese include
moving away from the heavy use of chemical fertilisers
and pesticides in agriculture that not only degrades
land (discussed in Chapter 5) and hurts yields, but also
poses serious health risks. Chemical inputs are also
expensive, particularly for small and marginal farmers,
accounting for around 30 per cent of cultivation costs
(NSS 2005). While certifed organic farming is still
Decentralised storage
facilities and other post-
harvest infrastructure
would provide small
and marginal farmers
holding power. Farmer
producer organisations
could play a signifcant
role in linking small
farmers to organised
markets.
5
Golas or Kodambbaes are traditional storage structures made of wood or mud together with natural plant based pest-repellents like neem.
Livelihoods 31
currently limited to only 0.5 per cent of cultivated land,
these nationwide initiatives are based on sustainable,
even organic, farming practices.
One such initiative is the Community Managed
Sustainable Agriculture (CMSA) introduced in
Andhra Pradesh in 2004 to address low proftability
resulting from the high cost of fertiliser and pesticides,
with subsequent indebtedness, even leading to
suicides in desperation. CMSA encourages a shift to
non-pesticide management, based on understanding
the crop ecosystem, adopting suitable cropping
practices, including multi-cropping, understanding
insect biology and behaviour and adopting suitable
preventive measures. CMSA, which is largely driven
by farmers self-help groups (SHGs), also engages the
local community in building and sharing knowledge
and skills. A farmer who has successfully adopted
CMSA becomes a community resource person who
then promotes and advises on these methods and
provides extension services in neighbouring villages.
CMSA has shown impressive results. It has
substantially reduced cultivation costs without
signifcantly reducing productivity, resulting in a
net increase in farmers income as well as health and
ecological benefts (UNEP 2012); see also Kumar et al.
2009). Since men tend to migrate for work and women
undertake farming responsibilities, these health benefts
have a gendered signifcance. By 201213, nearly 2
million farmers adopted CMSA on over 1.5 million
hectares or over 10 per cent of Andhra Pradeshs net
cropped area (SERP 2013).
While many other sustainable farming initiatives
exist, few promote certifed organic farming. In fve
districts of drought-prone Vidarbha, Maharashtra,
for instance, certifed organic farming yielded positive
results, even turning farmers back from the brink of
distress. More than 50,000 farmers in over 600 villages
switched to natural and sustainable methods of farming,
and are being supported by an NGO to obtain organic
certifcation. Not only do they now enjoy improved
income, health and yields, but they no longer depend on
expensive seeds and pesticides from outside dealers.
Another important sustainable agricultural practice
is the cultivation of millet, which is not just a monocrop
farming system, but considered a holistic farming
method. Millets are traditionally inter-cropped with
other varieties of millets and pulses, oilseeds and
vegetables. Te mix of crops allows harvesting at diferent
times and reduces the risk of complete crop failure as
at least one variety of millet grows even when rainfall
fails. Millets grow on harsh
uplands and hilly terrains
that are predominantly
inhabited by tribals making
it an important component
of their diet.
Te System of Rice
Intensifcation (SRI), an-
other sustainable method
of cultivation, also benefts
small and marginal farm-
ers. With SRI, younger seedlings are planted at a wider
spacing, while maintaining aerobic soil conditions and
avoiding complete soil fooding. SRI uses 40 to 50 per
cent less water and signifcantly less seed and chemical
fertilisers, but generates signifcantly increased yields.
In Nalanda, Bihar, for instance, paddy yields increased
from 30 quintal/ha to 70 quintal/ha (Krishnagopal
2010). Organic farmers in Bihar set the 2013 world re-
cord, producing 224 quintals/ha. SRIs have now spread
to other states including Tamil Nadu, Karnataka,
Odisha, Madhya Pradesh and Andhra Pradesh.
2.4.2 Collective Farming
Trough collective farming, small and marginal
farmers and the landless can overcome many problems.
Small farmers can make
large joint investments in
agricultural machinery or
land (buying or leasing)
by pooling their fnancial
resources and gaining
better access to credit.
Group farming especially
supports women farmers
who often lack land rights
and are discriminated against in market dealings
(Agarwal 2010). Group cultivation also can help
spread risk by greater crop diversifcation.
While collective farming is not new, recent successful
approaches are distinct because of the domination of
women farmers. An early example is a collective started
in the 1980s by poor, low-caste women in Andhra
Pradeshs Medak district, supported by the Deccan
Development Society (DDS). Te underlying aim is to
ensure food security without harming the environment.
Women members lease land, pay 25 per cent and take
the rest on concessional credit from the DDS and the
state. Te group shares all cultivation tasks except
ploughing for which they hire tractor services. Today
Millet cultivation has
multiple beneftshigh
nutritional value, use as
fodder, ability to grow
in harsh conditions, and
requiring few external
inputsand is inter-
cropped with other
crops, reducing the risk
of complete crop failure.
By pooling fnancial
resources and gaining
better access to credit,
small farmers can make
large joint investments
in agricultural
machinery or land
(buying or leasing).
32 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
this initiative supports about 2,600 families. A similar
initiative by Andhra Pradesh Mahila Samakhya started
in 2001 supports about 4,300 small and marginal
women farmers and landless who farm food crops on
leased land as a group. Te largest collective farming
initiative is by Kudumbashree, the SHGs promoted by
the government of Kerala in 1998 (see Box 2.3).
Another form of collective is a producer company
incorporated under the Companies Act. Farmers
take stakes in such a company and can undertake
production, processing and direct marketing. Currently,
India has about 130 such companies (Planning
Commission 2011a). While there are some successes,
producer companies have not really taken of for several
reasons such as inadequate capital and capacity issues
in operations as a company.
2.4.3 Diversifcation: Growth of Livestock
Technology and diversifcation have contributed the
most to agricultural growth over the past three decades.
While technological changeparticularly during the
green revolutionwas the main driver of growth,
diversifcation into horticulture and livestock has also
been important. Excluding the northern states, in the
2000s, diversifcation contributed around 40 per cent to
agricultural growth (Birthal et al. 2013).
Although marginal and small farmers have embraced
diversifcation and enjoy comparative efciency in
producing vegetables, their lack of access to markets
and credit, and higher transport and transaction costs,
have meant that they still rely heavily on traditional
foodgrains for food security. While some could beneft
from modern supply chains, such as through cooperatives
(particularly dairy) and contract farming, on the whole
they remain constrained in taking advantage of higher
value commodities.
Marginal and small farmers have also diversifed into
animal husbandry to augment their incomes. More
than two-thirds of all Indian farm households now
practise livestock husbandry, especially small farmers
(ibid.). Marginal and small farmers own more than
half the countrys cattle and bufalo and between 62
and 64 per cent of small ruminants (sheep and goat)
and poultry. Teir share of livestock increased by 15 to
25 percentage points between 198182 and 200203
as compared to a total increase of 7 percentage points
in rural households (Birthal and Negi 2012). But landless
households have reduced their livestock holdings due to
increasing difculties in accessing common grazing lands.
Because it tends to be
more predictable than
crop income, livestock
income plays a crucial role
in helping reduce year-to-
year income fuctuations.
If drought or foods afect
crop yields, livestock can stabilise income as long as
some crop residue or by-product is available as fodder,
although consecutive crop failures that severely afect
feed availability do also afect livestock.
Livestock husbandry has other benefts as well.
Livestock can be sold in times of need (e.g. wedding,
education) or distress and is natural capital that can be
multiplied to generate wealth. In other words, livestock
assumes the role of a fnancial institutiona living bank
with ofspring as interestand is an insurance against
income shocks (Birthal and Negi 2012).
Te rapid growth of livestock over the past two
BOX 2.3 Collective Farming Under Kudumbashree in Kerala
Over 250,000 landless and small and marginal women farmers have formed collectives across 14 Kerala districts since
200607, cultivating 24,000 hectares. Each group of 4 to 10 members leases land for 1 to 3 years and/or pools small parcels
of their own land. The groups generally gets subsidised credit from NABARD and other banks primarily to lease land, about
30 per cent of which had been fallow (9 per cent of Keralas fallow land). The state government helped with subsidised
seeds, fertilisers and manure, pesticides and access to machinery, training and support for marketing. In some districts
the groups cultivate paddy for subsistence; in others they grow pineapple, bananas and vegetables mostly for sale. All
members contribute agricultural labour and divide the produce and profts amongst themselves.
Collective farming under Kudumbashree has several benefts. The group can raise productivity by 1020 per cent because
it can mobilise labour when needed. Employment boosts the womens self-worth and societal status, while improving
food security and nutrition levels. But challenges of fnding land to lease, short tenures, insecurity of leases and ad-hoc
rents remain.
Source: Planning Commission (2011a).
More than two-thirds
of all farm households
now practise livestock
husbandry, especially
small farmers.
Livelihoods 33
Now almost 43 per cent
of rural households are
engaged in non-farm
work.
decadesfaster than cropsthus is not surprising.
Livestock now generates higher output than foodgrains.
It contributed 31 per cent to agricultural growth in the
1990s and 36 per cent in the 2000s, with a contribution
of as high as 70 per cent in some states such as Bihar and
Uttar Pradesh, and 57 per cent in Tamil Nadu (ibid.).
Despite its importance in the value of agricultural
output, the livestock sector receives only about 12 per
cent of total public expenditure on agriculture and allied
sectors and about 4 to 5 per cent of total institutional
credit to agriculture and allied sectors (Planning
Commission 2011f ). Similarly, small ruminants, which
support livelihoods of landless and weaker sections and
hold scope for commercialisation, have received less
attention from government, banks and co-operatives.
Livestock owners often fnd it difcult to obtain feed,
fodder and drinking water. With two-thirds of livestock
in rainfed areas, these issues came to the fore during the
2009 drought and consequent high infation in feed and
fodder (Planning Commission 2013).
2.4.4 Insurance
Agricultural insurance ofers income-stabilising support
to farmers, particularly those who undertake risky rainfed
cultivation. In fact, banks
often make agricultural
insurance a precondition to
institutional credit.
For farmers, currently,
the main risk-management
instrument is the National
Agricultural Insurance
Scheme (NAIS) introduced in 1999. It operates on an
area yield index basis with claim payments based on the
average crop yield across the insurance unit, typically a
block. Premium rates depend on the season and crop and
small and marginal farmers receive a premium subsidy.
By 200809 the Agricultural Insurance Company, the
only organisation authorised to sell NAIS products,
covered about 19 million Indian farmers (Clarke et
al. 2012), merely 17 per cent of the total. And about
two-thirds of those insured were borrowing farmers
who were required to purchase NAIS insurance;
only 6 per cent of non-borrowing farmers purchased
insurance (ibid).
One reason for this low penetration is the fnancial
viability of NAIS. Due to welfare concerns, farmers
premium rates are capped and central and state
governments pay for claims that exceed the cap. Between
2000 and 2008, the claims were three-and-a-half times
the premium paid (ibid.). Tis not only put stress on
the government but also delayed claim payments due to
inadequate ex-ante budgeting. Delays and inconsistencies
in reports of crop cutting experiments to estimate yield
also increased farmers basis risk. Resulting delays of up
to 9 to 12 months caused farmers already under the stress
of poor harvests cash-fow problems and made them
ineligible for formal credit. It is such a vicious circle that
has contributed to the low uptake of crop insurance.
Recognising NAISs shortcomings, the government
launched two pilot schemes to allow private provider
participation based on actuarially determined premium
rates. Premium rates paid by farmers remain capped
and central and state governments paid the diference
upfront. Te Weather Based Crop Insurance Scheme
(WBCIS), frst introduced in Karnataka in 2007, now
has about a third of NAIS coverage nationwide (Planning
Commission 2012a). Under WBCIS, farmers receive
claim payments if weather parameters exceed a pre-
determined level. Tis has lower moral hazard as claims
are payable irrespective of yield, and the insured are
incentivised to save crops. It has also allowed extension
of insurance to crops without historical yield data (Nair
2010a). Financially, WBCIS is more likely to receive
reinsurance from international markets and costs less
because it has eliminated feld visits (Nair 2010b). But
it does not protect against localised weather events and
may not capture aggregate events like disease outbreak.
Additionally, the poor density of weather stations in
India increases basis risk. Te other scheme, Modifed
National Agricultural Insurance Scheme (MNAIS),
was introduced in 201011. It aims to reduce insurance
units from block to gram panchayat (GP) and provide
higher indemnity. Importantly, it provides early on
account payment of up to 25 per cent of likely claims
based on weather indices. Tese pilot programmes are
to be reviewed in the Twelfth Plan for future revisions to
a National Agricultural Insurance Programme.
2.5 Significance of the Rural
Non-farm Sector
Since agriculture cannot absorb all the growth in the
rural workforce, the crucial role of non-farm activities
in rural livelihoods was recognised in the 1980s. In the
last two decades growth in
non-farm work accelerated
and now almost a third of
rural workers and 42.5 per
cent of rural households do
Agricultural insurance
ofers income-stabilising
support to farmers,
particularly those who
undertake risky rainfed
cultivation.
34 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
There is no clear
relationship between
state incomes and
rural non-farm sector
employment.
non-farm work (NSSO 2011). Tis change has taken
place in varying forms and degrees across the country.
Tis present section attempts to explain the drivers of
this growth, the process through which it has happened
and its implications for village social structures. It also
addresses broad issues such as the nature of rural non-
farm jobs, the sections of the rural population that
beneft from them and the barriers they face.
2.5.1 Non-farm Sector is the Source
of Most New Rural Jobs
Between 199394 and 200910, rural employment
grew by over 44 million and reached a total of 337
million adult workers (aged 15 years and above). Over
this period, all net new jobs were in the non-farm sector
(see Table 2.6), an acceleration of non-farm activity as
compared with the 1980s, when 6 out of 10 new jobs
were in agriculture (World Bank 2011a). Almost two-
thirds of the increase in non-farm employment was in
casual wage labour, whereas roughly one-ffth between
199394 and 200910 was in self-employment.
Where is this job growth being created? Do poorer
states have more non-farm activity because of distress
or do richer states have greater non-farm employment
because of growth? Tere is no clear relationship
between state incomes and rural non-farm sector
employment. Kerala, at 64 per cent, has one of the
highest shares of non-farm employment, whereas other
high income states such as Gujarat, Maharashtra and
Karnataka have small non-farm sectors. Tere is similar
diversity amongst low income states. Chhattisgarh and
Madhya Pradesh have the
least, with between 15 to
18 per cent of the rural
workforce employed in
non-farm activities, while
non-farm employment
has rapidly increased in Bihar and Jharkhand (see
Appendix 2.2).
2.5.2 What is Driving Non-farm Growth?
Te Debate
Many have debated the issue of what has driven non-farm
job growth over the past three decades. Te literature
in the 1970s and 1980s debated the role of agriculture
in rural non-farm sector growth. A variety of factors
were identifed as explaining concentration of rural
non-farm activity in particular regions of the country,
such as the inter-linkages between agriculture and non-
agricultural activity. Tis hypothesis emphasised the
forward and backward linkages of the rural non-farm
sector with the agriculture sector, whereby growth in
agriculture increases demand for non-farm inputs and
vice versa. Researchers observed that the performance
of the rural industrial sector in certain states broadly
related to agricultural productivity (Raj 1976; Papola
1987) and in some cases higher consumption and input
intensity accounted for higher income in agriculturally
productive states (Hazell and Haggblade 1991). Micro
studies found that in the long term, crop diversifcation
and resulting higher rural incomes prompted growth
in non-farm occupations, often due to a growing
demand for retail trade and services (Chand 1996).
But the hypothesis that production and consumption
linkages with the agriculture sector have driven non-
farm job growth in the past two decades is supported
by little empirical evidence (Lanjouw and Murgai 2008).
Studies show that the non-farm sector (particularly self-
employment) actually acts as a safety net especially in
regions of declining agricultural productivity (Lanjouw
and Murgai 2010).
An alternative view is that non-farm activity acts as
a residual sector so that rural workers who are not fully
absorbed in agriculture spill over into non-farm activities
TABLE 2.6 Rural Workers Employed in Farm and Non-farm Sector (Millions)
Male Female Person
1993 1999 2004 2009 1993 1999 2004 2009 1993 1999 2004 2009
94 2000 05 10 94 2000 05 10 94 2000 05 10
Agriculture 139 142 146 146 90 90 103 83 229 232 249 229
(74) (71) (67) (63) (86) (85) (83) (79) (78) (76) (73) (68)
Non-agriculture 49 57 73 86 14 15 21 22 63 72 94 108
(26) (29) (33) (37) (13) (14) (17) (21) (22) (24) (27) (32)
Total employed 188 199 219 232 105 106 124 105 293 304 343 337
Note: Figures in parentheses are percentages of total employed.
Source: NSSO (1997, 2001, 2006b, 2011); Himanshu (2011).
Livelihoods 35
(Vaidyanathan 1986). A variation of this view is that
agrarian distress pushes rural households to diversify
into non-farm activities to mitigate risk from agriculture
or increase household income when it goes below the
reservation level. Tis view dominated the debate
during much of the 1990s and 2000s, especially since it
was observed that crises brought out several household
members, women, and the elderly to work who were
otherwise not participating in the labour market, and
who subsequently withdrew when conditions began
to improve (Himanshu 2008; Abraham 2009). Some
recent empirical evidence suggests that non-farm work
is to supplement family income rather than to mitigate
risk (Cofey et al. 2012).
Since the 1990s, pull factors, in particular
urbanisation, have been identifed as stimulating non-
farm growth (including Papola 1992; Bhalla 1997;
Himanshu et al. 2011),
citing empirical evidence
that non-farm employment
grew faster where urban
incomes also grew (Lanjouw
and Murgai 2008).
Proximity to growing urban
areas, therefore, could have a signifcant positive impact
on the rural non-farm sector (Lanjouw and Murgai
2010). Small towns that are more closely connected
to surrounding rural areas and have stronger spill-over
efects naturally have a stronger impact on rural non-
farm growth.
2.5.3 Types of Non-farm Jobs and
Key Trends
Rural non-farm jobs fall into three major categories
spread across a variety of industriesregular formal
jobs, casual labour and self-employment. Over the
past decade, the trade, construction and transportation
sectors have driven non-farm job growth (see Table 2.7).
Across both industries and types of jobs, some clear
trends are emerging.
Decline in Salaried Jobs
Employment in the formal, organised sector has
declinedfrom 25 per cent of total non-farm
employment in 199394 to 21 per cent in 200910 (see
Figure 2.5). Tis is a cause for concern because formal
sector jobs (particularly government jobs) bring greater
job security, assurance of minimum wage, and benefts
like health, insurance and pension.
Growth in government jobs has been limited. Any
expansionsuch as teachers or staf for the implemen-
tation of programmes such as the Mahatma Gandhi
Recent evidence
suggests non-farm
employment grew faster
in villages close
to growing small towns.
TABLE 2.7 Sectoral Share in Rural NDP and Employment
Economic activity Sectoral share in Sectoral share in rural
rural NDP (%) employment (%)
1993 1999 2004 1993 1999 2004 2009
94 2000 05 94 2000 05 10
Farm: Agriculture, forestry and fshing 57.0 51.4 38.9 78.4 76.3 72.7 67.9
Non-farm 43.0 48.6 61.1 21.6 23.7 27.3 32.1
Mining and quarrying 2.6 1.8 3.7 0.6 0.5 0.5 0.6
Manufacturing 8.1 11.2 11.5 7.0 7.4 8.1 7.2
Registered 5.2 6.7 6.7 n.a. 1.3 1.0 1.0
Unregistered 2.9 4.5 4.8 n.a. 6.1 7.1 6.2
Electricity, gas and water supply 0.9 1.4 0.9 0.2 0.2 0.2 0.2
Construction 4.6 5.6 7.8 2.4 3.3 4.9 9.4
Trade, hotels and restaurant 7.8 8.7 14.9 4.3 5.1 6.1 6.4
Transport, storage and communication 3.4 4.0 5.7 1.4 2.1 2.5 2.9
Other services 15.6 15.9 16.6 5.7 5.2 5.0 5.4
All 100 100 100 100 100 100 100
Note: n.a. refers to Not available; Other services include fnancing, insurance, real estate and business services and community, social and
personal services. Data for the unregistered manufacturing sector employment in 1993 is not available because NSS had no survey in 199394
on the informal sector. Registered units are units employing 10 or more workers and using power or 20 or more workers but not using power;
Unregistered units refer to all residual units.
Source: CSO (2007); NSSO (1997, 2001, 2006b, 2007, 2011, 2012); Himanshu (2011).
36 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
FIGURE 2.5 Non-farm Employment by Type (Per Cent of Total Non-farm Employment)
70
60
50
40
30
20
10
0
P
e
r

C
e
n
t
Casual Self-employed Regular
Male Female Person Male Female Person Male Female Person
199394 199900 200405 200910
Source: NSSO (1997, 2001, 2006b, 2011); Himanshu (2011).
National Rural Employment Guarantee Scheme
(MGNREGS), Integrated Child Development Servic-
es (ICDS) scheme, and NRLM-Aajeevikahas often
been based on contracts rather than on permanent staf.
Te formal private sector saw no job growth between
19992000 and 200910. Manufacturing, the largest
source of non-farm income and employment in rural
areas through the 1990s, did not create jobs during the
post-liberalisation period of high growth. Even though
growth in manufacturing output was consistently
higher in rural areas than in urban centres, resulting in
over 51 per cent of all organised manufacturing value-
added being produced in rural areas in 200708, up
from 36 per cent in 199899, it generated minimal
increase in employment (CSO 2011a). Tis is because
the growth of organised manufacturing in rural areas
has largely been in natural resource-based industries,
which are capital-intensive and do not employ much
labour. Te growth industries have been basic metals,
non-metallic mineral products, and coke and petroleum
products, which accounted for as much as 45 per cent
of the total net value-added in 200708, up from 20
per cent in 199899. Te machinery and chemicals
sub-sectors, which accounted for 10 per cent and 15 per
cent of rural manufacturing value-added in 200708
also have grown rapidly but are not labour-intensive.
On the other hand, the contributions of agro-based
and labour-intensive industries such as food products,
textiles and leather have declined from 27 per cent of
the total value-added in 199899 to 14 per cent in
200708.
Even the limited number of jobs created in the formal
private sector is mostly on a contract basis. Private
corporations with the potential to create regular salaried
jobs circumvent government laws to keep down the cost
of labour and retain fexibility (see Box 2.4).
With registered manufacturing units in rural areas
employing less than 15 per cent of workers, the rest
work in the unorganised manufacturing sector often as
self-employed persons (see Table 2.7).
Until Recently, Self-employment has been
Predominant
Until recently, the largest category of rural non-farm
workers was the self-employed, predominantly in
unorganised manufacturing, trade and services. Between
1983 and 200405, the number of self-employed in
rural areas doubled from 23 to 47 million, or 50 per
cent of total rural non-farm employment (see Figure
2.3). From 200405 to 200910, however, the number
declined sharply to 41 million or 38 per cent of total
rural non-farm employment.
Self-employment in Unorganised Manufacturing
is Declining ...
A signifcant segment of self-owned enterprises oper-
ates in unorganised manufacturing, relying on fam-
ily labour. In 200506, only 16 per cent of the total
unorganised manufacturing workforce were hired
workers, mainly in industries such as food processing,
non-metallic mineral products (such as glass, ceramics,
tiles, clay and fnished stone), textiles, furniture, and
apparel (NSSO 2007). Un-
organised manufacturing
also includes traditional
artisans who have typically
passed down their skills
over the generations.
Self-employment
in unorganised
manufacturing is
declining but growing
in trade and services.
Livelihoods 37
Labour productivity of the self-employed or
own-account enterprises (OAEs) tends to be low
and their value-addition and number of people
they employ have marginally declined over time. In
addition, inconsistent product quality, design issues
and inadequate marketing channels limit their access
beyond local markets. In other instances, OAEs have
been unable to scale up either for lack of seed capital
or lack of knowledge to innovate production processes.
Due to these limitations and increased competition
from urban products, many in the unorganised sector
have discontinued production and have resorted to
wage labour (see Section 2.5.4). Even skilled artisans
who cannot make a living of their trade are forced to
migrate or work as casual labour.
Te government has tried to revive such enterprises
by providing technology upgrades, credit support and
market connections. Tis sometimes takes a cluster
approach, encouraging industries to beneft from
proximity to one another by providing them access to
infrastructure, markets and technology. But while a
handful of clusters have succeeded, by and large this
intervention has not worked. Success stories include
the cashew and fruit processing cluster in Sindhudurg
district in Maharashtra, where micro enterprises and
SHGs have mechanised the processing and packaging
of cashew and fruits to meet international standards
and are marketing directly to Mumbai and international
markets (UNIDO 2003).
... but is Growing in Trade and Services
In recent years, as self-employment in unorganised
manufacturing has declined, the trade segment has
grown, both in numbers employed and in rural NDP
BOX 2.4 Domination of Informal Labour
When 93 per cent of the workforce is unorganised and informal, businesses would be foolish not to tap into this gold
mine. But facts are concealed, less than proper wages are paid, not to mention the slurring over of provident fund, medical
benefts and bonuses. If this means bribing the labour inspector, it is a minor expense. Not surprisingly, the unorganised
workers have grown over time in India. When labour is ready to be hired for a song, it is tempting for business houses to
rely on the informal sector.
This has unexpected consequences. If you think your swanky car is a product of the organised sector, think again. Reports
suggest that as much as 85 per cent of the workforce of some of the largest auto manufacturers is made up of contract
labour. Similarly, garment manufacturing units are outsourcing their work to smaller unorganised units who mainly
employ informal labour under poor working conditions. Relying on cheap, informal labour has become such a habit
that it is hardly surprising that the number of units employing less than 10 workers, which get classifed as informal has
increased signifcantly over the last 25 years or so. Although many are household industries, they often produce for large
corporate enterprises. As household industries employ low paid labourers, there is little demand for skilled workers and
they help private corporations make huge profts. Not only does this make our corporate sector corruption-prone trying to
circumvent government laws, but also inhibits it from being world class. This is why the vocationally trained labour force is
stagnant at 5 per cent in India, but a staggering 95 per cent in South Korea.
But why should any of that be worrisome? After all, on the back of informal labour, our textile exports went up by roughly
100 per cent between the years 1995 to 2003. Even if one were to entertain good intentions, it is hard to argue against
such practice. Corporate spokespeople may, however, explain this situation somewhat diferently. In fairness, they are
not always unconvincing. They would argue that the reason for their over-reliance on the informal sector is because
government laws are so unreasonable. In their rendition, the Industrial Disputes Act makes it impossible to fre recalcitrant
and non-performing workers and unit closures once the unit employs more than 100 people. But the laws and regulations
on worker job security, minimum wages are not unique to our country. Nothing stops the employer of a unit with less than
100 employees from providing wage guarantee and social security benefts.
If the corporate sector routinely lapses into corrupt practices, blame it on the easy pickings strewn in its path. Once you
go down the road on informal labour, other practices soon follow as natural accompaniments. Records are concealed,
payments docked for no good reason, and a little bribe on the side helps grease the wheel. As our low-wage products make
us internationally competitive, there is little reason to change the rules. The law enforcers and entrepreneurs are not just on
the same page, but often on the same balance sheet too. When it comes to the corporate sector, small may not always be
beautiful, but it need not be informal either.
Source: Dipankar Gupta.
38 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
(see Table 2.7), and is now the main source of growth
in self-employment. Two possible reasons for this
are: (i) the rural production economy is growing and
related trade is expanding, or (ii) the rural market for
urban products is emerging. It appears that rapidly
rising rural consumption is driving growth in retail
trade. Several market surveys and studies show the
large and growing size of the rural market and the rapid
increase in penetration of consumer durables, consumer
products and farm equipment such as tractors, combine
harvesters, and power sprayers. As much as 50 to 75
per cent of the sales of fast moving consumer goods and
consumer durables are in rural markets.
2.5.4 Te Marked Casualisation of the
Labour Force
A striking feature of non-farm employment is the
casualisation of labour. Today, two out of three new
rural non-farm jobs are casual labour, i.e. unskilled daily
wage jobs. Unlike regular
salaried jobs, casual labour
typically requires little or
no education and none of
the fnancial capital that
self-employment requires.
Casual labour ofers no job
security or benefts, but
because it is both perceived
and compensated much better than agricultural labour,
ofers the chance of social mobility. For this reason, the
move to casual labour is often not a distress move away
from agriculture labour, but rather an intentioned one.
Over time, this move from agriculture to casual work
has also contributed to a narrowing of the gap between
casual non-farm and farm wages, as agricultural labour
is becoming scarce. Te wage gap between regular
employment and casual labour has also narrowed. One
possible explanation is that the growth in regular jobs
has largely been in lower paying contract-based jobs
(World Bank 2011a).
Te one-time trend of young men moving to non-
farm employment while women and older men stayed to
do farm work is now changing. In recent years, the gap
between male and female wages, particularly in casual
non-farm work, has narrowed and female participation
in the casual labour force has grown (see Figure 2.5).
Te main demand for casual labour has come from
the construction industry, which has now overtaken
manufacturing as the highest provider of non-farm
employment. A majority of the construction workforce
is characterised by unskilled workers, who secure
work on a day-to-day basis through a spot or naka
market. Te construction sector boom has led to
growing demand for masons, marble polishers, brick
kiln workers and skilled workers such as carpenters,
plumbers, electricians, welders and crane operators. But
the demand for skilled workers remains largely unmet,
while the share of unskilled workers in the construction
sector has risen from 73 per cent in 1995 to 83 per
cent in 2005 (Planning Commission 2007). Training
of construction workers is generally passed on by
master craftsmen who often lack the knowledge of new
construction technology. Even unskilled workers need a
minimum amount of training on the use of machinery,
safety procedures, workplace discipline and ability to
execute instructions.
2.5.5 Te Evolving Social Dynamics
of the Village
Historically, the most privileged rural segment could
get regular salaried jobs, which typically required
better education, social connections or payment of
bribes. Tese were the early migrants who over time
became permanent migrants. For decades, the more
disadvantaged, particularly the Scheduled Castes and
Tribes (SCs/STs) or those with lower landholdings,
could not move away from agriculture. Debts often tied
them to large landowners. But with the decline in farm
size and consequent preponderance of family farms,
along with new opportunities outside agriculture, many
moved to non-agricultural jobs. Te SCs in particular
beneftted from such jobs
with a 12 percentage point
shift from agricultural
labour to casual labour
(see Figure 2.6). In making
it possible for them to
break out of traditional caste hierarchies, the growing
availability of casual labour jobs has given the socially
disadvantaged upward mobility (see Chapter 1).
As more people move to casual non-farm work,
social hierarchies and traditional production systems in
villages are disintegrating. One of these is the traditional
jajmani system, whereby the landless service classes or
kameens, with occupations such as weavers, cobblers,
barbers, palanquin bearers or iron-smiths, provided
services to the landed higher castes. Te higher caste
patron or jajman provided inputs to the kameen class,
who then would render services or supply fnished
goods in exchange for grain and other payments in
A striking feature of
non-farm employment
is the casualisation
of labour. Today, two
out of three new rural
non-farm jobs are casual
labour, i.e. unskilled
daily wage jobs.
Growing availability
of casual labour jobs
has given the socially
disadvantaged mobility.
Livelihoods 39
kind. Jajmani caste groups were hereditary, so that
the relationship between jajman and kameen passed
down through generations. Kameens also worked as
agricultural labour. Most belong to the SCs and other
backward classes (OBCs). But as households diversify
and move out of inherited occupations, this web of
production and exchange is coming apart countrywide.
Tose that are turning to non-farm occupations are
concentrated amongst the less privileged with lower
landholdings (see Table 2.8).
But not all are switching occupations. Many
households, both more and less well-to-do, are not
leaving farming, but rather are combining farm and
non-farm work. Tese are the overlapping livelihoods
referred to in Chapter 1. Most non-farm work is in
nearby towns or in farther cities. Short-term migration
or commuting allows farming households to take on
non-farm work and villagers increasingly commute to
towns, mainly for construction work (Himanshu et al.
2011; Jeyaranjan 2012; Mukhopadhyay 2011).
Even as opportunities expand, the dearth of human,
fnancial and physical assets prevent the poor from
participating as entrepreneurs in growing non-farm
sectors and confnes them to employment in low-
productivity, low-growth segments (Haggblade et al.
2010). Not surprisingly, socially disadvantaged groups
face the most severe handicaps. SCs thus only own 8
per cent and STs 3 per cent of the unregistered sector
microenterprise, and 11 and 5 per cent respectively of
the registered sector (MSME 2007). But instances of
successful Dalit entrepreneurship are emerging (see
Box 2.5).
2.6 Barriers to Rural Non-farm
Livelihoods
Creating sustainable and secure livelihoods requires an
environment that enables and empowers individuals
to avail of opportunities. Tere are various aspects
to this, including capabilities, equal access and assets.
Capabilities include education and skills, and the health
and nutritional security needed to be a productive worker.
FIGURE 2.6 Shift of SC Agricultural Labour Households
to Casual Labour as Main Source of Income
(Per Cent of Total SC Rural Households)
Note: Other labour includes manual labour working in non-
agricultural occupations.
Source: NSSO (2001, 2006b, 2011).
60
40
20
0
P
e
r

C
e
n
t
Agricultural labour Casual labour
19992000 200405 200910
TABLE 2.8 Distribution of Rural Households with
Non-farm as Major Source of Income by Each Size
Class of Land Owned (Per Cent)
Size class (ha) 200405 200910
0 71.9 76.3
0.0010.004 50.3 52.4
0.0050.40 49.3 54.4
0.411.0 24.7 26.0
1.012.0 15.1 17.5
2.014.0 12.1 11.9
4.01+ 10.8 13.2
All 38.3 42.5
Source: NSSO (2011).
BOX 2.5 Dalit Entrepreneurship
Although one may not imagine Dalits as entrepreneurs, they do engage in certain traditional non-farm occupations. Rural
Dalits continue to face the disadvantages of discrimination, fewer social networks and lack of access to fnance, markets and
inputs compared to urban Dalits (Jodhka and Gautam 2008; World Bank 2011d). But micro-level data shows that migration
has helped Dalits move into entrepreneurial activities. A survey in urban centres in Haryana and Uttar Pradesh found that 20
per cent of Dalit entrepreneurs were migrants from nearby villages and had started ventureslargely funded by personal
savingssuch as shopkeeping, dealerships or agencies, and providing skill-based services (Jodhka 2010). While most frst
generation entrepreneurs had illiterate parents, they were better educated. Despite caste issues that bar them from renting
shops and expose them to hostile competition, Dalit entrepreneurship, thus, is emerging.
10
15
22
51
41
37
40 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Equal accessfrom fnancial inclusion to proximity
creates a level playing feld to compete for opportunities.
And assetssocial, fnancial or physicaldetermine
an individuals ability to avail of opportunities. Tis
section looks at some critical barriers that constrain
opportunities to developing productive rural livelihoods,
and discusses eforts made to address them.
2.6.1 Financial Exclusion
A key barrier for vulnerable groups is fnancial exclusion.
In 2003, nearly 80 per cent of non-farming households
had no access to credit from any source and thus could
not invest in productivity-
enhancing assets (NSSO
2005b). Tey also had no
afordable access to other
fnancial services such as
savings, insurance, and
payment and remittance
facilities at an afordable
cost. Tough eforts have been taken to extend fnancial
services to unbanked rural areas, this remains a concern.
Extension of Formal Banking Institutions
Banks play an important role in extending fnancial
services. Although the expansion of banking services
to rural areas slowed down after the 1991 reforms,
renewed emphasis on fnancial inclusion increased bank
penetration after 2005. After 2006 this was driven by
the Reserve Bank of India (RBI) innovations in the
form of no-frills accounts (NFAs) with zero or very low
minimum balance, relaxed know your customer norms
and electronic beneft transfer.
6
Such initiatives resulted
in an almost four-fold increase in bank coverage from
March 2010 to March 2012 (Sarr et al. 2012).
By the end of March 2012, around 105 million NFAs
had been opened. But banks often could not service
customers that were not within commuting distance.
Tis led to dormant NFAs, with barely just over 10
per cent reported as active (Kochhar 2009). Although
fnancial literacy education has increased usage (Sarr
et al. 2012), the high number of inactive accounts and
the small amounts transacted are not fnancially viable
for banks.
Banks have attempted to overcome this problem
through the business correspondent (BC) model
since 2006, allowing them to expand (see Table 2.9).
BCs are authorised to carry out transactions as bank
agents. Banks can thus extend services to distant clients
and provide services at customers doorsteps. About
1.5 lakh villages now have access to banking facilities,
either through a branch or a BC. Led by the State Bank
of India, 15 to 20 banks have piloted the BC model
reaching to about 1.2 lakh villages.
Yet, while access has increased, several problems
persist. Villages covered by bank branches enjoy a wider
range of services compared to those covered by BCs. BCs
often focus only on opening NFAs and linking them
to government payments such as under MGNREGS
or pensions; in some cases they extend credit either
in partnership with a microfnance institution (MFI)
or through the SHG federation, but BCs do not
usually promote saving habits or credit facilities, and
other aspects such as remittances and insurance are
unavailable. Banks also face challenges because BCs
handling of cash has attendant risks (ACCESS 2009)
and the low commissions paid to BCs does not lead to
stability or commercial viability (ibid.; Sa-Dhan 2012a).
Micro and small enterprises are eligible for credit at
reduced rates under priority sector lending activities
for non-farm activities, along with agriculture. Te
RBI also introduced a General Credit Card scheme
in 2006 to provide access to credit to non-agricultural
clients in rural and semi-urban areas along the lines of
the Kisan Credit Card scheme. In 2008, the Rangarajan
Committee stressed that all households must be covered
by 2015 and suggested the creation of two fundsthe
Financial Inclusion Promotion and Development Fund
In 2003, nearly 80
per cent of non-farm
households did not
access credit and
could not invest in
productivity-enhancing
assets.
TABLE 2.9 Progress in Financial Inclusion Through
the Banking System
Particulars March March March
2010 2011 2012
Total number of banking 54,258 1,00,183 1,47,534
outlets in villages
Through branches 21,475 22,662 24,701
Through BCs 32,684 77,138 1,20,355
Through other modes 99 383 2478
Number of no-frills accounts 50.3 75.4 105.5
(million)
Amount in savings (Rs crore) 4260 5700 9330
Source: RBI (2011b).
6
Electronic beneft transfers allow disbursement of government payments at the location of business correspondents (BCs) of banks through
hand-held devices using biometric smart cards.
Livelihoods 41
and Financial Inclusion Technology Fundby the
government, the RBI and NABARD.
Microfnance
Microfnance, an important tool in providing people
without bank accounts access to mainstream fnance,
has made inroads in lending to the poor (see Table
2.10). India has two models: the SHG-Bank Linkage
programme and the MFIs.
Te SHG-Bank Linkage programme, developed by
NABARD, links SHGs to banks and provides them
savings and credit facilities. SHGs pool the savings of
their members and use them and bank loans to extend
small loans to them. Sixty-eight per cent of microfnance
customers, or more than half the rural households, are
members (NABARD 2012). An average loan to an
SHG is around Rs 1.44 lakh and an average loan to a
member is around Rs 14,000 (ibid.). Often inadequate,
these are supplemented with other loans ( Johnson and
Meka 2010). NABARD has now introduced SHG2 to
progress from community banking to individual banking
by allowing SHG members to save by opening or
reviving their bank accounts and qualifying enterprising
members for larger loans.
MFIs, while narrower in reach, provided loans
through joint liability groups to almost 32 million
customers by end-March 2011, although credit later
declined after the microfnance crisis in Andhra Pradesh
(see Table 2.10). A number of factors caused the
crisis, including credit given too easily without proper
creditworthiness assessments, high interest rates and
coercive loan recovery practices. Often, if the periodic
repayment schedule did not coincide with the cash fows
of customers, they resorted to multiple borrowing to
repay previous debts, creating a debt trap (Planning
Commission 2011c). Te Malegam Committee Report
(RBI 2011a) highlighted the need to regulate MFI
activities because borrowers belonged to vulnerable
social groups. Consequently the Microfnance
Institutions (Development and Regulation) Bill, 2012
was introduced putting RBI in control of the sector.
A critical issue for income generation and enhancing
the non-farm sector is that microfnance credit has
been fungible and catered to varied fnancial needs of
poor households. Tough the RBI, in 2011, stipulated
that 75 per cent of loans should be for the purposes of
generating income, this is difcult to monitor. A study in
Andhra Pradesh found that only around 17 per cent of
loans were used for investment (Ananth 2011).
2.6.2 Marketing of Non-farm Products
Lack of marketing facilities is another major constraint
especially for the self-employed segment of the non-
farm sector, a heterogeneous collection of micro and
small enterprises that generally produce and market
their products under uncertain conditions. Te products
range from traditional
handloom and handicraft
goods to non-traditional
products such as garments,
iron and steel works, four
milling and food products.
Growth in non-traditional
goods recently has outpaced
that in traditional goods (Mehta 2002). Due to poor
education, lack of market orientation and poor market
access, small producers often know so little about
markets, consumer tastes and quality criteria that their
goods do not match market demand and result in low
returns (Annapurna 2006; Pastakia and Oza 2011).
Despite increased demand for rural products, small
producers cannot easily access urban and export markets
due to supply chain inefciencies. Tey lack organised
systems to aggregate goods, conduct quality checks,
and supply them to retailers. Because they also lack
the fnancial capacity to hold produce, they are forced
Small producers often
know so little about
markets, consumer
tastes and quality criteria
that their goods do not
match market demand
and yield low returns.
TABLE 2.10 Client Outreach and Credit Portfolio of Microfnance
200607 200708 200809 200910 201011 201112
Number of customers (million) 48.0 61.2 76.6 86.3 94.3 83.4
o.w. Banks-SHG 38.0 47.1 54.0 59.6 62.5 56.6
MFI 10.0 14.1 22.6 26.7 31.8 26.8
Loans outstanding (Rs billion) 158.2 229.5 344.1 456.1 521.8 572.5
o.w. MFI 34.6 59.5 117.3 183.4 215.6 209.1
Note: o.w.: of which.
Source: Adapted from Sa-Dhan (2012b); NABARD (2012).
42 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
to sell in the nearest local market, often to middlemen
who, while enabling market linkages, pay them a
fraction of the fair price. With the breakdown of the
jajmani system, producers who were once provided raw
materials by rich landlords and traders are now forced
to buy materials at high prices due to their limited scale
of operation, and no longer have the assured markets
they once had. As a result, a large number of artisans
and other rural producers are discontinuing production
and, as they lack other skills, looking for unskilled
casual employment.
New Trends and Initiatives for Supporting
Rural Marketing
Te government attempted to support rural producers
by setting up the All-India Handicrafts Board as early
as 1952. But as the focus shifted to industrialisation,
policies for artisans increasingly targeted welfare rather
than growth. Since 2000, this approach has changed
and the government has tried to create marketing
infrastructure. Certain initiatives of the past decade
merit discussion.
Improving marketing infrastructure and access to
markets. A market-oriented approach is critical for
livelihood projects to succeed and be scalable. In recent
years, the government has intervened by creating a
marketing infrastructure, linking small producers with
modern markets and giving them the opportunity to
learn consumers tastes. Since 1999, the Ministry of Rural
Development (MoRD) has organised SARAS melas for
the sale of rural products produced by SHGs. In 2009,
22 fairs were held with over 7,500 participants. It has
also created rural haats since 2009 to provide permanent
marketing centres at the village, district and state levels.
In addition, rural bazaars similar to ITCs e-choupal are
being started for ICT-based marketing, with operational
portals for Goa, Tamil Nadu and Tripura. But these
interventions are inadequate. Most production remains
disorganised and production-oriented rather than
demand-driven, leaving artisans struggling for sustenance.
Demand-driven production. Another intervention
involves addressing market information asymmetries
to enable demand-driven production. Te Rangasutra
initiative, for example, provides producers design and
marketing inputs, coordinates production and quality
control, and brings together poor handloom craftsmen,
fashion-conscious consumers, the organised retail sector
and other supply chain partners. Design houses and retail
outlets such as FabIndia, Anokhi and Contemporary
Arts and Crafts have marketed these products and
have attempted to reposition and contemporise them in
accordance with market tastes.
Value chain interventions. Value chain interventions
are seen as a special type of market-based intervention
that attempts to generate livelihoods at diferent
nodes of the chain. Certain successful initiatives
have revived a sick value chain or created new ones.
PRADANs sericulture initiative in Jharkhand and
Bihar, for instance, added new nodes to the tussar silk
value chain to improve quality and productivity, and
focused on marketing through Eco-Tussar which sells
these products through large urban stores and exports
(Pastakia and Oza 2011).But the rate of proliferation
of such practices is limited and should be hastened to
link small producers to modern markets and promote
their livelihoods.
2.6.3 Skills
Failure to adequately develop the skills of rural dwellers
has hurt their livelihood prospects. Over 30 per cent of
Indias rural population remains illiterate (Census of
India 2011) due to the poor quality of education and the
almost 50 per cent drop-out
rate (MHRD 2011). Many
jobs require vocational
skills not taught in schools.
With the growing demand
for technical skills to fll
roles previously flled by college graduates, vocational
training is increasingly seen as a way to improve rural
employment prospects (Unni and Sarkar 2012).
Huge skill gaps in professions ranging from plumbers
and electricians to nurses and teachers persist. Indias
vocationally skilled workforce is limited to only about 10
per cent, trained formally (2 per cent) or informally (8
per cent) (Planning Commission 2011h). While various
ministries have training programmes for artisans, textile
and handicraft workers and small enterprise workers,
most informal labourers generally learn from other low
skilled people either on the job or through informal
apprenticeships.
Training capacity remains grossly inadequate. Taken
together, the government-run, and now increasingly,
public-private partnership (PPP)-modelled, Industrial
Technical Institutes (ITIs), privately-run Industrial
Training Centres (ITCs) and various polytechnic
institutions can only train about 3.1 million people
per year while 12.8 million people enter the workforce
per year (Planning Commission 2011h). Te total
Failure to adequately
develop the skills of
rural dwellers has
hurt their livelihood
prospects.
Livelihoods 43
Aajeevika has a three-
pillared approach:
Improving existing
livelihood options
Building marketable
skills
Nurturing the self-
employed
training capacity would have to increase to 40 to 50
million per year over the next decade to achieve the
governments goal of training 500 million people by
2022 (Chenoy 2013).
But formal vocational training programmes are not in
high demand for various reasons:
Te quality and relevance of training provided in
formal institutions is poor and have not improved
employability. Te National Council for Vocational
Training sets the curricula of ITIs and ITCs,
but it does not take adequate account of industry
and employer needs. Private employers must be
continuously consulted in designing curricula and
keeping them updated for training to remain relevant.
Entrance requirements cannot be met. Even though
only 12 per cent of the rural population has secondary
education (NSSO 2013), it is often a pre-requisite
(Hajela 2012).
Te high cost of fnancing vocational education,
without sufcient banking support, also deters
potential participants. Even if employment
prospects following training may be good, pay
rates are too low to incentivise investment in the
programme. On the other hand, frms do not want
to pay a placement fee for skilled workers for fear
that they will get inadequately skilled workers and
the risk of attrition.
To address these concerns, the government launched
the National Skill Development Policy in 2009, which
caters to emerging employment market needs by
involving social/ private partners. Te National Skill
Development Corporation (NSDC), an innovative
PPP was established to catalyse the creation of private,
for-proft vocational institutions. Rather than providing
training themselves, NSDC subsidises companies or
organisations that provide skill development through
loans, equity or tax breaks. Individuals learn industry-
relevant skills through such corporate involvement. Te
NSDC is also involved in forming Sector Skill Councils
to establish quality and skill competency standards,
standardise the afliation and accreditation process,
and assist in planning and implementing training
programmes by identifying skill development needs and
cataloguing skill types. But even the ambitious NSDC
faces the challenge of scaling up fnancial assistance
programmes with efective standardised monitoring
tools (Sabharwal and Sharma 2013).
2.7 National Rural Livelihoods
Mission (NRLM): Aajeevika
Launched in June 2011, Aajeevika
7
is envisioned as the
centrepiece in the fght against rural poverty. It is based
on the core belief that the poor have innate capacities
that can be developed through a group approach
(collectives such as SHGs, farmer cooperatives and
artisan groups) and supported with skills training,
marketing knowledge and fnance to build sustainable
farm and non-farm livelihoods. Aajeevika has a three
pillared approach:
Improving the poors
existing livelihood options;
Building marketable skills;
and
Nurturing the self-em-
ployed and entrepreneurs
(for micro enterprises).
First pillar: improving the
poors existing livelihood options
Aajeevikas frst pillar aims are:
to bring at least one member of each poor rural
household, preferably a woman, into the SHG
system, an efort rolled out in phases beginning with
150 districts, including 82 Integrated Action Plan
(IAP) districts;
to promote and scale up innovative livelihood
activities in farming and livestock;
8
to improve SHGs access to credit and improve
members fnancial literacyi.e., make them more
informed and responsible borrowers; and
7
Aajeevika replaces the Swarnajayanti Gram Swarozgar Yojana (SGSY), the primary programme aimed at assisting the rural poor in
developing alternate income sources since 1999. Central to SGSY were SHGs, which marketed their farm and non-farm produce, received
skill training as units, formed savings collectives, and acted as channels for livelihood fnance. Tis group approach marked a critical shift from
SGSYs predecessor, the Integrated Rural Development Programme which focused on providing household-level access to fnance for small
enterprises. But SGSY had limited success. While nearly 31 lakh SHGs were formed between 19992000 and 200809, barely 22 per cent
of them undertook economic activity. Much of the economic activities was in the primary sector with little diversifcation in their livelihood
base (MoRD 2009). Tis was mainly due to insufcient capacity building, lack of technical training and credit and market constraints. Reviews
(Planning Commission 2012a) also found that states with more robust and pro-poor institutions had better success in implementing SGSY
and in mobilising the poor, particularly the most vulnerable groupsSC/STs, women and the disabled.
8
A key programme, Mahila Kisan Sashaktikaran Pariyojana (MKSP) is intended to create sustainable agricultural livelihoods for women,
improve their skills and managerial capacities and ensure food security at the household and community level. MKSP has aided in extending
44 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
to use SHGs as conduits to broader fnancial inclusion
by having them serve as business correspondents and
community facilitators for credit, remittances and
insurance.
Te second and third pillars: placement-linked skill
training and self-employment
To move beyond the low productivity businesses
that characterised previous programmes and create
formal and self-employment opportunities, Aajeevika
emphasises professionally-managed and relevant capacity
building through:
(a) Aajeevikas skill development programme; and
(b) rural self-employment training institutes (RSETI).
Aajeevikas skill development programmewhich
aims to cover about 50 lakh rural youth over the 12th
Plan period, is largely
run by the private sector,
fnanced 75 per cent by
the government and 25 per
cent by the private sector
implementing agency. Te
programme focuses on the
rural poor (all benefciaries
are Below Poverty Line or
BPL) and youth from IAP
districts, Jammu and Kashmir, north-eastern states,
districts/ blocks with high SC population and minority-
concentrated districts, and girls. What distinguishes
this from other government programmes is its links
to post-training job placement, guaranteeing salaried
employment for 75 per cent of the trainees. But the
programme faces various challenges, a key one being
job retention. Te Himayat programme in Jammu and
Kashmir
9
has tried to address the issue of retention
with some success (see Box 2.6). Te Ministry is now
considering a migration support centre and an alumni
programme to counsel the youth who have migrated
from rural areas and need to adapt to the demands of
the formal sector.
In addition to skills training for formal employment,
Aajeevika provides training in technical skills,
marketing, and best practices to encourage the rural
youth to set up micro enterprises. Tis is through
the RSETIs created in each district in partnership
with public sector banks. RSETIs are intended to
provide apprenticeship opportunities and banks are
to provide credit for starting micro enterprises. In
addition, following a Kerala model, Micro Enterprise
Consultantsmen and women who can provide
entrepreneurs support in identifying business
opportunities, building market and supplier linkages,
etc.are locally placed on a chargeable basis.
Aajeevika also trains SHG members as health
professionals, nutrition and education experts who
can act as community resources, and government
representatives for social development programmes.
sustainable agricultural practices such as community managed sustainable agriculture in Andhra Pradesh and SRI cultivation in Bihar
(see section titled Sustainable Agriculture). MKSP has also assisted in establishing market linkages and connecting women farmers with
community-based organisations that provide access to credit, inputs, procurement and marketing.
9
Aajeevika recently launched a skill development initiative like Himayat called Roshni for the rural youth from the 24 most critical LWE
afected districts covering women and vulnerable tribal groups on a priority basis.
BOX 2.6 Himayat Programme in Jammu and Kashmir
Himayat is a placement-linked skill development programme seeking to train and place one lakh school dropouts and
economically disadvantaged youth in Jammu and Kashmir over fve years. Project implementing agencies provide three to
nine months of training for emerging sectors such as retail, information technology, communication and hospitality. About
70 per cent of the training is centred on domain skills and 30 per cent on personality development, such as communication
and English language skills and computer literacy. The youth are trained in batches of 10 to 15 candidates from a Gram
Panchayat and parents are involved to allay fears of their children working outside their villages improving job retention.
The youth are mainly placed in urban centres of Jammu and KashmirSrinagar and Jammuand outside Jammu and
Kashmir in Chandigarh, Delhi and Punjab. Leading companies such as Cafe Cofee Day, KFC, V-Mart, Competent Synergies
and Bharati Walmart have recruited trainees. Himayat provides fnancial assistance of Rs 2000 per month for six months.
Approximately 8,000 youth were trained and 5600 placed in the frst two years. Job retention was a concern in the initial
batches as the youth found it difcult to adapt to the discipline of formal work and urban life. These issues are being
addressed by helping youth take informed job decisions, alumni programme for developing social network in cities and by
providing trainees support for the frst month, to, for instance, help them settle in the city.
Source: Based on discussions with MoRD ofcials.
Aajeevikas skill-
development
programme is largely
run by the private sector,
fnanced 75 per cent by
the government and 25
per cent by the private
sector implementing
agency.
Livelihoods 45
Strategic Shifs: NRLM versus Its Predecessor, the
Swarnajayanti Gram Swarozgar Yojana (SGSY)
NRLM has two strategic shifts aimed at overcoming the
shortcomings of its predecessor programme, the SGSY:
It is demand-driven. States prepare livelihoods-based
7-year business plans and annual action plans for
which they request funds from the centre.
It has introduced a professional and autonomous
institutional delivery structure by the State Rural
Livelihood Mission (SRLM), an autonomous
society that has fexibility in hiring and autonomy in
developing private-sector partnerships. SRLMs have
multidisciplinary teams of trained professionals at
the district and block levels responsible for social
mobilisation and technical support for SHGs and
Aajeevika benefciaries. While most states have set
up SRLMs as societies, Gujarat has experimented
by setting up a for-proft company, the Gujarat
Livelihood Promotion Company. Recently, the
Cabinet authorised the creation of an autonomous
and professionally managed National Rural
Livelihoods Promotion Society focused on providing
the states technical support.
To overcome exclusion and inclusion errors, Aajeevika
will use a system of participatory identifcation of the poor
(PIP) rather than the BPL list. Tis will beneft SHGs
due to greater afnity amongst members, which is more
difcult if members are brought together arbitrarily
using a BPL list. PIP has a set of automatic inclusion
and exclusion criteria and a set of deprivation indicators
broader than income alone. Te Gram Sabha (GS) and
Gram Panchayat (GP) then vet and modify the list of
candidates that ft these criteria.
Aajeevika is intended to cover all districts over the
next 5 to 7 years. Certain states such as Andhra Pradesh
and Kerala are already implementing NRLM on a state-
wide basis and other states will gradually transit from
SGSY to NRLM. While the programme holds promise
for energising rural livelihoods and making them more
productive, how well it will actually perform remains to
be seen.
2.8 Conclusion
Te agrarian economy remains central to rural
livelihoods. But rising costs, shrinking farm sizes and
stagnating productivity put it at risk, particularly for
small and marginal farmers for whom access to land,
credit and markets remains challenging. Dryland
farmers, in particular, have been sidelined in the
development of commercial crop models, even though
their farms constitute well over half of the countrys
total cultivated land.
Farm-based livelihoods must urgently be revitalised
and secured by addressing these issues. To address
the current leasing-in of land on insecure terms,
without credit, subsidies and other institutional
support, collective or cooperative farming should be
encouraged. Farmers then can jointly buy inputs and
sell products and thus compete with larger farmers on
a more equal footing.
Technological research and development to improve
yields merit investment, but traditional agricultural
knowledge and practices must inform this research.
Special attention must be paid to improving productivity
of small and dryland farmers. Crops like millet, for
instance, that are not only better suited in dryland
areas, but also ensure food security due to their high
nutritional value, should be promoted.
Other interventions include improving access
to credit, developing products suited to agrarian
livelihoods, and increasing fnancial literacy. Crop and
livestock insurance should be expanded to protect
rural incomes from shocks. As farmers increasingly
depend on livestock for income, rising fodder and feed
costs and the marketing of livestock products need to
be addressed. Livelihoods based on small ruminant
husbandry should also be promoted, particularly for
the marginal and landless.
Non-farm sources of income have grown in
importance over the last two decades. But non-farm
jobs overwhelmingly are in the form of casual labour
or daily wage work. Although such jobs do provide
the unskilled certain opportunities, they ofer no job
security, advancement opportunities or other benefts of
formal employment. Of the persistent barriers to more
productive jobs for rural dwellers, poor access to capital,
marketing opportunities and marketable skills remain
the most pressing.
Te government launched Aajeevika to address these
constraints. However, the scale of the constraints far
surpasses the actions taken to address them. While
private sector involvement in skill-development
programmes has improved the relevance of skills
training and thereby the potential for job placement,
these projects are too small in size and number to satisfy
to total need.
46 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Appendices
TABLE A2.1 Marketable/Marketed Surplus of Paddy Out of Farm Production by Size Category
of Farmers in India, Triennium Ending 199899
Quantity (000 tonnes) Per Cent
S. No. Details Small Medium Large Total Small Medium Large Total
1. Total production 52,029 36,672 33,570 1,22,271 100 100 100 100
2. Total farm family requirement including losses 28,620 15,269 10,577 54,466 55 42 32 45
3. Marketable surplus 23,409 21,404 22,992 67,805 45 58 68 55
4. Quantity soldMarketed surplus 22,779 19,620 21,144 63,543 44 54 63 52
Note: 1. Average of 199697, 199798 and 199899.
2. Size category of farmers based on the area under paddy cultivation. Diference between marketable and marketed due to post-harvest losses.
Source: MoA (2002).
TABLE A2.2 State-wise Share of Non-agriculture in Total Rural Employment (Per Cent)
State 199394 19992000 200405 200910
Andhra Pradesh 21 21 28 31
Arunachal Pradesh 14 17 18 24
Assam 21 32 26 30
Bihar 16 19 22 33
Chhattisgarh 14 15
Delhi 90 93 93 100
Goa 55 71 65 76
Gujarat 21 20 23 22
Haryana 28 32 36 40
Himachal Pradesh 20 26 30 37
Jammu & Kashmir 24 24 36 40
Jharkhand 30 45
Karnataka 19 18 19 24
Kerala 44 52 58 64
Madhya Pradesh 10 13 18 18
Maharashtra 17 17 20 21
Manipur 36 25 31 47
Meghalaya 14 14 18 29
Mizoram 11 15 13 19
Nagaland 25 20 21 26
Odisha 19 22 31 32
Punjab 25 27 33 38
Rajasthan 20 22 27 37
Sikkim 41 39 40 46
Tamil Nadu 30 32 35 36
Tripura 52 54 57 69
Uttar Pradesh 20 24 27 33
Uttarakhand 22 31
West Bengal 37 36 37 44
All-India 22 24 27 32
Note: All data pertain to usually working persons in the principal status (PS) and subsidiary status (SS) taken together.
Source: NSS: Employment and Unemployment Situation in India, Report Nos 409 (50th Round, 458 (55th Round), 515 (61st Round) and 537 (66th Round)
(1997, 2001, 2006 and 2011).
Livelihoods 47
Te State-wise status of the implementation of
NRLM-Aajeevika (and transition from SGSY) is
presented below:
Twenty-six states have taken approval for rolling out
of NRLM-Aajeevika.
Sixteen states have appointed full time state mission
directors.
A core team is in place in 13 states.
Twenty-three states have submitted their Annual
action plan under NRLM-Aajeevika.
Annual action plans for 10 states have been approved;
remaining 13 states are under discussion.
State perspective and implementation plan have been
received from 5 states, out of which 3 approved.
Most missions have undergone immersion-cum-
exposure visits.
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Image credit: www.thehinduimages.com
Summary
W
hile living standards in
both rural and urban
areas have improved,
there are growing
concerns regarding inclusivity with wide
disparities between states, districts, social
groups and by gender. Tese disparities
are not just in terms of income but also
in social development. Human wellbeing
goes beyond income to encompass a
range of rights and freedoms which build
human capability, including education,
health and access to various services.
Rural poverty, as measured in
consumption terms, has substantially
decreased to 26 per cent in 201112
from 34 per cent in 200910 and 42 per
cent in 200405, bringing with it higher
aspirations for a better quality of life.
But while reduced, poverty is now more
concentrated than beforeregionally,
and among certain social groups.
Concentration has increased as poverty
in the poorer statesJharkhand, Bihar,
Assam, Odisha, Chhattisgarh, Madhya
Pradesh and Uttar Pradeshhas been declining at
a slower pace. In 199394, nearly 50 per cent of the
rural poor lived in these 7 states, and by 200910
the share rose to over 63 per cent. Most of these 7
states have a high share of Scheduled Caste (SC) and
Scheduled Tribe (ST) population. Poverty is also
markedly higher among SC and ST, who constituted
44 per cent of the rural poor in 200910. In 201112,
the share of these seven states poor rose to 65 per
cent of the rural poor in the country, though some
of these states, in particular Bihar, Chhattisgarh and
Uttar Pradesh, have shown impressive rates of poverty
decline between 2009 and 2012.
But poverty is multidimensional. Even using broader
measures of human development, such as education,
health and standard of living indicators, these states
along with Rajasthan fare worst. Recognising the need
to address the high levels of deprivation in key aspects of
human well-being, the central government has introduced
many programmes and schemes over the years.
Increased government education spending on
numerous programmes has helped make notable strides
in elementary school enrolment and attendance, and in
reducing gender disparity. Secondary and higher levels
have also witnessed increasing attendance rates, though
they remain much lower than the elementary school level.
Despite several policies and programmes, the story
3
CHAPTER
Inclusion
58 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
of Indian education is one of quantitative progress
but conspicuous failures in quality. Government
initiatives have largely focused on inputs, which
may increase attendance, but dont improve learning
outcomes. Accountability remains a problemteacher
absenteeism is high and even when at school, teachers
often dont teach. Even when they do, they often focus
on completing a syllabus rather than paying attention to
whether children are actually learning. Te resulting poor
learning levels are the education systems most pressing
problem, with children in the poorer BIMAROU states
performing worst.
Another important aspect of social development
health and nutritionhas, despite its importance,
received very low public spending and attention. Child
and maternal mortality rates in rural areas are high
and the alarming malnutrition levels have shown little
improvement. Tere is also large social stratifcation,
with STs and SCs having much higher rates of
malnourishment, child mortality, and lower healthcare
access. Deprivation is concentrated in some areas, and
there is some evidence to show inter-district inequality
may be increasing. State-wise the BIMAROU states
fare worst on child and maternal health outcomes and
poor penetration of healthcare services. Yet, there are
also pockets of poorly performing districts in richer
states such as Maharashtra, Andhra Pradesh and
Karnataka.
Improving outcomes requires, apart from an efcient
healthcare system, access to nutritious meals, safe
drinking water, and sanitation. But progress in delivering
basic services remains poor and the public healthcare
system in India is fraught with severe challenges.
Preventive measures that comprise public health
including environmental hygiene, immunisation, and
health education, have generally been neglected. Tere
are also severe shortages of physical infrastructure
and, critically, skilled human resources. Shortfalls are
exacerbated by the lack of accountability of healthcare
providers, manifested in high absenteeism and low
efort levels.
Disillusioned by the poor public delivery of both
education and healthcare, the rural population has
increasingly turned to the private sector for these
services. Parents are increasingly investing in education
as about 28 per cent of rural children of primary
school age attend private schools, perceived to provide
better education, and 23 per cent of all students take
supplementary tuitions. Also, most rural households
fall back on seeking healthcare from private providers
that, though unregulated and often unqualifed, put in
more efort. Despite the overall poor quality of care, they
incur large healthcare expenditures, often fnanced by
borrowing, which push them into indebtedness.
Indeed, severe shocks such as unforeseen health
expenditures make a large proportion of households
vulnerable to poverty even though they may not be
currently poor. Variability of rural incomes and having
to cope with intermittent shocks are a common feature,
especially among poor households. Welfare programs or
social protection measures help vulnerable households
deal with such income shocks. Yet, current Indian
government social protection spending remains focused
on programmes to alleviate chronic poverty.
While Indias social protection spending is relatively
large for a low income country, the largest of these
schemes is the public distribution system (PDS),
providing subsidised foodgrain, which accounts for
about half of the total expenditure on social protection.
Protective measures such as PDS provide a safety net
to the chronically poor but do not ofer a way out of
poverty. Also, the PDS is fraught with high leakages
and mis-targeting. Te new National Food Security
Act primarily builds on the PDS, giving a legal right to
food to two-thirds of the countrys population at heavily
subsidised rates.
In contrast, promotional schemes (such as NRLM
Aajeevika) aim to build capacity and facilitate improved,
more productive livelihoods. And preventive schemes
(such as the Mahatma Gandhi National Rural
Employment Guarantee Scheme or MGNREGS)
provide income guarantees to prevent households from
falling into poverty. By ofering ropes and ladders out
of poverty, these types of schemes seek to bring about
more sustainable welfare benefts than safety nets
alone but such schemes are limited. As new sources
of vulnerability emerge and there is a wider diversity
of needs, putting more emphasis on preventive and
promotional measures will be important.
Overall, results have mostly fallen short of desired
levels, considering the large resources spent. Key
reasons have been mis-targeting due to poor benefciary
selection procedures, weak delivery systems and
widespread corruption. Te government is trying to
remedy the process of benefciary selection through the
use of the socio-economic and caste census which uses
parameters broader than income to select deserving
candidates. Tere is also a small move towards cash-
Inclusion 59
based transfers away from the primarily in-kind system.
Whether cash or in-kind, more experiments are needed
to arrive at an appropriate design that also meets the
objectives of minimising leakages and targeting of the
most vulnerable in a better manner.
In this chapter, we examine how inclusive Indias
growth has been by looking at the distribution of growth
and development among Indias rural population, across
states, and where possible across districts, and across
social and occupational groups. Are living standards
improving across the board amongst the rural population,
or are some advancing and some being left behind?
What does the state-wise distribution reveal? We
examine not only income levels but also non-monetary
aspects, including social development. We also try to
understand why some states have been able to deliver
better education and health services and outcomes
than others and whether key government policies and
programmes that assist vulnerable populations have had
a signifcant impact. Finally, we look at new proposals
the government is considering.
3.1 Growth, Poverty and
Inequality
3.1.1 Growth in Real Consumption
Indian living standards in both rural and urban areas
have defnitely improved. But the growth in real per
capita expenditures, a proxy for income, has always been
lower in rural areas than in urban. Over the past decade
(19992010)a period of high growthurban areas
gained the most, and rural-
urban disparity widened
(see Figure 3.1). Te
recent data for 201112
show further acceleration
in consumption growth in
both rural and urban areas
(see Section 3.1.9).
Te state-wise picture too refects lower longer term
growth in rural areas compared to urban, although the
acceleration in growth rates in rural areas in as many
as 12 major states exceeded that in urban areas from
200405 to 200910 (see Table 3.1). Notwithstanding
the higher rural per capita expenditure growth in
so many states, the overall growth in urban areas
outpaced rural growth. Part of the reason is that some
states recorded slower growthnotably Assam, Bihar,
Chhattisgarh, Haryana, Karnataka and Uttar Pradesh
between 2004 and 2010in rural welfare in the
second half of the decade compared with the period
199394 to 200405.
3.1.2 How is Growth Distributed?
Until the mid-1990s, inequality in rural areas
remained stable or even declined, while it increased in
the faster growth period of 19992010. One simple
measure of the increase or decrease of inequality is the
growth rates in real per capita expenditure amongst
diferent expenditure classes. From 1983 to 1997,
MPCE growth rates in rural areas were uniform across
all expenditure groups indicating stable economic
inequality, whereas urban growth patterns worsened
inequalities with skewed growth amongst urban
expenditure groups (see Table 3.2). Te period of
1999 to 2010 saw acceleration in growth across all the
income groups in rural and urban areas. But the higher
growth during this period was accompanied by a sharp
rise in inequalities (more so in urban areas) as the
diferential in the growth rates increase as one moves
from lower to middle and top groups. Growth in the
second period was defnitely pro-rich.
3.1.3 Trends in Inequality
While the trend in rural inequality was stable from
1983 to 1997, it subsequently increased, confrming
the inequality seen in growth of per capita monthly
expenditure (see Figure 3.2). Urban inequality registered
a signifcant rise in both the periods. Rural-urban
Over the past
decadea period of
high growth urban
areas gained the
most, and rural-urban
disparity widened.
Note: There is a break in the series because the frst period until 1997
is based on the Uniform Reference Period (URP) and the subsequent
period on the Mixed Reference Period (MRP).
Source: NSS unit-level data from Household Consumption Expenditure
Surveys (1983: 38
th
Round, 198788: 43
rd
Round, 199394: 49
th
Round,
200405: 61
st
Round & 200910: 66
th
Round)
FIGURE 3.1 Trends in Real Monthly Per Capita
Expenditure (MPCE) (200405 Prices)
1400
900
400
M
P
C
E

(
R
s
)
1980 1985 1990 1995 2000 2005 2010
Rural Urban
60 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
The trend in rural
inequality was stable
during 1983 to 1997, but
interpersonal disparities
widened thereafter.
TABLE 3.1 Growth Rates of MPCE in Major States of India
Annual growth rate
199394/ 200405/ Urban/Rural diferential
200405 200910
Rural Urban Rural Urban 199394 200405 200910
Andhra Pradesh 1.67 2.58 2.43 2.34 163.9 180.7 179.9
Assam 1.50 1.71 0.76 0.44 191.5 195.9 184.5
Bihar 0.52 0.95 0.48 0.40 156.4 163.9 163.3
Chhattisgarh 0.66 2.34 -0.07 1.95 180.5 216.4 196.9
Gujarat 1.08 1.94 2.69 1.92 170.4 187.0 180.1
Haryana 2.60 1.65 1.01 1.73 144.9 130.7 135.5
Himachal Pradesh 1.82 1.51 4.44 2.11 175.9 170.2 152.0
Jammu & Kashmir 1.68 0.49 2.22 1.28 175.7 138.5 132.3
Jharkhand 1.08 2.97 1.60 1.95 188.8 231.6 193.8
Karnataka 1.97 2.35 1.66 3.23 201.4 209.6 226.4
Kerala 3.08 3.00 3.46 3.34 132.5 131.3 130.6
Madhya Pradesh 0.17 1.03 2.39 3.39 169.9 193.7 203.4
Maharashtra 1.60 1.52 2.76 3.80 207.7 205.9 216.5
Odisha 0.39 0.76 4.04 4.67 179.6 187.1 192.9
Punjab 0.84 2.63 2.52 1.19 118.8 144.3 135.2
Rajasthan 0.27 1.27 1.84 2.31 141.5 157.9 161.6
Tamil Nadu 1.41 2.75 3.16 1.47 167.9 193.9 178.4
Uttar Pradesh 0.87 1.54 0.23 2.72 151.6 163.1 184.4
Uttarakhand 0.42 0.27 12.03 1.40 161.1 158.3 96.2
West Bengal 0.57 1.87 0.63 1.38 174.9 201.3 209.0
All India 1.31 2.05 1.78 2.50 176.1 190.7 197.5
Source: NSS unit-level data from Household Consumption Expenditure Surveys (1983: 38th Round, 198788: 43rd Round, 199394: 49th Round,
200405: 61st Round 200910: 66th Round).
TABLE 3.2 Annual Growth Rates of Per Capita
Monthly Expenditure (Per Cent)
Period Bottom Middle Top All
30 % 40 % 30 % classes
Rural
198397 1.02 0.80 0.85 0.86
19992010 2.05 1.97 2.59 2.29
Urban
198397 1.18 1.27 1.92 1.62
19992010 2.28 2.65 3.47 3.07
Note: The growth rates are exponential growth rates. The 198397 series
is based on URP data, while the 19992010 series is based on MRP data.
Source: NSS unit-level data from Household Consumption Expenditure
Surveys (1983: 38th Round, 198788: 43rd Round, 199394: 49th
Round, 200405: 61st Round & 200910: 66th Round).
inequality has worsened
over time. Te urban-rural
MPCE ratio increased
from around 1.5 in the early
1980s to 1.7 in the late
1990s; it subsequently rose
to 2.0 by 2010. If such tendencies persist, India may face
the risk of rising social distress.
Te standard (or most commonly used) measure
of inequality, the Gini coefcient,
1
also confrms that
rural inequality was stable from 1983 (at 0.302) to
1997 (at 0.305) and had even reduced in the earlier
period (to 0.277) in 199091. But in the period from
1999 to 2010 the Gini coefcient increased (from
0.263 to 0.284).
1
Te Gini coefcient measures income inequality. It lies between 0 and 1, where 0 corresponds with perfect equality (where everyone
has the same income) and 1 corresponds with perfect inequality (where one person has all the incomeand everyone else has zero income).
Inclusion 61
Inequalities in States
Consumption inequalities vary considerably in both rural
and urban areas (see Table 3.3). Te Gini coefcient of
inequality is higher in the rural areas of Kerala, Punjab,
Himachal Pradesh, Madhya Pradesh and Haryana than
the nationwide coefcient. In contrast, all the north-eastern
states, Assam, Jharkhand, Rajasthan, Bihar and West
Bengal have considerably lower rural inequalities than the
nationwide coefcient. But, in as many as 14 states, rural
inequalities worsened between 199394 and 200910.
It is also apparent that acceleration in the growth of real
consumption in rural India was accompanied by widening
interpersonal disparities. Regression analysis indicates
that in both rural and urban areas, given the initial level
of Gini, a one per cent growth in MPCE would result in
about 0.4 per cent increase in Gini.
2
Inter-group Inequalities
To what extent do regional, social or occupational
inequalities explain overall inequality? Radhakrishnan
et al. (2013) attempted to answer this, based on social,
6
5
4
3
2
1
0
I
n
d
e
x

o
f

i
n
e
q
u
a
l
i
t
y
1983 1987 1989 1992 1994 1997 1999 2001 2004 2006 2009
FIGURE 3.2 Trends in Inequalities
Note: Rural (urban) inequality is measured by the ratio of MPCE of richest 30 per cent and bottom 30 per cent of the rural (urban) population. Rural-
urban diferential is given by the ratio of average MPCE of urban areas to that of rural areas.
There is a break in the series because the frst period until 1997 is based on the Uniform Reference Period (URP) and the subsequent period on the
Mixed Reference Period (MRP).
Source: NSS unit-level data from Household Consumption Expenditure Surveys (1983: 38th Round, 198788: 43rd Round, 199394: 49th Round,
200405: 61st Round & 200910: 66th Round).
Rural Urban Rural-Urban diferential
occupational and regional
(states and rural/urban)
groups nationwide. Teir
results indicate that in
almost all classifcations,
inter-group inequality contributed only a small part to
the overall inequality (see Table 3.4). Inter-occupational
inequality contributed the most to overall inequality.
But the contribution of inter-group inequality to overall
inequality increased for inter-state and inter-social
groups. Inter-state inequality contributed only 4 per
cent to total inequality in 199394, for example, but
increased to 7 per cent by 200910. Similarly, inter-
social group inequality contributed 5 per cent to total
inequality in 199394, but 10 per cent by 200910.
Overall, regional (state-wise) diferences appear to be
widening and social disparities increasing.
3.1.4 Trends in Incidence of Poverty
Te proportion of people living below the poverty line
has declined considerably over time (see Figure 3.3).
3

Graphically, the Gini coefcient is represented by the area between the Lorenz curve (it maps the cumulative income share on the vertical axis
against the distribution of the population on the horizontal axis) and the line of equality (45 degree line).
2
Te estimated regressions give the relationship between the per cent increase in Gini during 1993/2010 and the per cent increase in MPCE
during the same period and the Gini coefcient in 199394.
3
Te ofcial poverty estimates since the mid-1970s have been based on nationwide household consumption surveys conducted
quinquennially adopting more or less common methods and procedures (see Annexure 3.1 for the methodological issues involved in
measurement of poverty).
Regional (state-wise)
diferences are widening
and social disparities are
increasing.
62 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 3.3 Gini Coefcient of Inequality Across Major States
State Rural Urban
199394 200405 200910 199394 200405 200910
Andhra Pradesh 24.28 26.13 26.92 29.67 35.33 35.33
Assam 17.19 18.88 21.94 27.73 30.24 32.76
Bihar 20.19 19.08 21.55 27.14 31.34 31.68
Chhattisgarh 19.48 25.72 23.42 26.02 36.24 30.48
Gujarat 21.77 26.04 25.22 26.27 30.54 30.81
Haryana 26.23 31.47 27.63 26.26 33.37 35.69
Himachal Pradesh 24.75 28.15 28.24 30.56 27.15 35.18
Jammu & Kashmir 21.14 21.23 21.80 25.48 24.91 30.65
Jharkhand 20.74 20.42 21.19 30.17 32.97 34.25
Karnataka 23.63 23.87 23.18 29.81 35.99 37.38
Kerala 26.53 33.74 34.99 31.38 38.48 39.96
Madhya Pradesh 25.89 24.61 27.63 29.64 35.93 36.52
Maharashtra 25.95 28.06 24.37 32.83 36.05 37.97
Odisha 21.80 26.01 24.75 28.89 33.28 37.73
Punjab 23.32 27.87 28.54 25.97 32.92 35.72
Rajasthan 22.85 21.65 21.33 26.21 31.49 31.58
Tamil Nadu 27.44 26.86 25.65 31.59 35.59 32.74
Uttar Pradesh 24.64 24.64 23.06 29.60 34.51 39.48
Uttarakhand 22.74 23.38 43.81 25.36 30.99 32.25
West Bengal 23.16 24.89 21.98 32.05 36.37 38.41
NE States 22.65 22.20 20.85 24.21 27.53 26.64
Other States & UTs 28.93 30.69 26.55 32.76 33.46 35.67
Total 26.53 27.36 27.58 32.05 35.57 37.06
Source: NSS unit-level data from Household Consumption Expenditure Surveys (1983: 38th Round, 198788: 43rd Round, 199394: 49th Round,
200405: 61st Round 200910: 66th Round).
TABLE 3.4 Percentage Contribution to
Overall Inequality
199394 200910
Rural-Urban 4.3 4
Inter-state 4 7
Inter-social 5 10
Inter-occupational 13.5 13.9
Note: Contribution of diferent groups is not additive.
Source: Radhakrishnan et al. (2013).
In rural areas the poverty ratio remained above 50 per
cent with a marginal decline until the mid-1990s but
declined faster thereafter. Urban poverty declined faster
than rural poverty during the entire period. Between
1983 and 1994, rural poverty declined nearly 1 per
cent annually and urban poverty declined 2.4 per cent
70
60
50
40
P
o
v
e
r
t
y

r
a
t
i
o
1980 1985 1990 1995 2000 2005 2010
Rural Urban
Note: These series are consistent with the Tendulkar methodology.
Source: NSS unit-level data from Household Consumption Expenditure
Surveys (1983: 38
th
Round, 198788: 43
rd
Round, 199394: 49
th
Round,
200405: 61
st
Round 200910: 66
th
Round).
FIGURE 3.3 Trends in Poverty Head Count Ratio
in Rural and Urban Areas
Inclusion 63
annually while between 1999 and 2010 the decline
in the rural poverty ratio accelerated to 2.7 per cent
annually and urban to 4.8 per cent annually. Te faster
decline in the poverty ratio in the second period is
mostly attributable to the high growth experienced in
rural and urban areas, in spite of rising inequality.
3.1.5 Depth and Severity of Poverty
Not only is the proportion of poor declining, but the
average consumption level of the poor is approaching
poverty line consumption.
In other words, the depth
of poverty is declining as
refected in the poverty
gap (PG).
4
Te rate of decline in the PG for both rural
and urban areas was higher than that of the poverty
head count ratio (see Figure 3.4). In rural areas the PG
measure declined at 2 per cent annually between 1983
and 1997 and then accelerated to 6 per cent annually.
Similar trends are also observed in urban areas also.
1999 and 2010 nearly 6.2 per cent annually. Because
the percentage of severely poor declined faster than the
total poor, the severely poor as a percentage of total poor
declined from more than half in the 1980s to around one-
third by 2010.
3.1.6 Poverty Across States
But the decline in poverty
has been far from uniform
across states (see Table
3.5). Te national average
decline accelerated between
19932004 and 2004
2010 and the rate of rural
poverty decline accelerated
from 0.8 per cent annually
during 19932004 to 1.6 per cent annually during
20042010. Chhattisgarhthe state with the highest
incidence of povertyfollowed by Assam, have actually
witnessed a marginal increase in poverty during 2004
2010. Poverty in the poorer states of Bihar and Uttar
Pradesh has declined less than 1 per cent annually in
the same period. Southern states fared relatively well in
reducing rural poverty in both periods.
It is evident that rural poverty is becoming increasingly
concentrated in Jharkhand, Bihar, Assam, Odisha,
Chhattisgarh, Madhya Pradesh and Uttar Pradesh. Teir
share of the poor far exceeds their share of population,
The depth of poverty is
declining.
4
Poverty gap measures the intensity of the poverty. It is equivalent to the income gap below the poverty line per head of total population, and
expressed as a percentage of the poverty line. where, m=number of poor population, n=total population, z=poverty
line, y=income of i
th
person.
30
20
10
0
P
o
v
e
r
t
y

r
a
t
i
o
1980 1985 1990 1995 2000 2005 2010
FIGURE 3.4 Trends in Poverty Gap (PG) Ratio
Rural Urban
Note: The series has a break because the initial period until 1997 is
based on the Uniform Reference Period (URP) and the later period on
the Mixed Reference Period (MRP).
Source: NSS unit-level data from Household Consumption Expenditure
Surveys (1983: 38th Round, 198788: 43rd Round, 199394: 49th
Round, 200405: 61st Round 200910: 66th Round).
Between 1983 and 2010,
the incidence of severe
poverty, i.e. those living
below 75 per cent of the
poverty line, also declined
signifcantly (see Figure 3.5).
Between 1983 and 1997 the
rate of decline was 2.6 per
cent annually and between
The incidence of severe
poverty, those living
below 75 per cent of the
poverty line, fell sharply:
the severely poor as a
percentage of the total
poor declined from more
than half in the 1980s to
around one-third by 2010.
FIGURE 3.5 Trends in Percentage of the Severely Poor
40
35
30
5
P
e
r

c
e
n
t

o
f

v
e
r
y

p
o
o
r
1980 1985 1990 1995 2000 2005 2010
25
20
15
10
Rural Urban
Note: There is a break in the series because the frst period until 1997
is based on the Uniform Reference Period (URP) and the subsequent
period on the Mixed Reference Period (MRP).
Source: NSS unit-level data from Household Consumption Expenditure
Surveys (199394: 49th Round, 200405: 61st Round 200910: 66th
Round).
Rural poverty is
becoming increasingly
concentrated in
Jharkhand, Bihar, Assam,
Odisha, Chhattisgarh,
Madhya Pradesh and
Uttar Pradesh.
64 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 3.5 Levels and Rate of Reduction of Poverty Head Count Ratios Across States
Poverty ratio Rate of reduction (percentage points/annum)
Rural Urban Rural Urban
199394 200405 200910 199395 200405 200910 19932004 200410 19932004 200410
Andhra Pradesh 48.1 32.3 22.8 35.2 23.4 17.7 1.4 1.9 1.1 1.1
Arunachal Pradesh 60.0 33.6 26.2 22.6 23.5 24.9 2.4 1.5 0.1 0.3
Assam 54.9 36.4 39.9 27.7 21.8 26.1 1.7 0.7 0.5 0.9
Bihar 62.3 55.7 55.3 44.7 43.7 39.4 0.6 0.1 0.1 0.9
Chhattisgarh 55.9 55.1 56.1 28.1 28.4 23.8 0.1 0.2 0.0 0.9
Delhi 16.2 15.6 7.7 15.7 12.9 14.4 0.1 1.6 0.3 0.3
Goa 25.5 28.1 11.5 14.6 22.2 6.9 0.2 3.3 0.7 3.1
Gujarat 43.1 39.1 26.7 28.0 20.1 17.9 0.4 2.5 0.7 0.4
Haryana 40.0 24.8 18.6 24.2 22.4 23 1.4 1.2 0.2 0.1
Himachal Pradesh 36.7 25.0 9.1 13.6 4.6 12.6 1.1 3.2 0.8 1.6
Jammu & Kashmir 32.5 14.1 8.1 6.9 10.4 12.8 1.7 1.2 0.3 0.5
Jharkhand 65.9 51.6 41.6 41.8 23.8 31.1 1.3 2.0 1.6 1.5
Karnataka 56.6 37.5 26.1 34.2 25.9 19.6 1.7 2.3 0.8 1.3
Kerala 33.9 20.2 12 23.9 18.4 12.1 1.2 1.6 0.5 1.3
Madhya Pradesh 49.0 53.6 42 31.8 35.1 22.9 0.4 2.3 0.3 2.4
Maharashtra 59.3 47.9 29.5 30.3 25.6 18.3 1.0 3.7 0.4 1.5
Manipur 64.4 39.3 47.4 67.2 34.5 46.4 2.3 1.6 3.0 2.4
Meghalaya 38.0 14.0 15.3 23.0 24.7 24.1 2.2 0.3 0.2 0.1
Mizoram 16.6 23.0 31.1 6.3 7.9 11.5 0.6 1.6 0.1 0.7
Nagaland 20.1 10.0 19.3 21.8 4.3 25 0.9 1.9 1.6 4.1
Odisha 63.0 60.8 39.2 34.5 37.6 25.9 0.2 4.3 0.3 2.3
Pondicherry 28.1 22.9 0.2 32.4 9.9 1.6 0.5 4.5 2.0 1.7
Punjab 20.3 22.1 14.6 27.2 18.7 18.1 0.2 1.5 0.8 0.1
Rajasthan 40.8 35.8 26.4 29.9 29.7 19.9 0.5 1.9 0.0 2.0
Sikkim 33.0 31.8 15.5 20.4 25.9 5 0.1 3.3 0.5 4.2
Tamil Nadu 51.0 37.5 21.2 33.7 19.7 12.8 1.2 3.3 1.3 1.4
Tripura 34.3 44.5 19.8 25.4 22.5 10 0.9 4.9 0.3 2.5
Uttar Pradesh 50.9 42.7 39.4 38.3 34.1 31.7 0.7 0.7 0.4 0.5
Uttarakhand 36.7 35.1 14.9 18.7 26.2 25.2 0.1 4.0 0.7 0.2
West Bengal 42.5 38.2 28.8 31.2 24.4 22 0.4 1.9 0.6 0.5
All India 50.1 41.8 33.8 31.8 25.7 20.9 0.8 1.6 0.6 1.0
Source: NSS unit-level data from Household Consumption Expenditure Surveys (199394: 49th Round, 200405: 61st Round 200910: 66th Round).
and is on the rise. In 199394, nearly 50 per cent of
Indias rural poor lived in these states. Tis fgure rose to
63 per cent in 200910 and 65 per cent in 201112.
Have the states with high growth fared better
in reducing poverty? Odisha, which has had high
economic growth, has also had a signifcant decline in
poverty. As can be expected, states with low economic
growth have not fared as well. Regional disparity is
increasing as poorer states are reducing poverty at a
slower pace.
Table 3.6 presents the trends in the severely poor
in rural areas of major states. Estimates indicate that,
although the percentage of severely poor in rural India
has declined considerably, about one-tenth of the rural
population (constituting one-third of the rural poor) lives
in severe poverty. States with higher incidence of rural
poverty also have higher incidence of severe poverty. For
instance, a quarter of Bihars rural population and nearly
one-ffth of that in Madhya Pradesh and Chhattisgarh
still sufer from severe poverty.
Inclusion 65
TABLE 3.6 Percentage of the Severely Poor Across Major States
States Percentage of severely poor Share in total poor
199394 200405 200910 199394 200405 200910
Andhra Pradesh 20.4 11.2 7.3 42.31 34.61 32.34
Assam 20.1 11.7 10.7 36.61 32.08 26.86
Bihar 29.6 23.5 25.8 47.55 42.18 46.60
Chhattisgarh 21.8 24.5 20.7 39.02 44.54 36.80
Gujarat 19.4 17.3 5.7 45.08 44.28 21.57
Haryana 16.8 7.7 6.6 41.97 31.06 35.77
Himachal Pradesh 12.2 6.7 2.0 33.11 26.83 22.49
Jammu & Kashmir 8.0 2.8 1.7 24.49 20.15 20.99
Jharkhand 31.3 19.4 14.8 47.54 37.58 35.62
Karnataka 27.8 9.7 7.4 49.17 25.94 28.42
Kerala 13.3 7.5 3.5 39.13 37.06 29.10
Madhya Pradesh 23.8 23.0 19.4 48.74 42.98 46.23
Maharashtra 33.7 22.5 8.6 56.80 46.97 29.29
Odisha 30.8 34.3 15.9 48.79 56.39 40.55
Punjab 5.7 5.5 1.9 28.20 25.08 12.88
Rajasthan 15.5 11.5 4.8 37.89 31.96 18.12
Tamil Nadu 25.5 12.4 5.7 49.97 33.15 27.07
Uttar Pradesh 24.5 15.9 12.8 48.11 37.28 32.44
Uttarakhand 10.2 8.2 2.2 27.77 23.46 15.90
West Bengal 14.5 13.5 7.9 34.06 35.28 27.49
North-east excl. Assam 14.6 9.3 3.9 35.61 29.55 15.82
Other States & UTs 7.0 8.0 1.8 33.75 38.81 19.49
All India 22.8 16.3 11.3 45.59 39.08 33.96
Source: NSS unit-level data from Household Consumption Expenditure Surveys ((199394: 49th Round, 200405: 61st Round 200910: 66th Round).
3.1.7 Poverty Among Social and
Occupational Groups
Poverty is markedly high among Scheduled Tribes
(STs) and Scheduled Castes (SCs) in rural areas. Even
in 200910, nearly half of the STs and about 42 per
cent of SCs were poor (see Figure 3.6). Between 1993
94 and 200405, the rate of decline in the incidence of
poverty among these social groups was sluggish at less
than 1 per cent annually. Also, during this period, the
social group others registered a faster rate of decline
in poverty. Decline in
poverty of all social groups
accelerated considerably
between 2004 and 2010.
In fact, trends suggest that
poverty of SCs and STs
declined faster than the
Poverty is markedly
high among STs and
SCs in rural areas: even
in 200910, nearly half
the STs and about 42 per
cent of SCs were poor.
average between 200405
and 200910. Yet, SCs and
STs constitute 44 per cent
of the rural poor.
Particularly troublesome
is the fact that poverty in
states with large percentages
of poor SCs and STs shows
no improvement (see Table
3.7). More than half the STs in Madhya Pradesh,
Maharashtra and Jharkhand and nearly 70 per cent in
Bihar and Chhattisgarh are poor.
Within the major religious groups, Muslim and
Buddhist communities have higher rates of poverty,
whereas Sikh and Christian communities have lower rates
of poverty. Tis diferential in religious and social groups
is largely attributed to inequality and discrimination
faced in accessing educational opportunities, capital
Poverty among SCs and
STs declined faster than
the average between
2004 and 2010, but they
constitute 44 per cent
of the rural poor despite
representing 30 per cent
of the rural population.
66 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 3.7 Rural Poverty Among Social Groups Across Major States of India
Poverty ratio Rate of reduction (19932010)
199394 200910
ST SC Others ST SC Others ST SC Others
Andhra Pradesh 58.4 64.5 42.4 40.2 25.7 20.4 1.1 2.4 1.4
Assam 55.3 58.4 54.5 32.0 36.9 42.1 1.5 1.3 0.8
Bihar 73.3 76.3 57.6 64.4 68.1 50.8 0.6 0.5 0.4
Chhattisgarh 65.9 53.4 48.2 66.8 67.6 45.4 0.1 0.9 0.2
Gujarat 53.1 56.3 37.2 48.6 17.9 19.2 0.3 2.4 1.1
Haryana 69.7 63.1 30.4 49.6 33.6 11.8 1.3 1.8 1.2
Himachal Pradesh 62.4 43.6 33.0 22.0 14.4 5.7 2.5 1.8 1.7
Jammu & Kashmir 74.5 34.4 30.3 3.1 8.5 8.3 4.5 1.6 1.4
Jharkhand 72.6 73.7 59.9 51.2 44.1 33.6 1.3 1.9 1.6
Karnataka 70.3 72.4 50.2 21.3 35.6 23.7 3.1 2.3 1.7
Kerala 40.9 53.3 31.6 24.4 27.7 10.0 1.0 1.6 1.3
Madhya Pradesh 69.9 59.4 36.0 61.9 42.4 32.4 0.5 1.1 0.2
Maharashtra 74.1 73.9 53.1 51.7 37.6 23.4 1.4 2.3 1.9
Odisha 82.1 62.8 54.6 66.0 47.1 25.2 1.0 1.0 1.8
Punjab 35.9 35.0 10.7 16.1 27.2 4.3 1.2 0.5 0.4
Rajasthan 63.9 55.3 30.8 35.9 38.6 19.5 1.7 1.0 0.7
Tamil Nadu 57.0 66.4 45.4 11.5 31.2 18.1 2.8 2.2 1.7
Uttar Pradesh 48.5 68.6 45.2 49.8 53.6 33.7 0.1 0.9 0.7
Uttarakhand 54.9 43.5 33.4 20.0 20.0 11.5 2.2 1.5 1.4
West Bengal 66.5 48.2 36.1 32.9 31.5 27.1 2.1 1.0 0.6
North-east excluding Assam 42.9 40.6 38.4 24.3 22.3 25.2 1.2 1.1 0.8
Other states and UTs 39.8 23.3 17.7 22.8 5.6 5.0 1.1 1.1 0.8
All-India 65.7 62.2 43.9 47.3 42.2 28.0 1.2 1.2 1.0
Source: NSS unit-level data from Household Consumption Expenditure Surveys (199394: 49th Round, 200910: 66th Round).
80
60
40
20
0
P
e
r

c
e
n
t

o
f

p
o
o
r
ST SC Others
66
62
47
62
54
42
44
35
28
FIGURE 3.6 Poverty Among Social Groups (Rural)
199394 200405 200910
Source: NSS unit-level data from Household Consumption Expenditure Surveys (199394: 49th Round, 200405: 61st Round 200910: 66th Round).
Inclusion 67
endowments and restricted occupational mobility. Tose
who have experienced economic progress have received
education and obtained government jobs, through public
schemes (Torat 2010). Nonetheless, all rural social
and/or religious communities with diferent professions
experienced a faster decline in poverty during the period
from 200405 to 200910 compared to 19932005
(Torat and Dubey 2012).
Decline in poverty has been highest for agricultural
labour households (see Figure 3.7), probably due to
the recent rise in real agricultural wages. Despite the
increasing prominence of the non-farm sector, poverty
has not declined as much in the self-employed. Te self-
employed in agriculture (cultivator households) and
the self-employed in non-agriculture have seen similar
decline in poverty.
Agricultural productivity and growth has been
the most important determinant of rural poverty
reduction. While higher yields and rising agricultural
wages continue to be associated with declining poverty
(Himanshu et al. 2010), another factor that has,
since 1991, become a major driver not only of urban
poverty reduction but also of rural poverty reduction
is urban growth (Datt and Ravallion 1996; Lanjouw
and Murgai 2009).
3.1.8 How Responsive is Poverty
to Growth?
Te strength of the relationship between growth
and poverty is usually measured by poverty elasticity.
Poverty elasticity can be crudely approximated by the
ratio of the rate of decline in poverty to the rate of per
capita GDP growth. Due to data constraints elasticity
cannot be estimated separately for rural and urban
areas. An estimate of poverty elasticity based on NSS
data for the period between 197071 and 200001, is
in the range of -0.86 to -0.77. If we use more recent
data (199394 to 200910), the poverty elasticity
turns out to be -0.52. Undoubtedly the trickledown
efect of growth is rather weak. Te weakening poverty-
reducing efect of growth is marked by a lagging
agricultural sector, worsening rural-urban disparity,
increasing interpersonal and intra-group inequalities,
and growing regional imbalances. What makes this
worse is that growth is neither in the sector in which
labour is concentrated (e.g., agriculture) nor in the
states in which poverty levels are concentrated (e.g.,
Bihar, Odisha, Madhya Pradesh and Uttar Pradesh).
A very weak relationship can be seen between poverty
reduction and growth in 199394 in high poverty
states like Chhattisgarh, Bihar, Madhya Pradesh and
Uttar Pradesh (see Figure 3.8). In these states poverty
reduction would require much higher growth. Odisha
and Uttarakhand, both
high poverty states have
reduced their poverty levels
considerably by registering
a high growth, though
poverty elasticity is low.
It is worth observing that
Punjab performed poorly in
poverty reduction because
A very weak relationship
can be seen between
poverty reduction and
growth in 1993-94 in
high poverty states like
Chhattisgarh, Bihar,
Madhya Pradesh and
Uttar Pradesh.
FIGURE 3.7 Rural Poverty Among Occupational Groups
80
60
40
20
0
P
e
r

c
e
n
t

o
f

p
o
o
r
AL OL SEA SENA Others
70
63
49
57
49
40
42
33
26
44
36
28
34
22
14
Note: AL=Agricultural labour; OL= Other labour; SEA=Self-employed in agriculture; SENA=Self-employed in non-agriculture.
Source: NSS unit-level data from Household Consumption Expenditure Surveys (199394: 49th Round, 200405: 61st Round 200910: 66th Round).
199394 200405 200910
68 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
of lower growth. Te southern states have performed
better in terms of growth as well as poverty reduction.
3.1.9 What Does the Recent Consumer
Expenditure Survey 201112 Reveal?
Te NSSOs 201112 household consumer expenditure
survey enables us to examine the latest trends in poverty,
growth and inequality.
Te fndings are striking. Compared to earlier
periods, 201112 presents a marked change in growth
and poverty. First, the MPCE in rural and urban areas
registered an unprecedented growth rate of 5.5 per
cent and 7.1 per cent per annum, respectively, between
200910 and 201112. Tis high growth could in part
be due to drought conditions in 200910, the base
year. Te acceleration in the MPCE growth occurred
in both rural and urban areas of almost all states.
Another striking feature of the high rural growth
experienced during 200912 has been that it was not
accompanied by widening consumption disparities
as in the earlier period. In
fact, the ratio of MPCE
of the top decile group to
that of the bottom declined
from 5.8 to 4.9. But not all
states share this feature.
In states like Rajasthan,
West Bengal, Tamil
Nadu and Uttar Pradesh,
consumption disparities
increased between 200910 and 201112.
Second, as a result of high growth during 2009
12, rural poverty declined dramaticallyat the
rate of 4.1 percentage points per annuma very
substantial acceleration from 1.6 percentage points per
annum between 200405 and 200910. Te rate of
decline in urban poverty also accelerated from about
1 percentage point per annum during 200409 to 3.6
percentage points per annum during 200912 (see
Table 3.8).
FIGURE 3.8 Poverty Elasticity and Poverty Levels in 199394
1.6
P
o
v
e
r
t
y

e
l
a
s
t
i
c
i
t
y
1.2
0.8
0.4
0.0
P
u
n
j
a
b
J
a
m
m
u

&

K
a
s
h
m
i
r
K
e
r
a
l
a
U
t
t
a
r
a
k
h
a
n
d
H
i
m
a
c
h
a
l

P
r
a
d
e
s
h
H
a
r
y
a
n
a
G
u
j
a
r
a
t
R
a
j
a
s
t
h
a
n
W
e
s
t

B
e
n
g
a
l
M
a
d
h
y
a

P
r
a
d
e
s
h
A
n
d
h
r
a

P
r
a
d
e
s
h
T
a
m
i
l

N
a
d
u
M
a
h
a
r
a
s
h
t
r
a
U
t
t
a
r

P
r
a
d
e
s
h
K
a
r
n
a
t
a
k
a
C
h
h
a
t
t
i
s
g
a
r
h
A
s
s
a
m
O
d
i
s
h
a
B
i
h
a
r
J
h
a
r
k
h
a
n
d
40
P
o
v
e
r
t
y

r
a
t
i
o
30
20
10
0
70
60
50
Poverty elasticity Base year poverty (199394)
Note: The elasticity values are absolute.
Source: NSS unit-level data from Household Consumption Expenditure Surveys (199394: 49th Round, 200405: 61st Round 200910: 66th Round).
As a result of the high
growth during 2009
2012, rural poverty
declined dramatically
at the rate of 4.1
percentage points per
annum. Rural poor are
now 25.7 per cent of the
total rural population.
TABLE 3.8 MPCE, Poverty and Inequality, 200412
MPCE
(200405 prices) Growth rate (%pa) Poverty Inequality (Gini)
Rural Urban Rural Urban Rural Urban Rural Urban
200405 579.2 1104.6 41.8 25.7 27.36 35.57
200910 632.7 1249.7 1.78 2.50 33.8 20.9 27.58 37.06
201112 704.6 1433.7 5.53 7.11 25.7 13.7 24.89 35.17
Note: 1. MPCE for all years is based on URP data. CPIAL and CPIIW were used to adjust the MPCE for prices in rural and urban areas respectively.
2. Poverty line based on URP data of 200910 was derived by applying the ofcial poverty estimate on the URP distribution. The resulting poverty
line is updated using above price indices for obtaining poverty line for 201112.
3. All the estimates are based on MRP data. Price defators implicit in ofcial poverty lines were used for arriving at real MPCE AT 200405.
Source: NSSO press release dated 1st August 2012 (available at http://www.mospi.gov.in); authors estimates; NSS unit-level data from Household
Consumption Expenditure Surveys (200405: 61st Round, 200910: 66th Round).
Inclusion 69
Te rate of decline in overall poverty from 30 per
cent in 200910 to 22 per cent in 201112 is quite
impressive. Figure 3.9 presents the rural poverty in
Indias major states for two recent rounds. States with
high poverty in 200910 contributed substantially to
the countrys overall reduction in rural poverty. Bihar
fared best with a rate of rural poverty reduction of 10.62
percentage points per annum. Two other states with
impressive rates of poverty reduction are Chhattisgarh
and Uttar Pradesh. Te rates of decline in poverty in
both were around 5.7 and 4.5 percentage points per
annum respectively. In contrast, Jharkhand and Odisha,
two other high poverty states, experienced a modest rate
of rural poverty reduction.
3.2 Human Development
Tat human well-being cannot be measured solely by
income and expenditure is now widely acknowledged and
growing recognition of this has led to eforts to develop
broader measures of poverty and human development.
Te human development approach treats human well-
being as the development end goal, and economic
growth, with rising incomes and expanding outputs,
as means of achieving that goal. Te notion of human
development, therefore, encompasses a wide array of
rights and freedoms, ranging from education, health,
safety, sustainability, gender equality, liberty and justice
to access to basic amenities. Tese rights build human
capability and empower people to have decisive infuence
over their own lives and exploit growth opportunities.
3.2.1 Human Development Index
Human development is commonly measured using the
Human Development Index (HDI) which combines
three dimensions of well-being: (i) education and
knowledge, (ii) health and longevity, and (iii) a decent
standard of living. While eforts have been made
to account for concerns such as individual security,
political participation, freedom, justice, peace and
harmony, due to difculties in measuring such factors,
the HDI has remained central to measuring human
FIGURE 3.9 Changing Rural Poverty Scenario
Chhattisgarh
Bihar
Madhya Pradesh
Jharkhand
Assam
Uttar Pradesh
Odisha
Maharashtra
West Bengal
Gujarat
Rajasthan
Karnataka
Andhra Pradesh
Tamil Nadu
Haryana
Uttarakhand
Punjab
Kerala
Himachal Pradesh
Jammu & Kashmir
10 0 30 20 50 40 60
201112 200910
Note: Population as on 1 March 2012 has been used for estimating number of persons below poverty line (2011 Census population extrapolated).
Source: Poverty Estimates for 201112, website (http://planningcommission.nic.in/news/pre_pov2307.pdf ), Planning Commission, Government of
India, accessed on 26 August 2013.
70 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
development.
5
At an aggregate level, India ranked
136 out of 186 countries in 2013 in terms of HDI
(UNDP 2013).
HDI values have risen modestly in recent years.
According to the latest national India Human
Development Report (IHDR) 2011, the national HDI
increased by 21 per cent from 19992000 to 200708.
But considerable inter-state and regional variations in
human development attainment exist. Kerala, Himachal
Pradesh, Goa, Punjab, north-eastern states (excluding
Assam), Maharashtra, Tamil Nadu and Haryana rank
highest in terms of HDI.
6
At the other end of the
spectrum are the poor states in the northern and central
belt: Chhattisgarh, Odisha, Bihar, Madhya Pradesh,
Jharkhand, Uttar Pradesh, Rajasthan and Assam. Tese
states are home to large proportions of marginalised
groups like STs and SCs and deprivation of those
living in these states is reinforced by the poor access to
infrastructure (see Section 3.5.2).
Te narrowing of inter-group variation over time,
known as convergence, is an important consideration in
measuring human development progress. Tough the
gap in HDI
7
between the best and worst performing
states did not narrow between 19992000 and 200708,
there is some evidence of convergence. Te dispersion in
HDI as measured by the coefcient of variation across
states reduced during this period. In addition, many low
performing states recorded impressive improvements,
with the increase in HDI in Uttarakhand, Jharkhand,
Bihar, Andhra Pradesh, Madhya Pradesh, Chhattisgarh,
Odisha and Assam being considerably above the average
increase. Despite this catching up, HDI rankings among
states saw almost no change.
Convergence in Literacy
Literacy rates have been converging across states and
between rural and urban areas. In 2011, the literacy
rate, ranged from 94 per cent in Kerala to 64 per cent in
Bihar and, while still wide, this gap is far better than the
50 percentage point gap in 1981.
Te rural-urban gap also signifcantly narrowed. In
1981, Rajasthan had the highest rural-urban gap with
rural literacy at only 39 per cent of urban literacy while
Kerala with the lowest gap had rural literacy at 92 per
cent of urban. By 2011, the highest rural-urban disparity
was in Andhra Pradesh with rural at 76 per cent of urban
and in Kerala rural literacy was 98 per cent of urban.
Te inter-state coefcient of variation in the rural-
urban ratio in literacy rate declined from 23 per cent in
1981 to 10 per cent in 2001 and further to 7 per cent in
2011. Te male-female literacy gap at the national level,
though still high, declined from 27 percentage points in
1981 to 17 percentage points in 2011.
Convergence in Life Expectancy but not
Infant Mortality
Health measured by life expectancy at birth (LEB) has
improved in both rural and urban areas and inter-state
variation has been declining. Te coefcient of variation
in LEB declined from 8.84 per cent in 198185 to 6.7
per cent in 200206.
Improvement in infant mortality is more complex.
Te nationwide infant mortality rate (IMR) declined
considerably from 115 per 1,000 live births in 1981 to
47 in 2010. But a wide variation across among states is
high: remains. In 2009, the IMR it ranged varied from
the lowest fgure of 12 per 1,000 live births in Kerala to
the highest of 67 in Madhya Pradesh. In fact, variation in
IMR has increased over time as the coefcient of variation
rose from 25.7 per cent in 1981 to 34.1 per cent in 2009,
largely due to growing rural regional disparities.
Broadening Poverty Measurement:
Multidimensional Poverty Index
Te Multidimensional Poverty Index (MPI),
8
developed
by the Oxford Poverty and Human Development
Initiative and the UNDP in 2010, measures poverty
along the same dimensions as the HDI but measures
deprivation along a larger set of indicators and,
importantly, measures both the incidence and intensity
5
Others, such as Gender-related Development Index (GDI) and Gender Empowerment measure (GEM), address some defciencies in
gender representations. Other indices address various other deprivations, each based on a chosen set of indicators. For example, HD could be
adjusted for the loss attributed to a measure of social inequality.
6
At the state level, the education index represented by literacy rate (1/3 weight) and adjusted mean years of schooling (2/3 weight), the
health index by life expectancy at birth (LEB) and infant mortality rate (IMR), and the income index by per capita real income (PCI) based on
consumption expenditure.
7
As estimates of HDI in the 2 national reports (NHDR 2001 and IHDR 2001) are not strictly comparable, convergence analysis is done
separately for two distinct periods: 19812001 (NHDR 2001) and 19992000/200708 (IHDR 2011).
8
MPI includes 10 indicators: years of schooling and child enrolment (education); child mortality and nutrition (health); electricity, fooring,
drinking water, sanitation, cooking fuel and assets (standard of living). Education and health indicators have 1/6 weight and standard of living
indicators have 1/18 weight. A person is judged poor if deprived in at least a third of the indicators.
Inclusion 71
of poverty, identifying those deprived in more than one
dimension simultaneously.
According to the Human Development Report
2011, 53.7 per cent of Indians were poor based on
the MPI (UNDP 2011). Tis is substantially higher
than the ofcial poverty estimate, as a large number of
households above the income poverty line sufer multiple
deprivations. An analysis between 1999 and 2006
reveals that the reduction in multidimensional poverty
has been greater than that in income poverty (Alkire
and Seth 2013). But, though it has declined, the rural-
urban disparity in MPI remains much larger than the
rural-urban diference in income poverty. In addition,
unlike income poverty where many of the poorer states
have managed rapid poverty gap reductions in terms of
MPI, states such as Bihar, Madhya Pradesh, Rajasthan
and Uttar Pradesh recorded very small improvements
(ibid.). One reason for this could be because they
continue to have the worst access to basic services (see
Section 3.5.2).
Correlates of Human Development
Higher average per capita income is associated with
lower poverty and higher expenditure on human
development-related items such as schooling and
healthcare. States with higher per capita incomes and
ones that could spend more on social services have done
better in terms of human development. But even some
of the poor states have managed to reduce gaps in some
aspects of human development. Te north-eastern states
apart from Assam have also done very well on human
development indicators. Te message is clearstates
need not wait to undertake initiatives to expand human
capabilities with education and healthcare services until
they attain high levels of economic growth.
An important caveat with regard to convergence
is that the fgures relate solely to quantitative targets,
without regard to the impact of quality diferences on
human development. Tere are, for instance, signifcant
diferences in the quality of education and healthcare
among various income classes, social groups and between
rural and urban households. Tese are discussed in
more detail in subsequent sections of the chapter.
3.3 Education
Indias education policies have largely been geared towards
increasing school enrolment. Universal elementary
education was enshrined in the Constitutions Directive
Principles of State Policy but, while they urged the
government to provide free and compulsory education
to all children until age 14, the Directive Principles are
not binding. In 1976, education was transferred from the
state list to the concurrent list through a Constitutional
amendment, with the objective of promoting meaningful
educational partnerships between the central and state
governments. Te National Policy on Education (NPE)
in 1986 was an important landmark with its emphasis
on universal enrolment in elementary education. More
recently, universal elementary education (UEE) was
reinforced with the 86th Constitutional Amendment
2002 and the Right to Free and Compulsory Education
Act (RTE) 2009, which recognised elementary education
as a fundamental right. Since the 1980s, the Government
of India has initiated a number of programmes like
Operation Blackboard, District Primary Education
Programme (DPEP), Sarva Shiksha Abhiyan (SSA)
and the Mid-Day Meal scheme (MDM) to achieve UEE.
Central and state government expenditure on
education, which approached 3.5 per cent of GDP in
the 2000s, backed these policies and schemes, although
spending continues to fall short of the 6 per cent of GDP
recommended by the Kothari Commission in 1966
and again by the Central Advisory Board of Education
(CABE) in 2006. While central government expenditure
has increased, state government spendingwhich still
accounts for 80 per cent of total public expenditure on
educationincreased at a slower pace. Spending on
education still varies greatly by state.
3.3.1 Progress
Te story of Indian education is one of quantitative prog-
ress but conspicuous failures in quality. After six decades,
India has made notable improvements in the gross and net
enrolment ratio, and achieved
universal enrolment in lower
primary education (see Fig-
ure 3.10 A and B).
But universal enrolment
for upper primary and other
higher levels of education is still far away. Moreover,
enrolment may not be the best measure of education in
any case. Before the RTE, there was in fact an incentive
to infate enrolment fgures as the central government
provided enrolment-based funds to schools.
Net attendance ratio (NAR), seen as a better indicator
of children going to school, has improved substantially
between the mid-1990s and
late-2000s, although school
attendance is still far from
universal in rural India (see
Table 3.9).
India has achieved
nearly universal
enrolment in lower
primary education.
School attendance
improved substantially
since the mid-1990s,
especially among girls.
72 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
FIGURE 3.10A Progress in Gross Enrolment Ratio in
Elementary Education (Per Cent)
FIGURE 3.10B Net Enrolment Ratio at Primary and
Upper Primary Levels (Per Cent)
120
70
20
P
e
r

C
e
n
t
1950
51
1960
61
1970
71
1980
81
1990
91
2000
01
2009
10
2010
11
100
80
60
40
P
e
r

C
e
n
t
2005
06
2006
07
2007
08
2008
09
2009
10
2010
11
43
13
32
62
79
81
100
96
116 119
49
62
68
86
82
103
104
23
33
42
62
59
86
82 85
93
96
99 98
100
43
48
53
56
58
62
Primary Upper primary
Elementary Primary Upper primary
Note: GER is the ratio of total enrolment in particular education level,
regardless of age, to the population of the age group that ofcially
corresponds to that level of education.
Source: MHRD (2008); (2011d).
Note: NER is the ratio of the number of persons in the ofcial age-group
enrolled in a particular class-group to the total number of persons in
that age group.
Source: Additional information on NUEPA (2012).
TABLE 3.9 Sex-wise Rural Net Attendance Ratio (NAR) (Per Cent)
Class 199596 200910 Increase (%)
Female Male Total Female Male Total Female Male Total
IV 56 68 63 77 79 78 38 16 24
VIVIII 32 44 39 56 55 55 75 25 41
IXX 17 26 22 39 48 44 129 85 100
XIXII 8 13 11 26 31 29 225 138 164
Note: NAR is the ratio of the number of persons in the ofcial age-group attending a particular class-group to the total number persons in that
age-group.
Source: NSSO (2010); (2013).
School attendance of girls rose sharply during this
period, resulting in reduced gender disparity at the
elementary level. Although wide gender inequalities
persist at higher levels, female attendance at the secondary
and higher secondary school level has also increased
signifcantly since 199596.
Some states have successfully used incentives to
increase female students attendance at higher levels.
For example, Bihar and Uttarakhand provide grants
for bicycles to incentivise girls aged 14 and above to
attend secondary school. In Bihar the programme has
resulted in a 40 per cent increase in girl-child enrolment
in class IX, and a 10 per cent increase in the number
of girls appearing for the class X board examination
(Muralidharan and Prakash 2013). Also, in 2008 the
central government introduced a pilot conditional cash
transfer schemeDhan Laxmi Schemein 11 blocks to
provide a signifcant cash transfer to families of girls that
receive immunisation, remain in school at least until
class VIII and delay marriage until the age of 18. Many
states also have similar schemes; for instance, Delhi
and Haryana provide transfers to girls through Ladli
Schemes conditional on completing class X. Additionally,
improved job opportunities and increased returns on
higher secondary education (see Box 3.1) may also
have driven higher female attendance, as labour market
opportunities have been found to reduce the probability
of women getting married or having children young as
they opt for further schooling, post-school training or
join the labour market ( Jensen 2012).
But wide attendance gaps persist across socio-
economic groups. Although attendance among the
socially disadvantaged groups has increased at the
elementary school level,
attendance rates of SCs and
STs diverge from that of
other social groups at higher
levels (see Table 3.10).
Wide attendance gaps
persist among socio-
economic groups.
Inclusion 73
TABLE 3.10 Rural Net Attendance Ratio by Social Groups and Main Religious Groups, 200708 (Per Cent)
Social group Primary Upper Secondary Higher
primary secondary
Males Females Males Females Males Females Males Females
ST 82.4 78.7 58.8 54.9 25.5 25.9 12.7 8.5
SC 81.5 77.4 60.7 55.4 33.3 30.0 20.6 16.4
OBC 83.3 81.0 62.0 55.7 42.8 35.7 26.4 19.9
Others 85.6 83.8 67.2 67.1 47.1 43.4 29.4 24.3
All 83.3 80.5 62.5 58.1 40.0 35.0 25.0 20.0

Main religious community Males Females Males Females Males Females Males Females
Hindus 84.2 81.5 64.5 60.0 41.7 36.9 26.2 19.9
Muslims 78.7 74.9 48.7 45.3 26.0 23.5 10.9 11.3
Christians 79.1 78.8 63.9 70.9 49.4 42.4 32.5 36.5
Sikhs 85.7 77.5 63.3 57.3 40.8 39.4 24.6 20.9
Note: ST: Scheduled Tribes; SC: Scheduled Castes; OBCs: Other Backward Castes.
Source: IHDR (2011) calculated from NSS 64th Round.
BOX 3.1 Returns to Education in India
Returns on education infuence the demand for education. Over the past decade or so, secondary (IXX) and higher
secondary (XIXII) education have shown the highest returns of any level of education, even greater than on tertiary
education (graduation and above) (Linden 2013). A person who completes lower secondary education earns a wage
premium of 36 per cent over someone completing primary education, and a person who completes higher secondary
education earns a wage premium of 43 per cent over someone completing lower secondary education (see Figure. 3.11).
Similar results are reported in another study, which has shown signifcant incentives to invest in secondary and higher
education (Agrawal 2011). Education beyond elementary school (IVIII) gives much higher returns than no education or
below primary level of education.
FIGURE 3.11 Wage Premiums in India
60
40
20
0
P
e
r

C
e
n
t
199394 19992000 200405 200910
31
19
43
37
10
32
21
42 42
17
30
18
36
43
14
16
36
43
36
26
Incomplete primary
Complete higher-secondary
Complete primary
Complete teritiary
Complete lower-secondary
Source: Adapted from Agarwal (2011), Linden (2013).
74 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
For every 100 children
who enrol in class I,
about 30 drop out
before reaching class V
and more than 40 before
reaching class VIII.
Among the main religious group, rural Muslims have
the lowest attendance rates at all levels (IHDR 2011).
Muslim children also make up the highest proportion of
out-of-school children of all social and religious groups
(ibid.).
Te high dropout rates or low completion rates of
rural school children is a major concern. Out of every
100 children who enrol in class I, about 30 drop out
before reaching class V
and more than 40 before
reaching class VIII. Fewer
girls drop out of primary
school than boys, but the
reverse is true at the upper
primary level (see Figure
3.12). Tis is probably
because girls in the upper primary age group are
required to help with household chores.
Te high dropout rates among children from socially
disadvantaged communities are even more alarming.
Almost 45 per cent of SC children and 55 per cent of
ST children drop out of school before completing class
VIII and this proportion increases to 60 per cent and
70 per cent, respectively, before reaching class X (see
Figure 3.12).
Te cost of education is a key factor that constrains
poor households, especially for those from socially
disadvantaged groups (NSSO 2010). Although the
government ofers free elementary education and a few
other incentives, students in rural government schools
must still pay for admission, stationery and books, travel,
tuition, examinations and library privileges, which may
lead to higher dropout rates among disadvantaged social
and religious groups (Tilak 2006; IHDR 2011). In
addition, dalits and STs are sometimes discriminated
against in schools and, coupled with inadequate parental
support in learning, lag behind, lose motivation and
have higher dropout rates (Nambissan 2010; World
Bank 2011).
3.3.2 Demand for Private Education
Parents are increasingly sending their children to private
schools, despite the higher fees. Tis refects higher
aspirations, as private schools are perceived to be of better
quality than government schools (Muralidharan 2012).
About 28 per cent of rural primary school age children
attend private schools
(ASER 2013). Parents
are also willing to pay for
supplemental education, in
the form of private tuitions
and coaching centres. About
23 per cent of rural children
seek private inputs, regardless of whether they attend
private or government schools, and this has resulted
in a somewhat better test performance (Banerji and
Wadhwa 2013; ASER 2013).
3.3.3 Learning Outcomes
Lamentably, improvements in enrolment and
attendance rates, greater investment in education
and increased private schooling and tuitions have
not led to better learning outcomes. Poor learning
outcomes persist and are the education systems most
FIGURE 3.12 Dropout Rates in School Education in 200910 (Per Cent)
20
60
40
20
0
P
e
r

C
e
n
t
Boys Girls Total Boys Girls Total Boys Girls Total
I-V
I-VIII
I-X
All SC ST
Source: MHRD (2012a).
About 28 per cent of
rural primary school
children attend private
schools and 23 per cent
take private tuitions.
Inclusion 75
pressing problems. What
is particularly worrying is
that learning levels have
continued to deteriorate
even after the Right to
Education Act came into
efect.
In 2012, 53 per cent of class V children across
rural India could not even read a class II text; this has
steadily worsened from 44 per cent in 2008 and 46 per
cent in 2010. Similarly, 75 per cent of class V children
were unable to do simple division in 2012, increasing
from 63 per cent in 2008 (see Table 3.11). It is possible
that with the elimination of exams and assessments
following the RTE and automatic promotion to
the next class, there is even less incentive for raising
teaching efort.
Tere are also wide inter-state disparities in learning
(see Table 3.12). Himachal Pradesh, Kerala and certain
north-eastern states have performed well but learning
levels overall are low nationwide. Sikkim, Kerala and
Himachal Pradesh are the only states in which more
than 75 per cent of rural children in classes III to V could
read at least at a class I level (ASER 2013). Mizoram
is the only state in which over three quarters of rural
children in classes between III and V could subtract
even though they are expected to do multiplication
and division as well (ibid.). As with other indicators
of development including poverty and health, Madhya
Pradesh, Jharkhand, Odisha, Uttar Pradesh, Bihar,
Rajasthan and Chhattisgarh performed the worst (see
Table 3.12)
3.3.4 What Afects Learning Outcomes?
In the past few years, many impact evaluation studies
have identifed key factors determining learning
outcomes. Tough factors
such as parental education,
teacher accountability and
pedagogy are important
in improving learning
outcomes, educational
policies in India have been
input-focused. Increasing inputs such as school facilities
and the number of teachers may improve enrolment,
but they either do not correlate with better learning
outcomes or do so only weakly. Some of the factors
afecting learning outcomes are:
Parental education: Tis key factor is positively
correlated to better reading and arithmetic skills
(Banerjee et al. 2012). Providing rural mothers
adult literacy classes and training on how to enhance
childrens learning at home has been found to improve
the performance of students on language and math
tests and increase the presence of educational assets
such as books and slates in homes (Banerji et al.
2013). Parental investment and support in education
plays an important role in improving learning
outcomes, and its inadequacy has contributed to the
lower learning outcomes of children from SC, ST
and Muslim households
even after controlling for
school type (Desai and
Torat 2013).
Fifty-three per cent of
class V children across
rural India cannot read
a class II text and 75 per
cent are unable to do
simple division.
TABLE 3.11 Learning Levels in Elementary Level of Education in Rural India in 2012 (Per Cent)
Class Able to read Able to recognise
Letters Letters and Letters, Letters, Numbers Numbers Numbers,
only words words and words, class 1 to 9 only and subtract
class I text I & II text subtract and divide
I 37.6 12 3.8 3.3 39.4 3.2 1
II 35.9 22.8 10.9 10.1 39.3 10.3 2.8
III 26.2 23.2 17.2 21.4 30.3 19.6 6.7
IV 17.6 19.9 20.9 34.7 20.8 27.1 15.1
V 12 15.3 21.4 46.8 14.7 28.7 24.8
VI 8.3 10.8 18.9 59.2 10.2 28.6 33.1
VII 5.6 7.8 15.8 69.1 6.6 27.8 41.5
VIII 4.1 5.6 12.4 76.4 5.1 25.7 48.1
Source: Adapted from ASER (2013).
Educational policies
have been input-
focused, but inputs
do not lead to better
learning outcomes.
Parental education is a
key factor in improving
reading and arithmetic
skills.
76 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 3.12 State-wise Learning Levels of Children in Class Groups III and IIIVRural (Per Cent): 2012
Proportion of children Proportion of children Proportion of children Proportion of children
(Class III) (Class III) (Class IIIV) (Class IIIV)
able to read letters, able to recognise able to read class I able to do
words or more numbers (1-9) or more level text or more subtraction or more
Bihar 56 Bihar 62 Madhya Pradesh 39 Madhya Pradesh 23
Uttar Pradesh 58 Uttar Pradesh 63 Jharkhand 45 Chhattisgarh 27
Tamil Nadu 59 Odisha 63 Uttar Pradesh 45 Uttar Pradesh 29
Rajasthan 59 Madhya Pradesh 64 Assam 47 Gujarat 33
Odisha 64 Rajasthan 65 Rajasthan 48 Rajasthan 33
Madhya Pradesh 65 Tamil Nadu 68 Bihar 48 Assam 33
Jharkhand 66 Jharkhand 68 Tamil Nadu 49 Jharkhand 36
All-India 68 All-India 71 All-India 54 Odisha 37
Assam 71 Gujarat 72 Chhattisgarh 54 Maharashtra 39
Chhattisgarh 73 Chhattisgarh 75 Tripura 56 Tamil Nadu 39
Gujarat 73 Assam 76 Odisha 57 All-India 41
Uttarakhand 75 Uttarakhand 78 Gujarat 59 Bihar 43
Maharashtra 77 Maharashtra 80 Karnataka 59 West Bengal 44
West Bengal 77 Karnataka 82 Jammu & Kashmir 60 Meghalaya 45
Haryana 80 West Bengal 84 West Bengal 60 Tripura 48
Karnataka 83 Haryana 85 Arunachal Pradesh 62 Karnataka 49
Andhra Pradesh 84 Arunachal Pradesh 89 Manipur 63 Jammu & Kashmir 49
Tripura 86 Punjab 89 Uttarakhand 63 Uttarakhand 50
Punjab 86 Andhra Pradesh 89 Goa 65 Goa 58
Arunachal Pradesh 87 Meghalaya 91 Andhra Pradesh 66 Haryana 59
Jammu & Kashmir 90 Jammu & Kashmir 91 Haryana 67 Manipur 62
Himachal Pradesh 90 Tripura 92 Meghalaya 67 Punjab 63
Meghalaya 92 Himachal Pradesh 94 Nagaland 68 Himachal Pradesh 65
Goa 95 Kerala 96 Mizoram 71 Andhra Pradesh 67
Manipur 96 Manipur 96 Maharashtra 71 Kerala 68
Mizoram 96 Mizoram 97 Punjab 73 Nagaland 68
Kerala 96 Nagaland 97 Sikkim 76 Arunachal Pradesh 69
Nagaland 97 Goa 97 Kerala 78 Sikkim 72
Sikkim 99 Sikkim 97 Himachal Pradesh 79 Mizoram 76
Source: Adapted from ASER (2013).
Teacher accountability: A nationwide study found that
on a given day 25 per cent of teachers were absent
from government primary schools (Kremer et al.
2005). Poor states such as Bihar and Jharkhand had
the highest absentee rates of around 40 per cent. Tis
high absenteeism among public school teachers limits
the beneft of reducing pupil-teacher ratios on learning
outcomes; increasing their number has no meaning if
teachers do not attend and teach. And higher pay does
not always lower absenteeismcontract teachers and
teachers in private schools, who are paid much less,
are absent less often than regular government teachers
(ibid.; Muralidharan and Sundararaman 2010).
Studies have found that monitoring teachers and
giving them fnancial incentives such as performance-
based pay may help improve attendance and students
learning levels (Muralidharan and Sundararaman
2010; Dufo et al. 2012).
Inclusion 77
But attendance is not
the only problemeven
teachers who attend
often do not teach. On
any given day, only about
half the rural teachers
actually taught (Kremer et al. 2005). Various micro-
level studies show no positive relationship between
teacher training and improved test scores. In fact,
evidence shows that rural primary school students
taught by contract teachers, who are not professionally
trained and have lower qualifcations than regular
teachers, have better test scores (Muralidharan and
Sundararaman 2010). Perhaps lack of employment
security incentivises them to work harder at teaching
(Muralidharan 2012; Mukerji and Walton 2013).
Pedagogy: Classroom instruction is an important de-
terminant of learning outcomes. About 75 per cent
of children cannot read at their age-specifc class level
and, even after an additional year of schooling, show
no improvement in learning (Prichett 2012). Tis
is in part due to a mismatch between a fast-moving
school curriculum and students slower learning pace.
Since they are expected
to complete the syllabus
within a specifed period,
teachers pay little atten-
tion to whether students
have actually learned. Al-
lowing teachers to focus
on students abilities rather than completing a syllabus
may be more conducive to better learning outcomes.
Himachal Pradesh, for instance, has better learning
levels than most other states because of its focus on
building skills and a gradual approach in introduc-
ing content and chapters and setting of learning goals
(Bhattacharjee et al. 2011).
3.3.5 A Critical Review of Policies and
Programmes
Many government initiatives have failed to yield
satisfactory results because they rely too heavily on inputs
rather than on identifying and focusing on the factors
that determine learning outcomes. Tis section briefy
evaluates the main government schemes and policies.
Right to Education (RTE)
Te Right of Children to Free and Compulsory
Education (RTE) Act 2009, is a landmark initiative
that aims to universalise education for children between
6 and 14 years by improving school infrastructure and
the number and quality of teachers. Te RTE also
aims to address social inequalities by reserving 25 per
cent of private school seats for disadvantaged students,
including SCs, STs and low income groups.
Notably, the RTE focuses heavily on inputs and
pays less attention to the quality of education. Te Act
mandates that schools that do not meet the norms of
infrastructure and other inputs, would be shut down by
April 2013, although this
has not happened and most
states have given schools
some more time to meet
the requirements and apply
for recognition. If these
schools, which include pro-poor NGO schools, budget
schools and non-formal schools, are closed, millions of
children will be afected.
Te RTE expects students to be placed in age-
appropriate classes, without considering individual
abilities. Its provisions for automatic promotions
until class VIII, without examinations and without
completing the syllabus within a defned time period,
may actually result in children falling farther behind as
they move to higher classes.
Te RTE mandates School Management Committees
(SMCs), also called Village Education Committees
(VECs) in some states, to monitor schools performance
and create an annual school development plan. Largely
comprised of locally elected representatives and
parents, these bodies are supposed to enhance school
accountability and bring efciency at the grassroot level.
But with very little control over school expenditure,
little decision-making power and low capacity, they have
not been very successful (Aiyar 2013).
Sarva Shiksha Abhiyan (SSA)
A fagship government programme, SSA has operated
since 2001 to ensure free and compulsory education to
children in the 6 to 14 years age group. SSA primarily
aims to strengthen existing school infrastructure and
bridge gender and social gaps in elementary education.
Between 2002 and 2009, primary school education
improved substantially in terms of infrastructure, access,
and enrolment. Primary school coverage improved across
all states, although in the upper primary level, coverage
decreased in Bihar, Haryana, and Rajasthan (Planning
Commission 2010b). Shortage of funds, delays in
receiving them, and poor monitoring and supervision
are constraints in the schemes implementation.
Attendance of public
school teachers is low
and even teachers who
attend often do not
teach.
Allowing teachers to
focus on abilities rather
than completing a
syllabus may be more
conducive to learning.
RTE is heavily input-
focused with less
attention on the quality
of education.
78 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
After RTE was implemented, SSA was modifed and
started operating as a vehicle of the implementation of
RTE, with funds for setting up new schools, constructing
classrooms, providing basic facilities in schools, and
recruiting additional teachers. Since 2010 the share
of schools with infrastructure such as boundary walls,
functioning toilets, separate toilets for girls and libraries
has increased, and schools have gradually been meeting
the pupil-teacher ratio norms (ASER 2013).
Mid-Day Meal (MDM) Scheme
Te MDM scheme is an extension of the National
Programme of Nutritional Support to Primary
Education, launched as a centrally sponsored scheme
in 1995. Although some states initially served only
dry rations, by 2005 all
states provided cooked
and balanced lunches to
primary school students.
By 2008 MDM was
extended to elementary
level in government and
government-aided schools.
While only 20 per cent of
schools had a functioning MDM in 2003, this increased
to 80 per cent by 2010 (Muralidharan et al. 2012). By
201011, MDM provided meals to more than 105
million children in 1.2 million schools.
Evaluations of MDM by various agencies show the
scheme has been successful in improving rural school
enrolment and attendance, while teaching good practices
like washing hands before and after meals ( Jayaraman et
al. 2010; ASER 2011, De et al. 2011). It has also helped
in breaking caste barriers as children from diferent
communities eat together (PEO 2010; Khera 2013).
But the programme has not had any signifcant positive
efect on learning outcomes ( Jayaraman et al. 2010).
Tis may be due to the diversion of teacher time toward
managing and overseeing the MDM, as teachers in
many states spend between one and two hours a day on
activities related to the programme, which compromises
on teaching time and contributes to poor test scores
(PEO 2010; Muralidharan 2012).
MDM has the potential to overcome nutritional
challenges. A common critique has been that the food
served is defcient in key nutrients in many places,
but most states have made progress on this front. For
instance, Rajasthan, which served mainly ghoogri (wheat
boiled with salt or sugar) in 2002, now provides a
balanced meal with fruit twice a week and even poorer
states like Odisha serve eggs twice a week (Khera
2013). In Madhya Pradesh the MDM has been found
to improve the nutritional intake of children, with the
daily nutrient intake increasing by between 50 and 100
per cent which helped reduce protein, calorie and iron
defciency (Afridi 2010). Another study in Andhra
Pradesh, one of the better performers, found signifcant
positive impacts on nutritional outcomes of weight-for-
age and height-for-age (Singh et al 2012).
One concern that remains is that infrastructure
constraints persist; apart from Tamil Nadu and Kerala,
schools in most states lack a clean source of water,
kitchen sheds and storerooms, making it difcult to
ensure that the food served is hygienic (PEO 2010).
In addition, there are concerns relating to pilferage
and adulteration of the food, and most states do not
follow PDS guidelines, which sometimes compromises
the quality of food and threatens the health and safety
of children.
Rashtriya Madhyamik Shiksha Abhiyan (RMSA)
As compared to elementary education, India has shown
little progress in secondary education. Te regional,
gender and social disparity in access and participation
are even greater than at the elementary school level.
Against this backdrop, the RMSA scheme was launched
in 2009 to make quality secondary education accessible
and afordable to all children. Te scheme aimed to
raise gross secondary school enrolment from 52 per
cent in 200506 to 75 per cent within fve years of
implementation and universal access by 2017.
Under RMSA over 9,500 new schools were approved,
nearly 60,000 teachers were added and all teachers
received in-service training (Planning Commission
2013). But so far the achievements have fallen far short
of the goals. Similar to RTE, the RMSA is not outcome-
focused and the scheme lacks efective assessment
mechanisms. It also does not address the variation
among secondary school standards across states or
create uniform, quality education in India. Secondary-
level learning outcomes, therefore, remain very poor.
3.4 Food and Nutritional
Security
Te Food and Agriculture Organisation (FAO) esti-
mated about 217 million food insecure Indiansor
about 18 per cent of total populationin the period
The Mid-Day Meal
Scheme has helped
improve school
enrolment and
attendance but not had
any signifcant positive
impact on learning
outcomes.
Inclusion 79
201012 (FAO 2012).
9

In 2011, India ranked 108
out of 122 countries using
the Hunger Index.
10
An-
thropometric measures of
nutrition in India are among
the worst in the world for both children and adults.
Particularly alarming is the fact that India has among
the worlds highest child malnutrition rates and has
made little progress in this regard over time. Tis pro-
longed child malnutrition has long-term consequences
on their health and cognitive development.
3.4.1 Nutritional Status
Nutrition status is often assessed using anthropometric
measures and incidence of anaemia and defciency
in key nutrients. Among children, malnutrition is
commonly diagnosed by examining various persistent
nutrition-related problems such as underweight (low
weight for age), wasting (low weight for height) and
stunting (low height for age). Despite Indias rapid
economic growth, improvement on these indicators
has been exceedingly slow.
Underweight children in rural areas only declined
from 47 per cent to 46 per cent between 199899 and
200506. Worryingly, the incidence of wasting, or acute
weight loss generally associated with starvation and
diseases, increased during this period by 3 percentage
points. Even on the measure of stunting, which is a
chronic and longer-term concern caused by consistently
low nutritional intake, progress has been inadequate
(see Table 3.13). While some have questioned the
efcacy of common WHO standards across countries
to measure malnutrition (see Panagariya 2013), this has
been refuted by several experts.
11

As with other measures of human development,
Bihar, Jharkhand, Chhattisgarh and Madhya Pradesh
fare worst, with the highest share of stunted, wasted
and underweight children. On the other hand, Kerala,
Goa and Tamil Nadu generally perform well on child
nutrition indicators, which may be attributed to socially-
oriented policies and better public services, as do most
of the north-eastern states (Drze and Khera 2012).
Most states appear to have made little improvement
between 199899 and 200506 (NFHS-2 and 3). But
Maharashtra, Himachal Pradesh, Jammu and Kashmir,
Punjab and Rajasthan have been able to make much
greater progress in reducing child malnutrition.
Income poverty of states does not always correlate
with malnutrition or hunger. While states with higher
poverty (e.g., Bihar and Jharkhand) also have high levels
of malnutrition, there are also instances of high poverty
but lower malnutrition (e.g., Assam) and low poverty but
high malnutrition levels (e.g., Karnataka and Gujarat).
Interventions thus should address malnutrition and
income poverty separately.
Properly judging recent progress is also a challenge.
Despite the urgency of the problem, there is a dearth
of real-time data measuring nutritional outcomes.
Te most recent reliable national data on nutrition out-
comes are as old as 200506 (NFHS-3). Yet, recent
data for 106 districts from the Hunger and Malnutri-
tion Survey Report 2011 across Bihar, Jharkhand, Mad-
hya Pradesh, Rajasthan,
Odisha and Uttar Pradesh
show very slow progress in
improving nutritional out-
comes (Naandi Foundation
2012). In about a third of the
districts, the share of under-
weight children declined less
than 10 per cent between
9
Rural food insecure people are defned as those consuming less than the nutritional target of 2,400 calories per day per person.
10
Te Hunger Index is calculated using three indicators: the proportion of the population with inadequate calorie consumption, the
proportion of children that are underweight and the under-fve mortality rate. It compares Indias position of food security with other nations
using data from NFHS-3 and NSSO.
11
For refutations of the argument in Panagariya (2013), see Wable (2013); Gillespie (2013); Cofey et al. (2013); Lodha et al. (2013); Gupta
et al. (2013); Jayachandran and Pande (2013).
TABLE 3.13 Malnutrition in India (Per Cent)
Nutrition Indicators NFHS-2 NFHS-3
(199899) (200506)
Stunting (children <3) 51 45
Wasting (children<3) 20 23
Underweight (children<3) 43 40
Anaemia (children 635 months) 74 79
Vitamin A defciency (children <5) n.a. 57
Women with BMI (<18.5) 36 33
Women with anaemia 52 56
Source: NFHS-3 (200506).
The prevalence of
wasting in children
below 3 years increased
by 3 percentage points
while stunting declined
by only 6 percentage
points between 199899
and 200506.
With among the highest
child malnutrition, India
ranked 108 out of 122
countries using the
Hunger Index in 2011.
80 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
200204 and 2011 and the share of underweight chil-
dren actually increased in 7.5 per cent of the districts,
three-fourth of which were backward districts covered by
the Backward Regions Grant Fund (BRGF).
Malnutrition is high among women. A third of
rural women were underweight and more than half
were anaemic in 200506. Pregnancy and lactation
in adolescent girls impedes growth, leading to weight
loss and low BMI (Rah et al. 2008). Yet in 2005
06, about 20 per cent of rural women between the
ages of 15 and 19 were either pregnant or already
mothers (NFHS-3). Poor maternal nutrition, in
turn, afects child health as nutritional disadvantage
begins during the intra-uterine period. About a third
of Indian infants are born underweight and around a
ffth stunted (Mamidi et al. 2011; Ramchandran and
Gopalan 2011).
3.4.2 What Causes Poor Nutritional
Outcomes Among Children
Food Security
Food security exists when all people, at all times, have
physical, social and economic access to sufcient, safe
and nutritious food to meet their dietary needs and
food preferences for an active and healthy life (World
Food Summit 1996)
Food security has four pillars: availability of foodgrains,
access to afordable food items, sufcient nutritional
levels for each person, and stability and quality food
(discussed in Section 3.6). Calorie consumption is
often used as a normative measure of food security or
impoverishment. But despite rising incomes, average
per capita calorie consumption has declined by 9 per
cent between 1983 and 200405 in rural areas, along
with decreasing cereal and protein consumption.
Although non-cereal consumption, such as of milk,
eggs and edible oil, increased during this period, it has
not been enough to ofset the calorie loss from cereal
consumption. Some argue that the declining calorie
intake has been due to lower activity levels and better
healthcare (see for instance, Deaton and Drze 2009),
but this likely applies to higher income groups. In
fact, although the rural population in the lowest two
MPCE deciles actually increased calorie consumption,
their consumption still falls short of the norm used for
defning the poverty line (Suryanarayana 2011).
But calorie intake alone does not determine
nutritional well-being. Proper growth and development
requires well balanced meals with protein, fats and
essential micronutrients (vitamins and minerals).
Major defciencies persist, especially among children
and women. About 80 per cent of rural India consumes
less than half the required quantity of vitamin A, a
defciency that can lead to blindness among children
(Radhakrishnan et al. 2010). And while the central
government recommends children between 9 months
and three years be given vitamin A supplements every
six months only a quarter actually received supplements
in 200506 (NFHS-3). Te National Nutrition
Monitoring Bureau (NNMB) shows that children aged
1 to 12 also have signifcant calcium, iron, thiamine,
ribofavin and vitamin C defciencies. Te intake of
iron and folic acid by pregnant and lactating women, to
be provided under ICDS (see Section 3.4.3), likewise
is alarmingly low (Sharma 2010).
Sanitation and Hygiene
Nutritional wellbeing requires not only adequate and
nutritious food intake but also clean drinking water,
adequate sanitation, and health services. Faecally
transmitted infections (FTIs) caused by widespread
open defecation are a major contributory factor to
the high incidence of malnourishment. Intestinal
infections reduce nutrient absorption capacity, worms
and parasites steal nutrients, and diarrhoea ejects
unabsorbed nutrients, thereby afecting nutritional
status (Chambers and Von Medeazza 2013; Cofey
et al 2013). Better sanitation could help prevent these
illnesses and reduce stunting. It also has been found to
reduce stunting and infant mortality.
12
Yet the status
of basic infrastructure is abysmal with some regional
variations (see Section 3.5.2).
Lack of Awareness
As already discussed, poor maternal nutrition afects
the health and nutrition of children. Tis is often
compounded by the lack of awareness of good infant
and child feeding practices among mothers. Reducing
malnutrition therefore requires preventive strategies
that aim to improve womens nutritional status before
and during pregnancy and support appropriate feeding
after delivery.
12
Implementation of the governments Total Sanitation Campaign (TSC) programme to provide saniation facilities in rural areas increased
average child height by 0.2 standard deviations and reduced infant mortality by 4 per 1,000 live births (Spears 2012).
Inclusion 81
Around half of AWCs
lack toilets, and a third
do not have drinking
water facilities, exposing
children to unhygienic
conditions and risking
their health.
3.4.3 Nutritional Security Interventions
Te central and state governments have implemented
several programmes to address under-nutrition at the
individual, household and community levels. Some of the
most prominent are: (i) Integrated Child Development
Services Scheme (ICDS) which provides nutritional
supplements and education on health practices to
children and pregnant and lactating women; (ii) Mid-
Day Meal (MDM) Scheme which provides meals to
school children (see Section titled Education); and
(iii) National Rural Health Mission (NRHM) which
focuses on maternal and child health (see section titled
Health). But these programmes have not succeeded in
signifcantly reducing under-nutrition.
Integrated Child Development Services (ICDS)
ICDS, Indias main early child development and nutri-
tion intervention, was initiated in 1975 to address the
underlying causes of persistent under-nutrition of chil-
dren. ICDS adopts a multi-sectoral approach, incorpo-
rating health, education and
nutritional interventions.
It is implemented through
a network of 1,24,000
anganwadi centres (AWCs)
at the community level and
provides immunisation,
supplementary nutrition,
health check-ups and refer-
ral services to children below 6 years and pregnant and
lactating mothers, pre-school education to children,
and nutrition and health education to women. An ex-
panded range of interventions includes nutrition and
health awareness for adolescent girls and skill develop-
ment for women.
ICDS, however, has not fared well. Although the
Supreme Court directed that ICDS be universalised,
it has not reached all children, girls and pregnant
women that need it. Even now, about a quarter of the
intended benefciaries receive no benefts (PEO 2011b)
and between 33 and 45 per cent of the benefciaries
receive no supplementary nutrition (CAG 2013). Many
AWCs also lack the equipment needed to provide
supplementary nutrition and medical kits to prevent
the outbreak of seasonal
diseases. Forty to 65 per
cent of AWCs, for instance,
lack separate spaces for
cooking and storing
food and for indoor and
outdoor activities, half lack toilets, and a third have no
drinking water facilities (ibid). Tis exposes children
to unhygienic conditions, risking their health and
compromising nutritional security.
Tere is also a great variation across states. ICDS
seems to be working well in Tamil Nadu, Himachal
Pradesh and Maharashtra, whereas Chhattisgarh,
Bihar, Haryana, Rajasthan and Uttar Pradesh show
poor coverage (PEO 2011b). Tamil Nadus ICDS and
its broader noon meal programme present valuable
learning experiences for other states. Tamil Nadus
success is arguably a result of pressure from below
(public expectations and participation) and from above
(in the form of political will).
Recognising the severity of under-nutrition, the
Prime Ministers National Council on Indias Nutrition
Challenge was formed in 2008 to scale up nutrition and
health interventions in an integrated manner. Te focus
is on: (i) household food security and livelihoods, (ii)
maternal and child care services, (iii) healthcare and
services, (iv) water, environment, sanitation and hygiene,
(v) capacity development and community processes
and (vii) nutrition policy, planning and surveillance
(Planning Commission 2011b). In 2010, the Council
recommended strengthening and restructuring the
ICDS, improving nationwide awareness of malnutrition
and a multi-sectoral programme to address malnutrition
in selected 200 high burden districts.
3.5 Health
Indias public healthcare
system is in crisis. Tis is
refected in the prevalent
high maternal and child mortality rates, high disease
burden, poor and inequitable access to healthcare
services, and high fnancial cost to households, often
impoverishing many. At only about 1 per cent of
GDP by the central and state governments combined,
public spending on health is amongst the lowest
in the world. Further, there is a strong urban bias in
healthcare provision: urban
areas have ffteen times the
number of public hospital
beds per person, four times
the number of doctors per
person and three times the
number of nurses per person
than rural areas (Planning
Commission 2012c). Besides
Indias public spending
on health is amongst
the lowest in the world.
The public sectors
failure to deliver services
has resulted in a loss
of faith in government
health services and
forced even the poorest
to turn to private
providers.
Thirty-three to 45 per
cent of the benefciaries
do not receive supple-
mentary nutrition under
ICDS.
82 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
a shortage of manpower, high absenteeism and
indiference of medical service providers, as well as
corruption plague the public healthcare system. Te
public sectors failure to deliver services has resulted in
a loss of faith in government health services and forced
people to turn to private providers. Indias healthcare
system is now overwhelmingly private. About 85 per
cent of all healthcare visits are to private providers
and the quality of treatment is highly variable and
unregulated (Hammer et al. 2007).
3.5.1 Te State of Rural Health
Neglect of Public Health
In most low income countries, communicable diseases
dominate the populations health problems and can be
efectively addressed through preventive public health
interventions including (i) environmental health services
such as pest control (through draining swamps and
mosquito spraying), safe drinking water and sanitation,
(ii) clinical services like screening and vaccinations
and (iii) health education. As countries develop and
improve the provision of primary healthcare and basic
infrastructure, the incidence of communicable diseases
generally declines.
In rural India, however, contagious and infectious
diseases continue to dominate as causes of ill health
and death, although non-
communicable diseases
such as hypertension and
diabetes are on the rise
(MHFW 2005; Lancet
2010). About 23 per cent
of Indias child mortality
can be attributed to environmental factors such as poor
water, sanitation and hygiene (World Bank 2013).
Tere are at least two compelling reasons for
addressing public health as the top priority in healthcare.
First, the poor sufer disproportionately from such
infectious diseases (Hammer et al. 2007). Second,
improving public health can have very large impacts at
relatively low cost.
Yet, preventive measures have not received their due. In
fact, over time, attention to public health has diminished:
the amalgamation of medical and public health services
in the 1970s, intended to increase efciency and co-
ordination, led to a decline in public health services (Das
Gupta et al. 2010). State governments began to pursue
single-issue programmes
that target individual
diseases in silos through
curative services without
recognising the common
underlying non-health causes. With government health
budgets focused on curative healthcare, it is mainly the
better of groups that beneft. Tamil Nadu stands out
as an exception as it has focused on disease prevention
through a broader public health programme (see Box
3.2). Other states must also urgently address the
environmental factors that afect health, which would
go a long way in reducing the incidence of preventable
diseases and death at a low cost.
Poor Maternal Health
Although maternal mortality ratios (MMR) have
improved over the last decade, most of the larger states
still have three-digit MMRs.
13
Dominant causes of
About 23 per cent of
child mortality in India
can be attributed to
environmental factors
such as poor water,
sanitation and hygiene.
Over time, attention
to public health has
diminished.
BOX 3.2 Lessons from Tamil Nadus Public Health System
Tamil Nadus infant, child and maternal mortality rates are less than half the national average even though the states
spending on health is roughly the same as the national average. This is in part due to a public health system that focuses
on environmental aspects to avert outbreaks and manage endemic diseases. The state Health Department (HD) has
three separate but well-coordinated DirectoratesMedical Services, Public Health (DPH) and Medical Educationthat
operate on equal footing. The DPH has its own staf, and qualifed personnel are attracted through a fast promotion track.
It also has a dedicated budget, which accounts for almost 40 per cent of the HDs expenditure. Grassroots workers and
technical staf play critical roles in preventive care and sanitation measures, such as clearing vector-breeding places. The
focus on prevention by ensuring hygienic conditions has played an important role in promoting good health. Tamil Nadu
demonstrates the potential to strengthen the public health systems within available administrative and fscal resources,
which can be replicated by other states.
Source: Das Gupta et al. (2010).
13
Te Maternal Mortality Ratio is calculated per 1,00,000 live births.
Inclusion 83
maternal death are sepsis and haemorrhage, often
preventable with appropriate care such as antenatal
check-ups, nutritional support and timely identifcation
of high risk pregnancy. Deliveries with the assistance of
skilled birth attendantswhether in institutions or at
homehelp prevent both maternal and neonatal deaths.
But in 200708 less than 40 per cent of rural births
were at institutions (compared to 70 per cent in urban
areas) and only about 6 per cent of home deliveries were
conducted by skilled professionals (DLHS-3). Most
rural women choose home deliveries due to poor access
to and low quality of healthcare in the maternity centres,
lack of healthcare personnel, and fnancial and socio-
cultural barriers. Tere is also strong social stratifcation
in institutional deliveries, with women from socially
disadvantaged and minority religious groups largely
delivering at home (see Section 3.5.3).
High Child and Neonatal Mortality
Te under-5 mortality rate in rural India, at 66 per
1,000 live births in 2010, is exceedingly high. Among
the main causes of child deaths are respiratory
infections and diarrhoeal diseases (Registrar General
of India 2009). But access to safe drinking water and
sanitation, which could go a long way in reducing such
ailments, is low (discussed in section titled Regional
Disparities in Health Status and Chapter 4) and too
many children fail to receive even basic treatment for
these ailments. Only about 30 per cent of rural children
with diarrhoea, for instance, received oral rehydration
treatment in 200708 (DLHS-3). Girls (aged 159
months) in central India had a much higher mortality
rate from both pneumonia and diarrhoea than boys
(Lancet 2010).
A large number of child
deaths occur during the
initial phases of life. Infant
mortality, the probability
of death before age 1, in
rural areas is worrying at 51
per 1,000 live births (SRS
2010). Tough it has been
on a downward trend and the rural-urban diference has
declined, progress has been unsatisfactory.
Te limited improvement in infant mortality has
largely been due to reductions in post-neonatal mortality,
i.e., after the frst 4 weeks of birth, in part due to
interventions targeting nutrition and immunisation. As
a result, while the rural neonatal mortality rate declined
from 57 per 1,000 live births in 1990 to 49 in 2000
and 38 in 2009, the share of neonatal deaths in infant
mortality nationwide has increased from 66 per cent to
70 per cent between 1990 and 2009 (Rammohan et al.
2013; SRS 2010). In fact, a recent report places India at
the top of the list of countries where infants die on the
day they are bornIndia accounts for 29 per cent of all
frst-day deaths (Save the Children 2012).
Te dominant causes of neonatal death are premature
birth and low birth weight, infections and birth asphyxia
and trauma, and can largely be prevented by improved
delivery and postnatal care (Lancet 2010). Poor
nutrition and anaemia among young mothers and close
spacing of births, coupled with inadequate knowledge
and poor healthcare support contribute to the high
neonatal mortality in India. To a large extent, neonatal
mortality can be prevented at a low cost as demonstrated
by the Gadchiroli model (see Box 3.3). But replication
of the model through the ASHA programme of the
Deaths within the frst
4 weeks of birth account
for 70 per cent of infant
deaths and can be
prevented by improved
delivery and post-natal
care.
BOX 3.3 Home-based Neonatal Care in Gadchiroli, Maharashtra
Neonatal mortality in India remains high in part due to a lack of knowledge of neonatal care. In 199398, Society for
Education, Action and Research in Community Health (SEARCH) conducted a feld trial of home-based neonatal care
(HBNC) in Gadchiroli, a backward district in Maharashtra, with remarkable results. Trained village health workers visited
pregnant women during their third trimester, observed labour and neonates at birth, and regularly visited homes during
the frst month after birth. They helped manage birth asphyxia, premature birth or low birth-weight, hypothermia and
breastfeeding problems, and diagnosed and treated sepsis, generally through very simple interventions. Pregnant women
and mothers of newborns were provided health education, advised to begin breast-feeding within the frst hour after birth,
and taught to maintain the body temperature of newborns.
HBNC reduced the neonatal mortality rate (NMR) by over 60 per cent and perinatal deaths, i.e. immediately before or after
birth, by about 70 per cent. In 2001, SEARCH replicated the trial through the ANKUR project in Maharashtra and found NMR
and IMR reduced to about half. Adoption of such an intervention in areas where mothers have limited access to medical
care for neonates ofers the opportunity to reduce neonatal mortality.
Source: Bang et al. (1999).
84 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
NRHM has encountered numerous challenges (see
Section 3.5.5).
Another signifcant cause of infant death relates
not to health but to gender bias. Indias child sex ratio
fell from 927 females per 1,000 males in 2001 to 914
in 2011. Due to preference for male children, female
foeticide and infanticide continues illegally (Bhalotra
and Cochrane 2010; Anderson and Ray 2012). India
and Nepal are the only countries where more girls
die before their frst birthday than boys (World Bank
2011). Gender bias is also observed in healthcare-
seeking behaviour. Girls are much less likely to
be immunised than boys, particularly among less
educated mothers (NFHS-3) and parents are likely
to consult health professionals sooner, travel longer
distances and incur greater expenditure for boys than
for girls (Pandey et al. 2002).
3.5.2 Regional Disparities in Health Status
Nationally aggregated indicators conceal the wide
regional variations in human development. While state-
wise data are available for some health and nutrition
indicators, they are not always updated, making it
difcult to assess progress over time. District-level data
are even more limited and do not allow disparities to be
assessed over time.
14
Tis section attempts to examine
regional inequities with the limited data available.
State-wise Comparison on Health
Broadly, the southern states fare better than the rest
with Kerala faring best on most development indicators
including literacy, sex ratio and infant mortality. At
the other end of the spectrum are the states in the
Indian heartlandBihar, Madhya Pradesh, Rajasthan,
Odisha, Uttar Pradesh, Chhattisgarh, Uttarakhand
and Jharkhandcollectively known as the undivided
BIMAROU states (or the Empowered Action Group
[EAG] under the National Rural Health Mission).
Tey generally fare worst on a range of development
indicators including health outcomes and access to
healthcare, though Uttarakhand fares signifcantly
better than the rest (see Table 3.14). Tese states are
home to 48 per cent of the
population, but have around
75 per cent of under-fve
deaths (Ministry of Home
Afairs 2012).
Inter-district Disparities
in Child Mortality
One must look beyond inter-
state comparisons because
there are wide variations
even within states. Even the
relatively rich states have
districts that perform very
poorly and require urgent attention. In terms of infant
mortality, for instance, the worst faring districts are not
only in the BIMAROU states but also in Andhra Pradesh,
Karnataka and Maharashtra
15
(Planning Commission
2013a). Identifying the variations among districts within
the poorly faring states may help explain the underlying
reasons.
For the eight EAG states and Assam, recent district-
level data can shed light on the extent of inequities. Tey
show that in the case of child mortality, only 37 out of
the 284 districts in 9 states are at or below the national
average (Ministry of Home Afairs 2012). Further,
even within these poorly performing states there are
signifcant intra-state disparities (see Figure A3.1). For
instance, in Uttarakhand the child mortality rate of the
worst performing district is 3.8 times that of the best
performing one; in Jharkhand it is 2.5 times and in
Odisha it is 2.8 times.
Some Correlates of Child Mortality Rate
An earlier study found that although infant and child
mortality rates declined in all districts between 1981
and 2001, the inter-district disparity in child mortality
rates also increased, so mortality became increasingly
concentrated in poorly faring districts (Bhattacharya
and Chikwama 2012).
16
It also confrmed the infuence
14
Te District Level Household and Facility Survey (DLHS) contains data on access to and awareness about indicators relating to
reproductive and child health including immunisation, ante- and post-natal care but the latest data are for 200708. Recent district level data
on child mortality are available through the Annual Health Survey (AHS) for the eight EAG states and Assam for 201112. Rajan et al.
(2008) estimate district-wise child mortality in 2001, but these estimates are not strictly comparable with AHS fgures. For child nutrition,
disappointingly the latest reliable district level data are from DLHS-2 for 200204.
15
As recent district level data are available only for the EAG states and Assam, it is not possible to examine intra-state inequities in remaining
states.
16
Using census data on the number of children ever born and number of chilren surviving, Bhattacharya and Chikwama estimated the
probability of dying by age 5 for 1981, 1991 and 2001. Comparable estimates are not available for 2011.
Even among the
relatively rich states
there are districts that
perform very poorly and
require urgent attention.
For instance, the worst
performing districts in
terms of infant mortality
are located not only in
the BIMAROU states but
also in parts of Andhra
Pradesh, Karnataka and
Maharashtra.
Inclusion 85
Table 3.14: State-wise Maternal and Child Health Indicators (Rural)
Infant Under-5 Share of children fully Maternal mortality ratio Institutional deliveries
mortality rate (2010) mortality rate (2010) immunised (200708) (2007 09) (200708)
Madhya Pradesh 67 Assam 88 Uttar Pradesh 29 Assam 390 Chhattisgarh 13
Uttar Pradesh 64 Madhya Pradesh 88 Madhya Pradesh 31 Uttar Pradesh and 359 Jharkhand 13
Odisha 63 Uttar Pradesh 82 Bihar 41 Uttarakhand Meghalaya 21
Rajasthan 61 Odisha 81 Rajasthan 47 Rajasthan 318 Uttar Pradesh 22
Assam 60 Rajasthan 76 Assam 50 Madhya Pradesh 269 Uttarakhand 25
Meghalaya 58 All-India 66 All-India 50 and Chhattisgarh Bihar 26
Chhattisgarh 52 Bihar 65 Gujarat 51 Bihar and Jharkhand 261 Assam 32
All-India 51 Gujarat 65 Jharkhand 52 Manipur 34
Andhra Pradesh 51 Chhattisgarh 63 Haryana 56 Odisha 258 All-India 38
Gujarat 51 Jharkhand 63 Chhattisgarh 57 All India 212 Mizoram 40
Haryana 51 Haryana 58 Jammu & Kashmir 60 Karnataka 178 Odisha 40
Bihar 49 Andhra Pradesh 53 Odisha 61 Punjab 172 Rajasthan 41
Mizoram 47 Jammu & Kashmir 51 Uttarakhand 61 Haryana 153 Madhya Pradesh 41
Jammu & Kashmir 45 Himachal Pradesh 50 Andhra Pradesh 65 Gujarat 148 Tripura 42
Jharkhand 44 Karnataka 49 Delhi 65 West Bengal 145 Haryana 42
Karnataka 43 Punjab 49 Maharashtra 68 Andhra Pradesh 134 Arunachal Pradesh 43
Himachal Pradesh 41 Delhi 42 West Bengal 76 Maharashtra 104 West Bengal 43
Uttarakhand 41 West Bengal 40 Karnataka 76 Tamil Nadu 97 Himachal Pradesh 46
Punjab 37 Maharashtra 39 Kerala 80 Kerala 81 Sikkim 48
Arunachal Pradesh 34 Tamil Nadu 30 Punjab 81 Gujarat 48
Maharashtra 34 Kerala 16 Himachal Pradesh 82 Jammu & Kashmir 50
West Bengal 32 Tamil Nadu 83 Maharashtra 54
Sikkim 31 Goa 93 Karnataka 60
Tripura 29 Punjab 60
Tamil Nadu 25 Andhra Pradesh 66
Nagaland 24 Tamil Nadu 92
Manipur 15 Goa 98
Kerala 14 Kerala 99
Goa 10
Note: Infant and under-5 mortality rates are expressed per 1,000 live births. The maternal mortality ratio is measured per 100,000 live births.
Source: SRS (2010); DLHS-3 (200708).
of safe drinking water, sanitation and female literacy on
infant and child mortality (see also Spears 2012; Jalan
and Ravallion 2003; Kumar and Vollmer 2011).
Given the limited recent district-level data available
(MoHA 2012), we look at two parameters that are
under government control and can infuence child
mortality: immunisation (DLHS-2 and 3) and basic
infrastructure availability (Census of India 2011).
Disparities in Immunisation
Government-sponsored immunisation programmes can
and do reduce child mortality (Kabir et al. 2003; Sinha
et al. 2007). An analysis of the district-level data shows a
strong negative correlation between immunisation
17
and
child mortality rate (r= 0.98). Tis strong relation can
be seen in Uttar Pradesh, for instance, of which 43 per
cent of districts are in the bottom quintile, in terms of
17
Performance on child immunisation is measured in terms of the percentage of children between 12 and 23 months that are fully immunised,
i.e., have received a BCG, three doses each of DPT and polio and measles.
86 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 3.15 Indicator-wise States Share of Districts in Bottom and Top Quintile (Per Cent)
States U5MR-2011 % HHs with three basic % children fully immunised
services-2011 (1223 months)-200708
Bottom quintile Top quintile Bottom quintile Top quintile Bottom quintile Top quintile
(100149) (2567) (0.4%2.70%) (10.97%61%) (11.70% (61.63%
29.96%) 88.30%)
Assam 9 17 0 74 4 22
Bihar 5 5 29 3 14 3
Chhattisgarh 0 50 39 0 0 50
Jharkhand 0 67 63 0 5 36
Madhya Pradesh 29 7 34 10 38 9
Odisha 23 20 31 14 3 50
Rajasthan 0 3 6 21 9 28
Uttar Pradesh 43 3 6 14 43 0
Uttarakhand 0 85 0 100 0 54
worst best
worse better
bad good
Note: U5MR: Under-5 mortality rate; HHs: Households.
Source: AHS (2012); Census of India (2011); DLHS-3 (200708).
both child mortality and immunisation, of the districts
in these nine states (see Table 3.15). More than half the
same districts have the highest amongst child mortality
and the lowest immunisation. Madhya Pradesh too
has a high share of districts in the bottom quintile of
child mortality and immunisation; and around 70 per
cent of the districts are in the bottom quintile in both
indicators, i.e. have low rates of immunisation coverage
and high child mortality.
Te pattern in the better performers reinforces these
results. Uttarakhand, Jharkhand and Chhattisgarh
have a large share of districts in the top quintile of
child mortality and of immunisation, and again many
of the same districts have high rates of immunisation
and relatively low child mortality. Although the analysis
here is only suggestive, it is consistent with what
several studies have foundthat government action in
immunisation helps to reduce child mortality.
However, government eforts need to be sustained and
deepened. What is worrying is that the share of children
fully immunised decreased in 59 districts or over 20 per
cent of districts in these states between 200204 and
200708, although state-wise immunisation coverage
improved in all states. Tirteen of these districts, which
were initially in the top 2 quintiles, moved to the bottom
2 quintiles in immunisation coverage, suggesting that
even in the best of districts immunisation eforts were not
sustained. Importantly, as many as 38 of the 59 districts
or 65 per cent are backward districts under BRGF and
some are Left Wing Extremist-afected districts. As
immunisation is a basic aspect of preventive care, this
is a critical concern from the perspective of inclusive
development.
Disparities in Access to Basic Facilities
Apart from immunisation, access to basic
infrastructureespecially drinking water and
sanitationalso promotes good health and prevents
child mortality. Some of the states with relatively low
child mortality have good access to basic infrastructure
(data include drinking water on premises, sanitation
and electricity); Goa, Punjab, and Kerala are the only
states with all districts in the top quintile of access to
these three basic facilities, and their child mortality is
also much lower than in the average.
In contrast, penetration of basic infrastructure
availability is very low in all the BIMAROU states:
less than 5 per cent of rural households in Jharkhand,
Bihar, Chhattisgarh and Madhya Pradesh have access
to all 3 basic facilities, while penetration is less than 10
per cent in the remaining states. In fact, the bottom 2
quintiles of districts in terms of access to all 3 amenities
Inclusion 87
are mainly concentrated
in the BIMAROU
states (see Map 3.2).
Households in districts
with civil disturbances
and inaccessible terrain
have particularly poor
access. For instance, in Bijapur, a Left Wing Extremist-
afected district in Chhattisgarh which is among the
most backward in the country, only 0.4 per cent of rural
households have access to all three facilities (Census of
India 2011).
Government schemes that address inequities in
coverage could go a long way in reducing the high levels
of deprivation. Te large gaps in reliable data on health
and nutrition also must be addressed going forward to
enable better designed and implemented policies and
programmes and to better monitor them.
3.5.3 Social Inequities in Nutrition
and Health Outcomes
Within the poor nutrition and health outcomes of
rural India, SCs and STs fare the worst. Teir life
expectancy, for example, is fve to seven years lower than
the advantaged castes (Borooah 2010). Tis is mainly
due to their social exclusion and restricted access to
various health and basic infrastructure services that bear
directly on health.
Scheduled Tribes (STs)
Amongst all the social groups, the tribals or adivasis are
the most deprived. Tribal children have the highest rates
of malnutrition; nearly 55 per cent of children under 3
years are underweight, compared with 42 per cent of
non-tribal children. Tey also have the highest share of
children under 3 years that are wasted (see Figure 3.13).
Even among adults, STs and SCs have a higher share of
women that are underweight (Body Mass Index or BMI
less than 18.5) and they are diverging from the national
average in terms of female
malnutrition (IHDR 2011).
Child mortality among
STs is much higher than
other social groups. Only
12 per cent of rural children
under 5 years are tribal,
Households in districts
with disturbed civil
disturbances and
inaccessible terrain have
particularly poor access
to basic infrastructure.
STs
SCs
OBCs
Others
STs
SCs
OBCs
Others
STs
SCs
OBCs
Others
Underweight Stunted Wasted
FIGURE 3.13 Share of Children under Three YearsUnderweight, Stunted, Wasted by Social Group (200506)
(Per Cent)
Source: NFHS-3 (200506).
0 20 40 60 0 20 40 60 0 10 20 30
FIGURE 3.14 Early Childhood Mortality Rates by Social Group: Rural (200506) (Per 1000 Live Births)
STs
SCs
OBCs
Others
Neonatal mortality Post-neonatal infant mortality
0 20 40 60 80 100
Child (14) mortality
Source: World Bank (2011), based on NFHS-3 (200506).
While ST children are
on par with non-tribal
children at birth, they are
rapidly disadvantaged
by the time they are 4
years old.
88 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
but 23 per cent of all child
deaths between the age of 1
and 4 are of tribal children
(World Bank 2011). But,
due to traditional practices
of birth spacing, feeding
and weaning that tribal
mothers follow, tribal children do not have a much
higher incidence of neonatal deaths (ibid.). Tus, while
ST children are at par with non-tribal children at birth,
they are rapidly disadvantaged by the time they are 4
years old (see Figure 3.14).
Tis has several implications for government eforts.
First, although traditional practices lower the risk
of infant deaths, increasing institutional deliveries
would further help reduce the risk as well as lower
ST maternal mortality. Less than 18 per cent of tribal
women have institutional deliveries and this has not
changed between 199899 (NFHS-2) and 200506
(NFHS-3) relative to advantaged castes for whom the
proportion of institutional deliveries increased from 40
to 53 per cent over the same period (see Figure 3.15a).
A second thrust of government eforts needs to be in
extending public health services such as immunisation.
Although immunisation of tribal children has improved,
a large gap between tribal and non-tribal children
persists (see Figure 3.15b). Only 45 per cent of ST
children were fully immunised in 2007-08 compared to
53 per cent among SCs and around 63 per cent among
the general category (DLHS-3). Due to the strong
inverse correlation between immunisation and child
mortality, sustained eforts at increasing immunisation
coverage could have a large impact for ST children.
Another fnding is that the high rate of child
mortality among STs is not because tribal children are
more likely to become sick but because they are much
less likely to be treated (World Bank 2011). STs poorer
access to health services is partly because they live in
remote rural and forest areas with an inhospitable
terrain where medical facilities are often unavailable, or
even if available, absenteeism of healthcare providers is
high and monitoring difcult (Planning Commission
2008b).
Tribal women are also less likely to obtain healthcare.
Fewer ST mothers receive adequate antenatal and
postnatal care (see Figure 3.16).
Te lack of basic infrastructure facilities is another
factor behind much of their poor health: 81 per cent of
Only 12 per cent of rural
children under 5 years
are tribal, but 23 per
cent of all child deaths
between the age of 1 and
4 are of tribal children.
STs
SCs
OBCs
Others
0 20 40 60
STs
SCs
OBCs
Others
0 20 40 60
FIGURE 3.15A Share of Women Having Institutional
Deliveries (2005)
FIGURE 3.15B Share of Children Fully Immunised
(200708)
Source: NFHS-3 (200506); DLHS-3 (200708).
STs
SCs
OBCs
Others
STs
SCs
OBCs
Others
0 20 40 60 0 20 40 60
FIGURE 3.16 Share of Mothers Receiving Ante-natal and Post-natal Check-ups (Per Cent)
Three or more ante-natal visits (200506) Post natal check-up within 2 weeks of delivery (200708)
Source: NFHS-3 (200506); DLHS-3 (200708).
Inclusion 89
STs lack drinking water facility within their premises
and 75 per cent lack latrines as compared to 46 per
cent and 43 per cent of the general rural population
respectively (see Chapter 4). Notwithstanding their
remote habitation, greater eforts must be made to
ensure that STs are provided public health services
and basic infrastructure facilities.
Scheduled Castes (SCs)
While also very poor, nutrition and health outcomes of
SCs are somewhat better than STs (see Figures above).
Tey have slightly better access to basic infrastructure
(see Chapter 4) too. While they receive better public
health services, such as immunisation and institutional
deliveries than STs, they are signifcantly worse of than
the more advantaged social groups. Dalits often live in
bastis in the periphery of villages while most facilities,
including healthcare services, are located in the centres.
Besides, they also often experience social resistance in
accessing these facilities.
Tere is an urgent need to pay adequate attention
to providing basic infrastructure and healthcare to the
disadvantaged groups to ensure greater fairness and
equity of health outcomes.
3.5.4 Challenges in the Rural Healthcare
System
Inadequate Infrastructure and Human Resources
Besides an inadequate
number of rural government
health facilities, many of the
existing facilities lack even
the basic infrastructural
facilities and services, such
as permanent running water
and electricity, and properly functioning equipment.
About 25 per cent of sub-centres and per cent of
primary health centres do not have regular water and
electric supply in India (MoHFW 2012). Also, because
medical personnel prefer to work in urban areas, they
have an inadequate presence in rural areas, with the
shortage particularly acute in the poor northern and
central states. State strategies like mandatory posting
of government doctors to rural areas for a certain
number of years and rural clinical placement for medical
students have not solved the problem. Te High Level
Expert Group (HLEG) on Universal Health Coverage
(UHC) (Planning Commission 2011a) suggested
introducing a three year Bachelor of Rural Health
Care degree to turn out practitioners to address this
challenge. Also, some innovative approaches involving
technology and mobile services are helping extend
healthcare services to rural populations (see Box 3.4).
Poor Accountability of Healthcare Providers
High absenteeism of health workers is perhaps a more
serious problem. Doctors and medical workers in
rural areas are absent nearly 40 per cent of the time
(Chaudhury et al. 2006; Muralidharan et al. 2011).
Doctors are absent more often than lower ranked
providers. Poorer areas have higher absences, as high
as 56 per cent in Jharkhand to 67 per cent in Bihar
(Muralidharan et al. 2011). Absence rates among
nurses range from 27 per cent in Madhya Pradesh to
over 50 per cent in Bihar, Karnataka, Uttarakhand and
Uttar Pradesh (ibid.). Due to these high absence rates,
village public health facilities are open infrequently and
unpredictably. A study in rural Rajasthan, for instance,
found that sub-centres were closed more often than not
during regular opening hours (Banerjee et al. 2004).
Due to high absence
rates of medical
personnel, village
public health facilities
are open infrequently
and unpredictably.
BOX 3.4 Innovations to Aid Healthcare Delivery to Rural India
Numerous initiatives, such as allowing paramedics to handle common ailments and referring patients to secondary care
for more complex problems, have helped improve rural medical services. Ophthalmic assistants with basic equipment and
internet connectivity, for instance, run Aravinda Eye Hospitals Vision Centres in Tamil Nadu and refer patients requiring
procedural interventions to the main hospital. This allows the hospital to utilise its resources in treating more serious
ailments and prevents patients from travelling to the hospital for small problems.
Another initiative is mobile healthcare units. DISHA, a project of Philips India, ISRO, Apollo Hospitals and Dhan Foundation,
has mobile diagnostic clinics equipped with x-ray, ultrasound, ECG and a pathology lab, and stafed with a doctor that
travels through rural areas providing consultation. Patient records are stored in a database and those requiring specialist
consultation are referred to hospitals. This provides doctors the equipment they need to make informed diagnoses and
provide the rural population access to qualifed doctors without requiring the doctors to live in the villages.
Source: Bhandari and Dutta (2007).
90 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Disillusioned by public
services, 63 per cent of
rural households obtain
healthcare services from
private providers.
Government doctors competence has been found
to be poor and they often make less of an efort
than unqualifed private providers that are directly
accountable to patients (Das and Hammer 2005; Das
et al. 2012). Another troubling issue is that patients are
often made to pay for services that are meant to be free
(Transparency International 2005).
Predominance of Unregulated Private Providers
Disillusioned by public services, 63 per cent of rural
households obtain healthcare services from private
providers (NFHS-3). In the extreme case of Bihar and
Uttar Pradesh less than 15 per cent of households depend
on public facilities. Yet, 42
per cent of those classifed
as allopathic doctors in
rural areas, actually have no
medical training (Rao et al.
2009). Tis proliferation of
unregulated and unqualifed
private providers demands an efective regulatory
system. Mainstreaming practitioners of traditional
medicine, who play a very important role in rural areas
is also urgently needed.
Financial Burden of Healthcare on Households
Expenditure by households (including urban) accounted
for 71 per cent of spending on healthcare in India in
200405 (MOHFW 2005). Te rural poor fnance
healthcare more through contributions and borrowing
than from current income and savings, which also
has long-term welfare implications (Mukherjee and
Levesque 2010). Tis has pushed many rural households
into indebtedness and poverty: over 40 per cent of
hospitalised Indians borrow heavily or sell assets to cover
expenses, and over a quarter fall below the poverty line
due to hospital expenses (NRHM Mission Document).
Tey also spend signifcant amounts on medicines,
often even when treated in public hospitals due to poor
public procurement practices. In this respect, Tamil
Nadu provides an example of an efcient centralised
procurement and distribution system, with an efective
quality monitoring mechanism, which can bring down
costs signifcantly and also assure adequate supply (see
Box 3.5). Te Twelfth
Plan reiterates the need to
replicate such a system to
provide essential generic
medicines free of cost in
public facilities.
3.5.5 Government Eforts
National Rural Health Mission (NRHM)
Te central governments NRHM launched in 2005
is intended to reduce regional imbalances in healthcare
infrastructure and to improve manpower use through
decentralisation. It places special focus on 18 states,
including the BIMAROU and north-eastern states,
Jammu & Kashmir and Himachal Pradesh. NRHM
set difcult-to-quantify goals of providing accessible,
afordable and quality healthcare in rural areas, especially
to vulnerable sections. Its targets include reducing the
maternal mortality ratio to 100, infant mortality rate to 30
and total fertility rate to 2.1 within a 7-year period (2005-
2012). Available data
18
show that, while some progress
has been made, none of the goals has been met (Planning
Healthcare expenditures
have been pushing
many rural households
into indebtedness and
poverty.
BOX 3.5 Streamlined Drug Procurement in Tamil Nadu
Patients seeking care in public healthcare facilities often need to buy medicines from retail shops at a high price. Tamil
Nadu has made impressive progress in streamlining its drug purchase and distribution systems through the Tamil Nadu
Medical Services Corporation (TNMSC), which has helped reduce medicine expenses dramatically. TNMSC makes bulk
purchases from manufacturers of generic drugs through a transparent bidding system, resulting in procurement prices as
low as one-tenth and at times even one-fftieth the MRP. District warehouses stock and distribute drugs to health facilities
that can request any medicine on the Essential Drugs List, ensuring that there are no shortages. As a result, Tamil Nadu is
able to provide free medicines to all patients that seek care from public facilities. As of 2004 the average cost of drugs for
in-patients in Tamil Nadus public hospitals was Rs 102 compared to over Rs 3000 in Haryana and Rajasthan (NSSO 2006).
Kerala has successfully adopted this model, but other states have made little progress.
Source: Planning Commission (2011d).
18
Evaluation of NRHM is limited by the lack of nationwide data on relevant indicators.
Inclusion 91
Commission 2011e).
NRHM has therefore been
extended for another fve
years until 2017.
NRHM has raised
expectations and included
public health in the policy
discourse, putting pressure
on state governments to improve health systems. Central
budgetary spending for health increased, but in the
absence of a monitoring system, low accountability and
high absenteeism continue to leave capacity unutilised.
Decentralisation under NRHM
As Panchayati Raj institutions (PRIs) should be
accountable to the people, devolving some healthcare
responsibilities to them should improve healthcare
service delivery. Devolution of responsibilities to the local
governments linking primary health centres with PRIs
yielded mixed results. Political decentralisation alone
is likely to have limited benefts unless accompanied by
local capacity building. Once people are made aware of
their entitlement, they will demand better service which
will enhance health outcomes (Pandey et al. 2007).
NRHM emphasises the need to build PRI capacity
to own, control and manage health services. It also
envisages community based monitoring of public
healthcare which may increase awareness of entitlements
and improve healthcare delivery, as in Maharashtra (see
Box 3.6). Te HLEG on UHC also recommended
that existing Village Health Committees (VHCs)
be transformed into participatory Health Councils
(Planning Commission 2011a). But while Village
Health and Sanitation Committees (VHSCs) succeeded
in providing safe drinking water, their involvement in
designing health activities and maintaining sanitary
activities has reportedly been poor (PEO 2011).
Janani Suraksha Yojana (JSY)
Janani Suraksha Yojana ( JSY), a fagship programme
of NRHM, is the largest conditional cash transfer
programme in the world intended to promote institutional
delivery to reduce maternal and neonatal mortality.
It provides cash incentives for women to deliver in a
government or accredited private medical facility. Initially,
only BPL women over 19 were eligible for their frst two
live births. Because these criteria may deny benefts to the
most vulnerable women, in 2006, the eligibility criteria
were relaxed. Now any woman in low performing states
is eligible regardless of poverty status, number of births
and age, and monetary incentives have been enhanced.
Women delivering at home with the assistance of skilled
personnel are also entitled to some cash incentive.
JSY has helped increase
institutional deliveries
and improve child feeding
practices (Mazumdar et
al. 2011; Lim et al. 2010).
Inequities have declined as
the efects have been greater
among less educated, poorer
and social disadvantaged
women and in low performing states (NHSRC 2011).
A study in 8 districts of low performing states found
most women received the monetary incentive at the
facility itself, usually by cheque as recommended by
guidelines, and only few had to pay bribes to receive the
money (Dongre and Kapur 2013).
BOX 3.6 Community Monitoring of Health Services in Maharashtra
The NRHM envisages a greater role for communities in monitoring healthcare delivery through rogi kalian samitis (health
committees). Nine states were chosen for the pilot phase of community based monitoring (CBM). In Maharashtra, one of the
pilot states, CBM is credited with improving healthcare delivery and raising awareness regarding healthcare entitlements.
The state government, which previously played a passive role, increasingly supported CBM.
Village health, water supply, nutrition and sanitation committees (VHCs), trained by civil society organisations, publicly
rate health services, together with the community. In addition, people are invited to report their experiences at jan sunwais
(public hearings) and the authorities present respond on how they will address the concerns. These meetings helped make
people aware of their rights and increased accountability of health ofcials. Being aware that they were being monitored
and reported, health professionals were motivated to function better. After CBM was introduced, provider attendance
improved and illegal practices like excess charging reduced. Confdence in the public system also improved as evidenced
by higher immunisation rates, increased patient attendance at public health facilities, including anganwadis, and a larger
share of villages ranking health services as good.
Source: Shukla et al. (2011).
JSY, the largest
conditional cash
transfer programme in
the world, has helped
increase institutional
deliveries, improve child
feeding practices and
reduced inequities.
NRHM has raised
expectations and
included public health
in policy discourse,
putting pressure on
states to improve
health systems.
92 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Accredited Social Health Activist (ASHA)
Te ASHA programme is an important instrument
of community outreach under NRHM. Based on the
Gadchiroli model of neonatal care (see Box 3.3), it has
the potential to reduce neonatal mortality. ASHAs
are accountable to panchayats and act as an interface
between communities and the public health system.
Tey are supposed to create awareness on obstetric
and child rearing services through home visits and
counselling. JSY assigns an important role to ASHAs,
providing them with monetary incentives to ensure
pregnant women receive antenatal care, escort them to
medical facilities and stay until they are discharged, and
assist in arranging postnatal care and immunisation.
But the promise of ASHAs has not been realised.
ASHAs have helped promote institutional delivery
and immunisation. But, performance on community
level counselling on child rearing and care has
reportedly been poor (Planning Commission 2011e).
ASHAs lack the knowledge needed to fulfl their roles
and training is not standardised across states (Bajpai
and Dholakia 2011; Planning Commission 2013a). In
the absence of refresher courses or ongoing mentoring
and supervision, poor retention of knowledge and
skills is a challenge.
Rashtriya Swasthya Bima Yojana (RSBY)
Less than a third of the rural poor use their own funds
for hospitalisation costs, while the remainder are forced
to borrow (Narayana 2010). To address this, RSBY
was launched in 2008. RSBY insures BPL families for
hospitalisation costs and allows them to choose between
public and private hospitals. Benefciaries must pay
a nominal registration fee while the cost of premium
payments is shared by the central and state governments.
RSBY has come under scrutiny for various
reasons. First, enrolment has been poor because state
governments and gram panchayats have not adequately
spread information about the scheme (ibid.). Second,
because RSBY insurance only covers fve days of
hospitalisation, those with chronic conditions still face
huge out-of-pocket expenses (Rathi et al. 2012). Tird,
many hospitals have withdrawn the cashless schemes
and others refuse to treat patients covered by RSBY.
Finally, because inpatient care constitutes only a small
portion of rural out-of-pocket healthcare expenditure,
RSBY fails to adequately protect the poor and alleviate
their fnancial burden (Saksena et al. 2010; Shahrawat
and Rao 2012).
3.6 Social Protection
3.6.1 Overview of Indias Social
Protection System
Indias spending on social protection schemes constitutes
approximately 1.6 per cent of the GDP, which is
relatively high for a low-income country. Te schemes
can be broadly categorised as promotional, protective
or preventive, depending on the type of intervention
(World Bank 2011b). While such categories are not
mutually exclusive, they assist in understanding the
direction and emphasis of the countrys social protection
system. Broadly defned:
Promotional measures aim to improve incomes
both in the short and long run often by encouraging
a particular practice or behaviour. For instance,
programmes such as mid-day meals promote
school attendance and proper nutrition which
in turn improves livelihood prospects. Similarly,
conditional cash transfers support investments in
human capital, and programmes such as the newly
formulated NRLM-Aajeevika facilitate development
of sustainable livelihoods.
Preventive measures seek to stave of poverty or
other hardships before they hit, by protecting
households ex ante against shocks, and supporting
them through failed risks, typically through social
insurance programmes. MGNREGS, for example, by
guaranteeing employment and providing an assured
income, prevents families from falling into poverty.
Protective or social assistance measures provide relief
ex post for the chronically poor or for those who fall
into poverty as a result of shocks. By providing food,
social pensions and assets such as housing, protective
measures mitigate the need for households to run
through their savings, sell of assets or take children
out of school to deal with sharply reduced income.
Protective measures such as the Public Distribution
System (PDS) for food, protect families nutritional
security during times of need, but unlike promotional
measures are not trying to incentivise certain
behaviours in doing so.
Protective spending is
the largest component of
Indias social protection
system, largely on account
of the PDS which was
enacted to alleviate food
insecurity (see Figure 3.17).
Indias system is heavily
focused on safety nets
rather than ropes or
ladders which seek
to promote sustained
movement out of
poverty.
Inclusion 93
Protective (PDS)
FIGURE 3.17 Central Government Spending on Social Protection Programmes, 201112 (Per Cent)
Source: Expenditure Budget, Union Budget 201314, various departments (http://indiabudget.nic.in, accessed on 7 May 2013).
TABLE 3.16 Major Central Social Protection Schemes
Type Scheme Entitlements Expenditure Targeting mechanism Refer to
201112
(Rs crore)
National Rural Livelihood Targeted livelihood 2392 One member of each Chapter 2
Mission-Aajeevika promotion scheme for poor household Section 2.7
groups and some individuals.
Targeted skill and
Promotional placement scheme for
rural poor and youth
Mid-Day Meals Scheme School feeding programme 9891 Government and Chapter 3
for children in grades 1 to 8 aided schools Section 3.3.5
Conditional Cash Transfer Conditional cash transfer to 1606 BPL and women in low Chapter-3
Janani Suraksha Yojana pregnant women to promote performing states Section 3.5.5
institutional delivery
Mahatma Gandhi National Self-targeted public works 29,213 Entire rural population Part-II
Rural Employment programme willing to work Chapter 7
Preventive Guarantee Scheme
(MGNREGS)
Rashtriya Swasthya Subsidised health insurance 926 BPL population Chapter 3
Bima Yojana (RSBY) Section 3.5.5
Public Distribution System Subsidised food distribution 72,822 BPL population. In Chapter 3
(PDS) some states includes Section 3.6.2
vulnerable such as SC/
STs, widow, old age
Protective and disabled
Indira Awaas Yojana Subsidised housing for 9872 BPL population Chapter 4
(Rural Housing) rural poor Section 4.5
National Social Assistance Social pensions to widow, 6608 BPL widow, BPL old Chapter 3
Programme (NSAP) old and disabled aged and BPL disabled Section 3.6.2
1%
19%
10%
50%
20%
Protective (Fuel Subsidy
+IAY+NSAP+Other)
Promotional
(NRLM+MDM+JSY)
Preventive (MGNREGS)
Preventive (RSBY)
94 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
As much as 59 per cent of the countrys social protection
spending is on food, fuel (including cooking fuels) and
MDM schemes. Indias system is heavily focused on
safety nets rather than ropes or ladders which seek to
promote sustained movement out of poverty (World
Bank 2011b). More recently, even though, other types
of social protection have also been introduced such as
MGNREGS and NRLM-Aajeevika, social assistance
continues to be the largest.
Despite Indias range
of social protection
schemes, their overall
impact has fallen short
due to the method of
benefciary selection, poor
delivery system, and poor
accountability. While
many schemes have been
inefective in identifying all the needy, or even in reaching
all the identifed benefciaries, leakages and corruption
have been widely existent too. Te government is now
trying to address these issues in various ways:
Benefciary selection through a community
participatory process and for the frst time a Socio
Economic and Caste Census, conducted in 2011
(SECC 2011), which would rank households based
on their socio-economic status vetted by the gram
sabha (see Box 3.7).
Improved delivery systems using technology and
adequate manpower.
Improved monitoring, transparency and
accountability by involving the community through
wall paintings, jan sunwai or public hearings in the
gram sabha, and social audits.
Tese methods have had some success, in various
programmes such as MGNREGS, and in certain
villages or states, some of which are documented in
various chapters of this Report. While encouraging,
however, the methods have not yet been applied on a
large enough scale.
Te key social protection measures have been
discussed in various sections of this report. Tis
includes promotional measures such as NRLM-
Aajeevika (Section 2.7), mid-day meals scheme
(Section 3.3.5) and conditional cash transfers such as
JSY (Section 3.5.5).
Preventive measures such as MGNREGS (Chapter
7) and RSBY (Section 3.5.5) are also examined. One
recent preventive measure not discussed elsewhere
in the report has been the initiative to provide social
security for unorganised workers (see below).
Section 3.6.2 below looks into protective measures
or social assistance programmes: PDS and NSAP.
Subsidised rural housing, also a protective measure, is
discussed in Chapter 4 (section 4.5).
Social Security for the Unorganised Sector
Providing social security to unorganised workers is
a critical concern, as due to their low income and the
uncertain nature of their jobs, they are unlikely to have
sufcient savings to meet sudden expenses such as
health exigencies, or to sustain themselves after they stop
working. In this context, two forms of social security
become important; (i) insurance (both health and
Despite Indias range
of social protection
schemes, their overall
impact has fallen short
due to the method of
benefciary selection,
poor delivery system,
and poor accountability.
BOX 3.7 Socio Economic and Caste Census 2011
A Socio Economic and Caste Census 2011 (SECC 2011) was carried out for the frst time in 2011 to provide the socio-
economic profle of various castes, and to score households based on their socio-economic status. This enables states to list
families living below the poverty line using a cut-of indicator or percentage. In contrast to the last BPL survey conducted in
2002, which identifed BPL families using 13 socio-economic indicators, the SECC 2011 uses 3 sets of parameters to identify
the BPL population: (i) exclusion parameters such as households with two wheelers, households with Kisan Credit Cards
with credit limit higher than Rs 50,000 and households with at least one government employee; (ii) inclusion parameters
such as primitive tribal groups and households without shelter and (iii) remaining households, which are scored using
seven deprivation indicators and then ranked with highest deprivation score having the highest priority for inclusion in
the list of BPL households.
SECC 2011 is a paperless exercise done on a handheld electronic device, drastically reducing data entry errors and
enumerator discretion. The collected data is verifed by the panchayat and draft list is read out in the gram sabha where any
person can fle objections. This data in electronic form is maintained in a centralised data base and can easily be updated,
analysed and retrieved.
Source: MoRD 2011.
Inclusion 95
life) and (ii) old age pension. Te Unorganised Social
Security Act 2008, based on the recommendations
of the National Commission for Enterprises in the
Unorganised Sector (NCEUS) is the frst attempt to
legislate social security for unorganised workers. Existing
state insurance and pension schemes were narrowly
targeted at the BPL workers, until 2011 when the
Swavalamban pension scheme for unorganised workers
was introduced. Tis scheme covers all unorganised
workers and requires a benefciary
19
contribution in the
range of Rs 1,000 to 12,000 per month with the central
government contributing Rs 1,000 per year for a period
of 3 years.
3.6.2 Social Assistance Programmes
Public Distribution System (PDS)
Te PDS introduced in 1965 provides the poor food at
subsidised rates. Te Food Corporation of India (FCI)
procures foodgrains for PDS from farmers and delivers
them to state governments for distribution through
a network of fair price shops. Te PDS was for many
years a universal scheme. But a targeted PDS (TPDS),
with greater emphasis on BPL households, replaced it
in 1997, to overcome regional mis-targeting and urban
bias.Because the earlier system was based on state
government requests, southern states with fewer poor
people received disproportionately more PDS foodgrains
than states with more poor people.
20
Under TPDS the
central government currently provides foodgrains to the
states on the basis of the 1993-94 poverty estimates
of the Planning Commission projected to the March
2000 population at 35 kg per family per month for BPL
families and Antyodaya Anna Yojana (AAY) families.
Allocations for above poverty line (APL) families are
also made depending upon the availability of foodgrain
stocks in the central pool and past of-take by the states.
Presently, these allocations range between 15 kg and
35 kg per family per month for diferent states/Union
Territories (UTs).
TDPS did improve targeting but not significantly.
While the targeting halved the richest quintiles access
to PDS, the poorest quintiles access did not improve
much (Himanshu and Sen 2011). This may in part
be due to exclusion and inclusion errors, i.e., many
poor people are not covered and many covered are not
poor. There is no definitive information on the extent
of mis-targeting. According to one estimate, almost
half the poor are identified as non-poor and almost
half the non-poor as poor (World Bank 2011).
Another estimate indicates that about 18 per cent of
BPL households do not have ration cards (MSSRF
2008). Leakages over the period 199394 to 2004
05 almost doubled (Khera 2011a; Himanshu and
Sen 2011). As much as 58 per cent of subsidised
grains failed to reach the target group (Planning
Commission 2005). This high leakage comprised an
estimated 21 per cent diversion to APL households
and 36 per cent siphoned off the supply chain (ibid.).
Much of the PDS grain ends up being sold in the
open market by corrupt intermediaries, including
dealers who manage PDS outlets, profiteering from
the difference between the lower subsidised prices
and market prices. Inefficiency, corruption and
leakages became rampant, often resulting in uncertain
and irregular availability of food. Poor northern and
eastern states which performed badly under universal
PDS continue to perform badly under TPDS with
very low per capita PDS purchase and highest
leakage due to dysfunctional delivery systems. The
poor in these states clearly are not benefitting. In
Bihar, for example, households in the bottom quintile
purchased only 2 per cent of the per capita foodgrain
consumption through PDS as compared to 68 per
cent in Karnataka and 50 per cent in Tamil Nadu
(Dev and Sharma 2010).
By 200910 the diversion of foodgrains declined to
an estimated 41 per cent at the national level, refecting
an improvement in almost all states, but particularly so
in certain states, such as Andhra Pradesh, Jharkhand,
and Odisha (Drze and Khera 2011). Although a few
surveys have found some improvement in the extent
of leakages in the PDS, the level of leakages in many
states continues to remain
very high. More importantly,
the wide variation in leakages
across states found by the
19
In addition, there are several state governments (such as Kerala Welfare Fund, Andhra Pradesh Labour Welfare Board and Maharashtra
Mahadi Workers Fund) and non-government (such as LIC Janashree Bima Yojana, and SEWA Gujarat) insurance and pension schemes
targeting the unorganised workers
20
Nearly one-half of the cereal subsidy went to the four southern states and West Bengal which accounted for about one-third of Indias
poor whereas about one-ffth went to Bihar, Odisha, Madhya Pradesh and Uttar Pradesh which had about half of the countrys poor (World
Bank 1997).
PDS foodgrain leakages
have reduced but are
still high.
96 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
studies hardly provides any clarity on the extent of
leakages at present under TPDS.
A few states, such as Tamil Nadu and Chhattisgarh
pioneered reforms to improve access and reduce leakages
(see Box 3.8).
TPDS did not address nutritional security as there
was a continued emphasis on rice and wheat without
diversifcation into coarse cereals, pulses and edible oils.
Tis neglect led to a change in consumption pattern
away from nutritious coarse cereals. Te negligible
public procurement of coarse cereals also disincentivised
coarse cereal cultivation. Recently few states such
as Andhra Pradesh, Chhattisgarh, Karnataka and
Tamil Nadu have introduced coarse cereals. A pilot to
promote millets through PDS to ensure food as well as
nutritional security and bring back millets in the local
production system undertaken in 2009 in two mandals
of Anantapur district in Andhra Pradesh showed
positive results. An intensive campaign through village
meetings, wall paintings and pamphlet distribution was
undertaken to encourage people to purchase millets.
Similarly, to promote millet production, millet seeds
were supplied to the farmers and millets were procured
from them for the PDS. Te results showed an increase
in oftake of millets through PDS and increased
production of millets due to assured market price for
supplying to the PDS.
National Food Security Act 2013
Te National Food Security Act (NFSA) 2013,
popularly known as the Right to Food, was passed by the
cabinet as an Ordinance in July 2013 and by both houses
of Parliament in August 2013. Aimed at addressing food
and nutritional security, it encompasses the existing
schemes, TPDS, ICDS and MDM. Building on the
TPDS, the NFSA entitles priority and AAY (or the
poorest households) to receive subsidised foodgrains.
Women, infants and school children are entitled to free
meals and nutritional support as in ICDS and MDM.
In addition, the Act provides for a maternity beneft of
at least Rs 6,000.
Te TPDS, which is central to the NFSA, would
include up to 75 per cent of rural households and 50
per cent of urban households, covering a total of about
two-thirds of the countrys population. Te central
government will determine the PDS coverage by
state and the state governments will identify eligible
households and make the list of benefciaries publicly
available.
21
States may use the SECC 2011 to identify
benefciaries. Priority households are entitled to 5 kg
BOX 3.8 Lessons from Chhattisgarhs PDS
Chhattisgarh has reformed its dysfunctional PDS into a transparent and efcient system, and made it quasi-universal
reaching about 80 per cent of the rural population in a timely and predictable manner. Not only did the government reach
the more poor and vulnerable people such as widows, pensioners, and the handicapped, but people now get higher per
capita foodgrain at a more subsidised price through the PDS than pre-reform 2004-05. It also reduced leakages dramatically
from 52 per cent in 2004-05 to 11 per cent in 2009-10.
How did the government do this? What lessons can be learnt? As a frst step, in 2004, the government changed the
management of ration shops from private dealers to community organisations such as cooperatives, gram panchayats
and self-help groups. This change brought better accountability as village people started running the shops. Also higher
commission to shop owners made these shops viable and limited unfair practices. To reduce corruption and leakages the
government introduced various transparency measures. One such measure was wall painting of the PDS shops with names
and numbers of the card holders, prices of cereals and sugar, and a toll-free number for complaints, so that entitlements
were publicly known and redress available. Another measure was to distribute the foodgrains in the presence of PRI
representatives and vigilance ofcers. Also, the government directly delivered foodgrains to the shops, which was earlier
done through private suppliers, and mandated that the supplies reach ration shops by the frst week of each month. The
use of technology such as Global Positioning System for trucks carrying PDS grains limited diversion during transportation
and helped timely delivery of grains to PDS shops. Digitisation of ration cards eliminated bogus ration cards and an SMS
alert system and citizen interface website encouraged citizen participation in monitoring.
Source: Khera (2011a); Puri (2012); Drze and Khera (2011).
21
Te state-wise distribution within the overall 75%/ 50% of rural/urban population coverage at the national level would be determined by
the central government using the household consumption expenditure survey conducted by NSSO.
Inclusion 97
of foodgrains per person
per month and Antyodaya
households to 35 kg per
household per month,
distributed through TPDS
at highly subsidised rates
(Rs 2/kg for wheat, Rs 3/
kg for rice and Rs 1/kg for
coarse grains). Te prices
are expected to be fxed for
3 years and would thereafter
possibly be at specifed
economic prices.
Te NFSA difers from the existing TPDS in certain
key ways:
It makes food a legal right and entitlement, not
merely a welfare programme.
It subsidises foodgrains even more than the current
TPDS (for non-AAY households), and the subsidised
prices are uniformly applicable, whereas the TPDS
had graded prices depending on the poverty status,
with the highest prices for APL population.
22

It re-classifes those eligible under the NFSA.
Tis will actually imply coverage of fewer people
(estimated at 800 million people) than the current
TPDS (which covers about 1 billion people, as about
240 million households have ration cards). Even
though fewer people will be covered, the higher per
capita subsidy (in terms of lower issue price for all
and higher quantity for non-BPL population) will
result in a larger total subsidy bill for the government
under NSFA. Te Ministry of Food and Consumer
Welfare estimates the subsidy bill for 62 million
tonnes at Rs 1,30,000 crore for 201314, against the
food subsidy expenditure under TPDS at Rs 90,000
crore provided in the Union Budget 201314 (up
from Rs 73,000 crore for 201112 ).
It allocates by state, allowing poorer states such as
Bihar and Uttar Pradesh to receive a higher allocation
than in the TPDS, and states with fewer lower
income households such as Tamil Nadu and Kerala
to receive a smaller allocation.
Tere are various issues stemming from the design of
NFSA. One is the high fscal/programme cost, besides
the direct food subsidy cost. To support NFSA, the
government would need to enhance procurement and
storage infrastructure, as well as manpower, and delivery
systems, which could add signifcantly to the cost (Gulati
et al. 2012). By the Planning Commissions estimates
for TPDS in 2004-05, for Rs 1 income transfer, the
government spent Rs 3.65 on handling foodgrains. For
the NFSA, the administrative and handling costs could
be even higher.
A second issue is the potential impact of high
foodgrain procurement on market prices, and its
infationary implication. To meet the entitlements,
procurement, already a high 30 per cent of foodgrain
production, would have to be sustained at high levels.
Tis translates to an estimated 50 per cent of marketable
surplus which, if exceeded, could exert pressure on food
prices in the market (GoI 2011).
Critically, the success of NFSA depends on fxing the
leaky delivery system. Although reduced, leakages are
still high at the national level, and particularly in some
states such as Bihar and Uttar Pradesh. Given the poor
delivery of TPDS in many states, NFSAs proposed
reforms of the TPDS are critical. Tese include
enhancing the use of information technology such as
end-to-end computerisation of TPDS, use of global
positioning system (GPS) on trucks, leveraging the
Aadhaar platform, strong grievance redressal mechanism
and increasing transparency of records.
23
States with
weak delivery systems and high leakages generally have
lower institutional capacity
and may not implement
the reforms soon. Te Act
tries to address this issue
by directing states to put
in place a strong grievance redressal mechanism and a
provision to compensate those households who do not
receive their entitlements.
Another important concern is that the NFSA, like
the TPDS, does not address nutritional security. It
continues to focus on supplying foodgrains rather
than a nutritional balance of food items, although the
government has indicated that over a period of time the
commodities will be diversifed by adding items such as
pulses and edible oils.
The National Food
Security Act, 2013
subsidises foodgrains
even more than the
current TPDS (for
non-AAY households),
and the subsidised
prices are uniformly
applicable, whereas
the TPDS had graded
prices depending on
the poverty status.
22
As of March 2013, the subsidised rates of the central pool of TPDS were: APL WheatRs 6.10 per kg; BPL WheatRs 4.15 per kg;
and AAY WheatRs 2 per kg. APL RiceRs 8.30 per kg; BPL Rice5.65 per kg; and AAY RiceRs 3 per kg (DFPD 2013).
23
Te Act tries to correct a few issues that plague the PDS, such as (i) in case of insufcient supply of foodgrains from the central pool, the
Centre would compensate the States; and (ii) for better delivery of foodgrains, the Centre would assist states towards the cost of intra-state
transportation, handling and storage of foodgrains and margins of Fair Price Shop (FPS) dealers.
The success of the NFSA
depends on fxing the
leaky delivery system.
98 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Overall, while the underlying aim of the NFSA to
provide food and nutritional security is unquestionable,
the overall programme comes at a huge cost, which
could be efectively used for providing basic amenities
to the poor and vulnerable (see Chapter 4) and other
forms of social protection, in particular promotional or
preventive programmes.
Direct Beneft Transfer (DBT)
Given the problems of the TPDS, which the NFSA
may not overcome, a direct cash transfer system in place
of in-kind benefts has been much debated. Proponents
of the cash transfer argue that since the government is
unable to efectively meet
its welfare obligations,
such as providing
foodgrains or meals, cash
is a better alternative. It
also gives people choice
by empowering them with
additional income and the option to spend, including
the option of getting better quality food. But fxed direct
cash transfers have been viewed with some cynicism
given persistent high infation.
Te DBT initiative was launched in 2013, directly
transferring entitlements and benefts of welfare
schemes to benefciaries using the Aadhaar platform,
a unique identifcation number database containing
biometric and other benefciary data. Tis initiative
would reduce intermediaries, leakages and delays in the
system, and root out duplicate and ghost benefciaries.
Since cash transfer through Aadhaar can signifcantly
reduce if not eliminate diversion, the total outlay even
with near universal coverage can be much less than the
present outlay (Parikh 2013).
On the other hand, critics of the cash beneft argue
that recipients might squander their cash on non-
essential items such as liquor and entertainment, thus
defeating the objective. Studies have found that this
issue could be addressed through better design of the
cash transfer programme. Te issues of identifying
poor households, and the large exclusion and inclusion
errors, also would remain (ibid.). Implementing the
DBT through Aadhaar on a large scale also raises
operational challengesproblems with low internet
coverage and fngerprint recognition have emerged in
pilot programmes using Aadhaar (Bhatti et al. 2012).
Starting July 2013, Aadhaar is also no longer recognised
for KYC to open bank accounts.
In-kind food transfers, moreover, are infation-proof and
would insulate benefciaries
from a rise in food prices.
Food is more likely to
be equitably distributed
among household members,
whereas an individual can
monopolise cash or beneft boys more than girls. If the
PDS can be reformed along the lines of Chhattisgarh and
Tamil Nadu, then it could successfully meet its goals of
food and nutrition security.
Te DBT could, in fact, be used for the NFSA
to reduce leakages. Te dealers should purchase the
foodgrains at close to market price (possibly between
MSP and market price) and sell it to benefciaries at that
price (plus some commission). Te government would
then transfer the diference between the sale price and
the subsidised price directly to the benefciaries accounts
using the DBT platform. A similar scheme is currently
being piloted for LPG cooking gas subsidy. By shifting
from the present system in which the subsidy is released to
FCI, to a system where subsidy is directly credited to the
benefciaries accounts, the incentive to divert foodgrains
would drastically diminish. A large percentage of wasted
subsidy could be saved (say Rs 25,000 crore per annum if
20 per cent leakage is plugged). If the government chooses
to implement NFSA through DBT, PDS benefciaries
would need Aadhaar numbers issued and bank accounts
opened, with links to the PDS database. Tis could be
completed in a year or two with some diligence.
Social Security Pensions
Social security interventions become necessary for two
main sets of reasons: (a) life-cycle challenges, e.g., old
age, disability, reproductive functions, and (b) changes
in the living environment, including macroeconomic
conditions, e.g. natural disaster, job loss, etc.
Introduced in 1995, the NSAP covers those vulnerable
mainly to life-cycle challenges. Te programme now has
fve major schemes, for which only BPL families can
qualify:
Indira Gandhi National Old Age Pension Scheme
(NOAPS) providing old age pensions to BPL
population;
Annapurna Scheme providing free food to destitute
elderly;
National Family Beneft Scheme (NFBS) providing
a lump sum insurance on the death of primary
breadwinner;
Indira Gandhi National Widow Pension Scheme
(IGNWPS) providing pensions to widows; and
Cash empowers people
with the option to
spend, including the
option of getting better
quality food.
In-kind food transfers
are infation-proof
and would insulate
benefciaries from a
rise in food prices.
Inclusion 99
Indira Gandhi National Disability Pension Scheme
(IGNDPS) providing pensions to physically and
mentally handicapped individuals.
NSAP provides monthly cash benefts to certain
vulnerable groupselderly above 60, widows and
handicapped who fall below the poverty line. Te central
government provides funds and lays out guidelines for
identifying the BPL benefciaries, and the panchayats
identify them. Many state governments top up the
schemes with their fnancial contributions or have state-
specifc schemes (MoRD 2013). Hence, there is a high
degree of variance across states in coverage and beneft.
Overall, these social pension schemes are quite
efective in targeting the poorest and socially
disadvantaged groups. Not only does the beneft go
to a higher percentage of those in the poorest income
groups, but it is also the primary source of support
for many of them (World Bank 2011b, Dutta et al
2010).
24
Although the amount is small, social pensions
have helped benefciaries meet their essential needs
such as food and health and reduced their dependence
on families. Also, importantly, corruption and leakages
are low in this programme (Gupta 2013; World
Bank 2011b). Corruption is generally at the stage of
registration of the benefciary, not thereafter.
Till recently, the overall coverage of these NSAP
schemes was very low. In 2005, IGNOAPS, the largest
of the NSAP schemes reached 6.1 million benefciaries
(i.e., about 10 per cent of the potential benefciaries)
possibly because the eligibility was narrowly targeted
to only destitute pensioners (Dutta et al 2010). With
the revised guidelines in 2007, the NSAP programme
was expanded to cover all BPL elderly/widows/
destitutes and by 2013 IGNOAPS reached about 37
million benefciaries (MoRD 2013). Te programme
still has potential to expand as the demand from eligible
benefciaries is probably low due to low awareness of the
programme and a very cumbersome registration process.
NSAP faces problems in delivery. Payment delays
sometimes as long as 6 monthsis a major drawback.
Tis is mainly due to delay in funds transfer between the
centre and state or the state and district administration.
Also, there are instances where the states used the funds
for other purposes, as the funds are not earmarked,
unlike centrally sponsored schemes (ibid.). Payment
through banks is a problem for benefciaries where there
is poor banking access. Also, rural bank branches are
ill-equipped to handle a large number of transactions
on a given day. Tere are other implementation issues.
For instance, regular verifcation of benefciaries is not
done, especially in the old age pension where pensions
continue to be paid even after death (World Bank
2011b).
Some of the problems in
delivery could be overcome
by making the pension
payments through Aadhaar.
Aadhaar helps in eliminating
bogus benefciaries, prevent
leakages, reduce the delay
in payments and provides
mobility to the pensioners in case of migration. In a
pilot project in 4 districts of Andhra Pradesh, the social
pensions are being transferred through the Aadhaar-
enabled payment system (AEPS). Along with social
pensions, MGNREGA wages are also transferred
through the AEPS. Although Aadhaar cannot overcome
mis-targeting, the SECC 2011 should help in identifying
all eligible benefciaries.
3.7 The Way Forward
Poverty is multi-dimensional. While income poverty
has declined signifcantly, social development in terms of
health, nutrition and education has made slow progress.
A key reason has been the lack of urgency in delivering
basic water and sanitation services, preventive healthcare
measures such as vaccination, and imparting health
education. Government alleviation eforts have generally
focused on inputs. Te construction of hospitals and
schools tends to be prioritised because they are easier
to measure than improvements in public health and
pedagogy (World Bank 2003; Hammer et al. 2007).
Quality and efectiveness are not sufciently prioritised.
In contrast, Himachal Pradesh, for instance, has been
able to achieve higher learning levels than other states
because it focused on basic learning outcomes rather
than a rigid syllabus.
Indias public sector education and healthcare
systems are in crisis. While public spending on these
services is low, greater budgetary allocations alone may
not result in improved outcomes. Importantly, the severe
lack of accountability has led to systemic problems of
absenteeism, low efort and competence. Teachers and
24
Survey results from Rajasthan, for instance, showed that nearly three-quarters of pensioners rely on the pension as the primary source of
support Dutta et al (2010).
Overall, the impact
of these NSAP
programmes has been
limited because they
are narrowly targeted
at BPL benefciaries.
100 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
healthcare providers have few incentives to improve
performance. Tey are largely unmonitored and not
penalised for lack of efort. Going forward, this must
be addressed through the introduction of policies
that increase accountability and incentivise good
performance.
Te need for accountability has been recognised
and some mechanisms have been introduced. School
Management Committees constituted under the
RTE comprising local representatives and parents are
meant to strengthen monitoring and enhance school
accountability. Similarly, the NRHM attempts to
introduce community based monitoring of healthcare
service delivery. Tese are steps in the right direction
and may help improve service if powers are devolved to
communities and capacity building is provided to enable
them to monitor these services.
Progress on policies that address incentives has
lagged but there are some encouraging developments.
Recognising the potential of conditional cash transfers,
some programmes have recently been introduced that
incentivise better practices. Incentives to increase the
secondary school attendance of girls through grants
for bicycles in Bihar and Uttarakhand, and monetary
incentives to promote institutional deliveries and
prevent maternal and neonatal mortality have met
with success. Such a concept should be extended to
improve performance among service providers as well.
Compensation of public sector teachers and healthcare
providers should increasingly be dependent on their
performance.
Critical to addressing poverty, whether chronic or
due to sudden shocks, is assistance from the government
by way of welfare or social protection programs.
Historically Indias social protection programmes
have focused heavily on protective schemes like food
securityproviding subsidised food and fuels to
vulnerable populationswhich was meant to provide
the safety net but developed too many holes and did
little to lift the poor out of poverty. But more recently
some new schemes have been introduced such as
insurance programmes, MGNREGS and even the
NRLM Aajeevika which rather than being safety nets
are trying to provide ropes and ladders out of poverty.
Ultimately, this is the direction in which social security
schemes should evolve so as not to perpetuate poverty
but to facilitate and enable more productive livelihoods.
While these programmes may be more challenging
to design and implement they build sustainability by
equipping vulnerable populations with the skills to
support themselves. Some of the programmes that have
started exploring this, such as MGNREGS and the
conditional cash transfers scheme, are showing signs
of success. It is also important that the programmes
are growing in scope because as the economy evolves,
citizens want more than just food subsidies. Tey also
want and need education, health insurance and housing.
A second issue is the nature of assistance. Most of
Indias social protection programmes are in-kind and
only a few newer schemes are exploring cash transfers.
Cash transfer schemes have several advantages,
particularly since transfers go directly to benefciaries,
cutting out intermediaries and minimising leakages
and corruption. Tey also provide benefciaries more
freedom of choice. Cash transfers, however, also carry
risks if they are unconditional and continue even after
benefciaries are on their feet, and if they do not build long
term capacity but foster dependence. Tey also carry the
risk of infation if they are not adjusted periodically. For
this reason, cash transfers must be rolled out gradually
and the outcome carefully assessed. As with all welfare
schemes, whether cash or in kind, success rests in good
design. More experiments need to be carried out to fgure
out what works and what does not. Data for monitoring
must also be diligently collected. At the same time, the
identifcation of benefciaries, already improved under
the SECC 2011, must be revised periodically to ensure
that cash transfers are properly allocated.
Annexure 3.1
Measurement of Poverty:
Issues in Official
Methodology
Income poverty is based on the proposition that
the living standard of a household depends on the
commodities consumed by them. Tis, in turn, depends
on the level of per capita total expenditure and prices.
Te basic step in the income poverty approach is to
identify a critical value of expenditure that can serve as
a poverty line. In the identifcation of this critical value,
a series of measurement choices are inevitable and some
of these choices are subjective. For example, what is the
appropriate poverty line? Should the poverty line be
based on calorie norm or a fxed commodity basket? If
the poverty line is to be anchored to calorie intake, what
calorie norm should be used? What is an appropriate unit
of analysis: the household, the family or the individual?
What equivalence scales should be used? Another factor
that has not received adequate attention in empirical
work is the impact of demographic composition factors
on the measurement of poverty (Wright 1996). While
making comparisons between time periods or between
communities, demographic compositional factors need
to be factored in.
Te Task Force (TF 1979) on Projection of
Minimum Needs and Efective Consumption Demand
constituted by the Planning Commission in 1979
defned the poverty line as that per capita expenditure
level at which the average per capita daily calorie intake
was 2400 kcal for the rural population and 2100 kcal
for the urban population, which meet the ICMR
norms. Te non-food items contained in the poverty
line expenditure were assumed to be requirements. Te
Expert Group (EG 1993) constituted by the Planning
Commission recommended the continuation of the
poverty line of the TF (1979) and adopted the rural/
urban consumption basket at the rural/urban poverty
line as the norm for all households in all the states. It
also suggested procedures for updating the poverty
line for changes in prices over time and for fxing state-
specifc poverty lines using state-specifc prices.
Te consumption basket identifed separately for
rural and urban areas was, thus, evaluated at state-
specifc prices to arrive at state-specifc poverty lines
in the base year, 197374 and adjusted for prices for
the subsequent years using the consumer expenditure
distribution. For any year, poverty levels were estimated
for each state using the state level consumer expenditure
distribution. Aggregating the state-wise poverty ratios
with state populations as weights, the all-India poverty
ratio for rural/urban was estimated. Since then, a similar
procedure with minor changes for price adjustments has
been adopted to arrive at the ofcial poverty lines for
states and nationwide.
Several parameters were used to derive the state-
level and national poverty lines as well as poverty ratios.
Besides being contentious, these parameter values may
change over time. Tree important issues arise in the
design of poverty estimates in this context.
Te frst issue concerns the poverty norm itself. Te
poverty line as defned by the TF (1979) and the EG
(1993) is partly normative, in that it is anchored to a
calorie norm in the base year, and partly behaviouristic,
in that non-food consumption is based on consumer
behaviour. For compensating the rise in prices, the EG
(1993) recommended the use of Laspeyers price indices
under the assumption that given the income equivalent
to poverty line, the poor can aford the reference
consumption basket (minimum needs).
But due to changing preferences the poor may
not choose the same consumption basket, even if
compensated for infation. In fact, the consumption
patterns have undergone signifcant changes over time
in both rural and urban areas, even among the poorer
sections. Broadly, the shifts in consumption patterns
have taken place in favour of non-cereal food and non-
food items of consumption which has increased the
average cost of calories across all the income groups.
Tis in turn has undermined the calorie content concept
of the poverty line. With current consumption patterns,
the consumption basket chosen by a consumer at the
poverty line no longer provides the minimum calories
to which the poverty line was anchored. As a result, the
poverty line has lost nutritional relevance over time.
And, although the EG (2003) committee recommended
periodic revision of the consumption basket, it has not
been implemented so far.
Te age-sex structure has also been undergoing
changes since the base year of the poverty line. Hence,
the per capita calorie norm may have to be reassessed.
Similarly, in view of the changes in occupational
structure and technological changes which reduced
drudgery, the recommended dietary allowances for
heavy work, moderate work, and sedentary job may have
to be revised. If a single poverty line is to be defned for
the country, and separately for rural and urban India, it
is not clear by how much and in what direction it may
have to be revised.
Te second issue is that the methodology does not take
cognisance of non-food needs. Household expenditure
102 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
on health and education has increased signifcantly over
time even for the poor. Te assumption made by the
TF (1979) and EG (1993) that the provision of public
health and educational services by the government
would meet the basic needs of health and education of
the poor are no longer valid. It is, therefore, necessary to
have some minimum norms (expenditure for non-food
needs such as clothing and shelter for diferent parts of
the country) for these heads of expenditure as part of
minimum needs to be built into the poverty line.
Te third issue relates to price adjustments. As
mentioned, the national rural/urban poverty lines with
197374 as the base year were adjusted to refect the
observed diferences in the rural/urban cost of living
across states and arrive at state-specifc rural/urban
poverty lines. For this, the EG used Fisher indices
(which refect interstate price diferentials) estimated
for 196061. Te 196061 Fisher Indices were
projected to 197374 using state-specifc consumer
price indices. Tis was done using state-specifc re-
weighted Consumer Price Indices for Agricultural
Labour (CPIAL) for rural and Consumer Price Indices
for Industrial Workers (CPIIW) for urban areas. Tese
are Laspeyers price indices with 196061 as the base
year. Te use of outdated price indices has distorted the
poverty measures to a large extent as the weights used in
the inter-state price indices with 196061 bases might
have changed considerably.
Another issue on which there is no agreement relates
to the use of a national basket uniformly across all the
states. Although the normative national rural/urban
consumption basket was valued at state-specifc prices
to arrive at state-specifc poverty lines, the procedure
has been questioned as consumption patterns and basic
needs difer from the national average in many states.
Similarly, the use of neighbouring states poverty lines
for small states (such as the poverty line of Maharashtra
for Goa and that of Assam for the other seven north-
eastern states) has been questioned.
Importantly, there has been a general consensus that
the ofcial estimates of rural poverty ratios grossly
underestimated the incidence of rural poverty and that
the basket underlying the poverty line was outdated
and did not adequately represent the growing basic
needs such as education, health, housing and transport.
Te Planning Commission set up an Expert Group
(EG, 2009) to review the methodology for estimation
of poverty which recommended continuation of the
measurement of poverty in the domain of private
consumption expenditure and suggested several
changes in the methodology for estimating the poverty
lines. Te EG (2009) accepted the ofcial national
urban poverty ratio in 200405 and recommended that
the consumption basket underlying the urban poverty
line be adopted for both rural and urban areas of all
states and the rural/urban basket should be valued
at state-specifc rural/urban prices to arrive at state-
specifc rural/urban poverty lines. Te EG (2009)
recommended the compilation of price indices from
unit level prices of the NSS. Te revised poverty lines
would provide adequate provision not only for food but
also for education and health.
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O D I S H A
C
H
H
A
T
T
I
S
G
A
R
H
U T T A R
P R A D E S H
DELHI
P U N J A B
H
A
R
Y
A
N
A
R A J A S T H A N
Karaikal (PI.)
Yanam (PI.)
Mahe (PI.)
M
A
H
A
R
A
S
H
T
R
A
Top quintile (27.0598.07%)
Second quintile (12.4927.04%)
Third quintile (6.6112.48%)
Fourth quintile (3.816.60%)
Bottom quintile (0.43.80%)
Not applicable
FIGURE A3.2 District-wise Quintile Distribution of Households with Three Basic Facilities:
Drinking Water Within Premises, Latrine and Electricity, 2011
Source: Census (2011).
Inclusion 105
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Image credit: Ministry of Rural Development
Summary
I
nfrastructure can transform
rural India; several studies and
evaluations confrm the positive
link between rural infrastructure
and improved livelihoods, health and
productivity, and reduced poverty.
Government spending on productivity-
enhancing infrastructure, in fact, has
a more signifcant and lasting impact
on poverty reduction than government
spending on unconditional subsidies.
While almost all rural infrastructure
sectors are under state governments,
central government spending has also
been signifcant, particularly since
200405.
But outcomes have been disappointing
both in terms of access and quality.
Village-level connectivity has improved,
but households still lack access to basic
services. Rural roads have connected
around 69 per cent of habitations that were
planned to be covered, but the smaller and
more remote ones are yet to be connected.
Almost all villages are connected to the
grid, but as much as 45 per cent of rural
households lack electricity connections. And a shocking
70 per cent still lack access to proper toilets. Twenty per
cent of rural households have none of the three basic
servicesdrinking water within premises, sanitation
and electricityand only 18 per cent have access to all
three. Even those who do have access do not have quality
of service. Electricity supply is often unreliable and water
supply unavailable or polluted. Huge inequalities among
states, and even within states, persist. In all states, the
socially disadvantaged and marginalised communities
fare worse than the rest. Scheduled Tribes, often
because they live in remote, isolated areas, typically fare
the worst.
Why are results so poor? Until recently, government
schemes were largely top-down in their approach
and supply-driven, lacking an integrated approach,
focusing on asset creation and not maintenance, with
little community involvement. A lack of monitoring
and accountability allowed corruption to take hold.
As a result, assets built were often of poor quality,
incomplete, unusable and/or inadequately maintained.
Although the government has subsidised the provision
of infrastructure to the poor, inequities loom large
because of defciencies in identifcation of the poor and
faulty scheme design.
What needs to be done? To a large extent, lessons
from past experience are being incorporated in a
changing approach in government schemes.
4
CHAPTER
Infrastructure
116 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Bottom up approach and community participation: In
response to past shortcomings, changes have been made
in the approach to infrastructure projects. Schemes are
increasingly designed as demand-driven, with villagers
deciding their own priorities and local governments
(panchayats) playing a greater role in implementing and
monitoring them. But panchayats are not always able to
fulfl this function, and schemes are not always fexible
enough to match projects to local needs. Community
involvement in planning, monitoring and paying for
maintenance is one important change that holds great
promise, but to date has shown mixed results. Certain
communities, especially through womens self-help
groups (SHGs), have successfully charged and collected
user fees to maintain water supply and other systems,
or have promoted good hygiene so that toilets are
maintained. But projects have also been planned in ways
that perpetuate existing social hierarchies so that only
the privileged derive benefts.
Change in targeting approach: Below poverty line (BPL)
households have been targeted to receive subsidies,
particularly for household-level infrastructure. But poor
households have often been excluded while non-poor
households have been included. Some schemesthe
fagship rural housing scheme, for instanceare now
involving communities in benefciary selection. And
there is renewed focus on providing infrastructure to the
most marginalised districts and populations through an
accelerated development plan.
Some types of infrastructurewater and sanitation,
for instanceneed to be universal to be efective.
Unless all households build toilets, gains made in water
supply or safe toilets for some are undone as others
practice open defecation. Te governments most recent
sanitation programme thus covers all households in a
village at one time.
Planning for maintenance: Te fagship rural roads
programmes initial success is, in fact, attributed to
its focus on maintenance and its three-tier quality
monitoring system. Going forward, state governments
must budget separate funds for maintenance.
Environmental sustainability and innovative technology:
Te use of locally produced and suitable building
materials such as fy ash bricks for roads and houses
could bring down costs while being environmentally
responsible. Innovations such as toilets that do not
require water-intensive drainage should be incentivised.
Incentivise private provision where possible: While intense
private sector competition in Indias telecommunications
industry has driven down rates and exploded the
subscriber base, the universal service obligation fund
needs to be leveraged to encourage the private sector
to innovate and compete in rural telephony to increase
penetration.
Holistic approach: Te disparate schemes of diferent
government agencies for related infrastructure must
be coordinated. Recognising the interrelatedness, the
Twelfth Plan, for example, proposes a shift in dealing
with water in a holistic way covering irrigation, drinking
water and sanitation.
While many of these changes are only slowly
entering scheme design and showing positive results,
huge challenges still remain in providing even basic
infrastructure equitably and with reliable service quality.
4.1 Rural Infrastructure:
An Overview
Infrastructure has the potential of transforming rural
India. As several studies show, rural infrastructure can
improve livelihoods, health and productivity and reduce
poverty. Public spending on productivity-enhancing
infrastructure, such as roads, electricity, irrigation,
agricultural research and development (R&D) and
education contributes to reducing poverty through
improved agricultural productivity, higher wages and
non-farm employment (see for instance Datt and
Ravallion 1996; Fan et al. 2000; Fan et al. 2007). By
lowering transportation costs and increasing farmers
access to markets, roads lead to agricultural expansion,
and by lowering the transaction costs of credit services,
result in increased lending to farmers, higher demands for
agricultural inputs and higher crop yields (Binswanger et
al. 1993). Electrifcation increases non-farm income and
allows students longer study hours. Telecommunication
improves rural access to fnancial, health and extension
services. Most fundamentally, improved sanitation and
drinking water facilities promote health and well-being
and, over the longer term, improve productivity ( Jalan
and Ravallion 2003; Kumar and Vollmer 2011). Te
role of rural infrastructure
is also critical as Indias
rural economy transitions
from an agriculture-led
to a non-farm economy.
Indeed, government
spending on infrastructure
has a more signifcant and
lasting impact on poverty
Government spending
on infrastructure has
a more signifcant
and lasting impact on
poverty reduction than
government outlay on
fuel, food and other
subsidies.
Infrastructure 117
reduction than government outlay on fuel, food and
other subsidies.
Almost all rural infrastructure sectors are under
the ambit of state governments, but getting reliable
and standardised information on their expenditures
or outcomes is very difcult. Over the years, the
central government has also contributed to developing
rural infrastructure. In the frst few decades after
Independence, driven by food security concerns and the
push for the green revolution, the central government
focused primarily on large irrigation projects and, from
the mid-1960s onwards, on electrifcation for tube well
irrigation. From the mid-1970s, the central government
also supported rural road construction, mainly under
various employment-generation programmes. Since
2000, however, and particularly since 2005, the central
government has broadened its rural infrastructure
thrust to encompass the range of basic infrastructure
that addresses the needs of individual households. Te
relative emphasis has thus increased over time towards
essential infrastructure like water and sanitation,
housing and household electrifcation.
With this expanded focus, government spending on
rural infrastructure quadrupled between 200001 and
201011 (see Figure 4.1). Since 2005, with the launch
of Bharat Nirman, the central governments fagship
rural infrastructure programme that includes roads,
electricity, drinking water supply, telecom, irrigation
and housing, investment in rural infrastructure has
shot up. Te Eleventh Five Year Plan (200712), which
had a major focus on infrastructure, had projected
rural infrastructure investment at Rs 4.35 lakh crore
(in 200607 prices), equivalent to 30 per cent of total
infrastructure investment. It is estimated that 90 per cent
of the rural infrastructure investment has been realised,
with over 40 per cent from the Centre (see Appendix
Tables A4.1A and B). To supplement these budgetary
allocations, debt fnancing has been obtained from several
sources, such as National Bank for Agriculture and
Rural Development (NABARD), Rural Infrastructure
Development Fund (RIDF), National Cooperative
Development Corporation (NCDC), Housing and
Urban Development Corporation (HUDCO), Small
Industries Development Bank of India (SIDBI), public
sector banks and multilateral development banks.
Over the years, the approaches to delivering rural
infrastructure services have changed:
Rural infrastructure is now viewed as a composite
whole with signifcant multiplier efects.
Even though government spending on irrigation
and roads continues to be the highest, the urgency
of addressing basic household infrastructure needs is
better acknowledged (see Table 4.1).
Te need for a more concerted efort to address the
needs of the most socially disadvantaged groups is also
explicitly acknowledged.
Tribal communities,
particularly those in
remote areas, have been
disadvantaged in getting
infrastructure access. Te
new Integrated Action
Plan (IAP) launched in
2010 aims to accelerate
development of Naxal-
infuenced districts,
predominantly inhabited
by tribals.
Note: All fgures include both Plan and non-Plan expenditure; Storage data (for constant 200607 prices) consists of expenditure on construction
of rural godown, investment in Food Corporation of India and Central Warehousing Corporation; Integrated Action Plan (IAP) data for 201213 is
up to November 2012.
Source: Union Expenditure Budget, vol. 2 (200102 to 201314), website (http://indiabudget.nic.in, accessed on 15 June 2013), and Ministry of Water
Resources, Press Information Bureau Release dated 4 December 2012 and 10 January 2012, website (http://wrmin.nic.in/, accessed on 15 June 2013).
40,000
30,000
0
10,000
20,000
Rs crore
2
0
0
0

0
1
2
0
0
1

0
2
2
0
0
2

0
3
2
0
0
3

0
4
2
0
0
4

0
5
2
0
0
5

0
6
2
0
0
6

0
7
2
0
0
7

0
8
2
0
0
8

0
9
2
0
0
9

1
0
2
0
1
0

1
1
2
0
1
1

1
2
(Rs crore at 200607 prices)
0.8
0.7
0.3
0.5
0.6
0.9
2
0
0
0

0
1
2
0
0
1

0
2
2
0
0
2

0
3
2
0
0
3

0
4
2
0
0
4

0
5
2
0
0
5

0
6
2
0
0
6

0
7
2
0
0
7

0
8
2
0
0
8

0
9
2
0
0
9

1
0
2
0
1
0

1
1
2
0
1
1

1
2
(as per cent of GDP)
0.4
FIGURE 4.1 Central Government Spending on Rural Infrastructure
Government
programmes are
shifting focus to
improved sustainability,
increased benefciary
participation, greater
fexibility to states
to adapt schemes to
local requirements,
and a more concerted
focus on socially
disadvantaged groups.
118 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Government programmes are shifting focus towards
sustainability and greening rural development, with
an emphasis on watershed programmes, biodiversity
conservation, solid and liquid waste disposal, and use
of eco-friendly construction material.
Responsibility for implementation, benefciary
selection and monitoring of rural infrastructure
projects is being decentralised in accordance with the
73rd Constitutional Amendment and vested with
the panchayats (see Table 4.2 and Chapter 6).
State governments are being given greater fexibility
in centrally sponsored schemes (CSS) to use
central government funds in accordance with local
needs. Based on the recommendations of the B. K.
Chaturvedi Committee report, a new framework is
being introduced for more fexibility, including setting
up a Rural Development Flexi fund. In June 2013,
the Cabinet approved CSS to have state-specifc
guidelines and reserve 10 per cent of the scheme
outlays as fexi-funds. States can use the Flexi fund to
supplement central government schemes or initiate
their own innovative projects for rural development.
Yet, what are the results on the ground? A snapshot of
outcomes shows that we are far from universal coverage
for most sectors (see Figure 4.2). Seventy per cent of
rural households lack access to proper toilet facilities
and 45 per cent lack electricity. What is more troubling
is that coverage fgures rarely reveal the entire story.
For instance, electrifcation does not necessarily mean
a regular supply of electricity. Similarly, for water and
sanitation, the quality of service is a major health issue.
Even though village-level connectivity has improved,
deprivation levels for basic
services remain unacceptably
high. An alarming 20 per
cent of rural households
have none of the three basic
servicesdrinking water
within premises, sanitation
and electricityand only
18 per cent have access to all
three (see Figure 4.3).
Access to basic facilities is glaringly unequal among
income and social groups. Only 5 per cent of the lowest
expenditure (a proxy for income) quintile and about 10
per cent of the Scheduled Caste (SC)/Scheduled Tribe
(ST) group have all three facilities (see Figures 4.4A
and B). But deprivation is so high in rural areas that only
39 per cent of even the highest expenditure quintile and
TABLE 4.1 Central Government Spending on Rural
Infrastructure (200012) (at 200607 prices)
Total expenditure Share
(Rs cr.) (%)
Rural roads 90,517 29.8
Rural housing 48,511 16.0
Irrigation 48,184 15.9
Watershed 10,557 3.5
Rural drinking water and 62,342 20.5
sanitation
Rural electrifcation 24,100 7.9
Telecommunication 13,851 4.6
Storage 1,972 0.6
PURA 206 0.1
Integrated Action Plan (IAP) 3,654 1.2
Actual expenditure on rural 303,894 100
infrastructure
Note: All fgures include both Plan and non-Plan expenditure;
Storage data (for constant 200607 prices) consists of expenditure
on construction of rural godown, investment in Food Corporation of
India and Central Warehousing Corporation. Figures may not add up
exactly to 100 due to rounding of.
Source: Union Expenditure Budget, Vol. 2 (200102 to 201314),
website (http://indiabudget.nic.in, accessed on 15 June 2013), and
Ministry of Water Resources, Press Information Bureau Release dated
4 December 2012 and 10 January 2012, website (http://wrmin.nic.in/,
accessed on 15 June 2013).
TABLE 4.2 Infrastructure Subjects Entrusted to PRIs
Sector Union/State/ Subjects
Concurrent List
Roads State Roads; Culverts; Bridges
Water State Drinking water; Minor
supply irrigation; Water
management; Watershed
development
Sanitation State Health and sanitation
Housing State Rural housing
Electricity Concurrent Rural electrifcation,
including distribution of
electricity; Non-convent-
ional energy sources
Telecomm- Union Not in Eleventh Schedule
unication
Storage Concurrent Agriculture, including
agriculture extension;
Public distribution system
Source: 73rd Constitutional Amendment Act (Eleventh Schedule
Article 243G), Constitution of India, website (http://lawmin.nic.in/coi/
coiason29july08.pdf, accessed on 27 February 2013).
An alarming 20 per cent
of rural households
have none of the
three basic services
drinking water within
premises, sanitation and
electricityand only 18
per cent have access to
all three.
Infrastructure 119
65
43
55
94
45
78
31
31
62
37
Note:
*
Data for 2011;
$
Share of electrifed BPL households under the Rajiv Gandhi Gram Vidyutikaran Yojana (RGGVY) to all rural poor households;
#
While Census 2011 reports that 55 per cent of households are electrifed, the National Sample Survey Organisation (NSSO) reports it as 66 per cent
in 200809;
**
Irrigation data is for 200809.
Source: National Rural Roads Development Agency (NRRDA) Annual Report 201112 (http://pmgsy.nic.in/downloads/anrpt1112_E.pdf, accessed
on 15 April 2013); the RGGVY online portal, accessed on 31 August 2012 (http://rggvy.gov.in/rggvy/rggvyportal/plgsheethomeplan.jsp, accessed
on 15 April 2013); Central Electricity Authority (CEA) (http://www.cea.nic.in/reports/monthly/dpd_div_rep/village_electrifcation.pdf, accessed on
15 February 2013); Directorate of Economics and Statistics, Department of Agriculture and Cooperation (DAC); Census 2011, Houselisting and
housing data (http://censusindia.gov.in/2011census/hlo/hlo_highlights.html, accessed on 15 July 2013); Press Information Bureau Release dated 24
August 2012 (http://pib.nic.in/newsite/PrintRelease.aspx?relid=86706, accessed on 15 July 2013); Universal Service Obligation Fund, Department of
Telecommunication, website (http://www.usof.gov.in/usof-cms/usof_search.html; accessed on 15 July 2013).
FIGURE 4.2 Outcomes on Rural Infrastructure for 201112
% habitations connected by road
% BPL households electrifed $
% households with electricity *#
% village electrifed
% gross irrigated area to gross cropped area **
% households collect water within & near premises (<500 mtr) *
% households with access to piped water *
% households with latrine facility *
% village panchayats with brodband coverge
% rural teledensity *
R
o
a
d
E
l
e
c
t
r
i
c
i
t
y
I
r
r
i
g
-

a
t
i
o
n
D
r
i
n
k
i
n
g

W
a
t
e
r
S
a
n
i
t
-

a
t
i
o
n
T
e
l
e
c
o
m
m
-

u
n
i
c
a
t
i
o
n
Note: NSS 65th and 58th Rounds give data on households with exclusive and shared latrine use whereas NSS 49th Round presents data on
households with latrine facilities within premises.
Source: NSS 65th Round, 200809.
FIGURE 4.3 Distribution of Rural Households of On-premise Drinking Water,
Latrines and Electricity for Domestic Use, Over Time
P
e
r

C
e
n
t
50
40
30
20
10
0
6
43
11
30
18
20
49th Round (199293) 58th Round (200102) 65th Round (200809)
All three facilities None of these
only 33 per cent of advanced social groups have access to
all three basic facilities.
Te lack of infrastructure often hurts women more.
Travelling long distances to collect fuel wood and water,
for example, is tedious, time-consuming and potentially
unsafe. Te lack of latrines
afects women more than
men and has been found
to reduce girls attendance
in schools. Pregnant
women are particularly at risk from the lack of proper
sanitation, safe drinking water and electricity. Poorly
built housing without proper ventilation and clean
fuels subjects women to indoor pollution from cooking
with biomass. Proper infrastructure thus could directly
reduce womens time poverty and enhances their work-
care-leisure balance (Dewan 2012).
Huge disparities among states in infrastructure access
also exist. Tere is, in fact, a reasonably strong positive
correlation between a states average rural monthly per
The lack of infrastructure
provision often hurts
women the most.
120 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
capita expenditure (MPCE) and road connectivity
to habitation, access to electricity, drinking water and
sanitation, and telephone connection. A somewhat
weaker relationship is observed between a states average
rural MPCE and the share of gross irrigated area to
gross cropped area.
Tere is likely a virtuous circle of infrastructure
investment and economic growth. In the past, the
government devoted more resources to irrigated areas
(Fan and Zhang 2004). Districts with higher irrigation
potential tend to be densely populated and attract
better infrastructure, banks and private investment,
leading to higher aggregate crop output. Of course,
initial conditions also matter. Often, states that started
with better infrastructure and human resourcesmore
intense irrigation, greater literacy and lower infant
mortality rateshad signifcantly greater long-term
consumption growth and poverty reduction (Datt and
Ravallion 1996).
Although there is
varied performance among
sectors and states, and
notwithstanding the
increased spending on
rural infrastructure, overall
massive shortfalls remain
and outcomes are not
commensurate with intentions and expenditures. Even
where assets have been created, they are often of poor
quality and/or in disrepair.
But why has this happened? Has funding been
insufcient or wasted? Have technology and design
choices been ill-suited to local conditions? Have
they failed to incorporate traditional systems and
accommodate peoples requirements? Does the politics
of populism continue to skew the design of schemes, for
instance, in providing unmetered subsidised electricity
for agriculture? Or have policies been well designed
but implementation faltered due to lack of capacity or
institutional fragmentation? Does governance hold the
answer? Has decentralised governance turned over to
PRIs, for instance, while desirable in theory, failed at
overcoming entrenched social hierarchies?
With growing recognition of peoples
willingness to paywhether for private education,
telecommunications or waterand the importance of
community ownership and management, will we begin
to see better delivery, quality and sustainability? Tis
chapter attempts to shed light on these questions by
reviewing the performance and outcomes in each key
rural infrastructure sector with a focus on access, equity
and sustainability, attempting to identify the underlying
reasons for poor performance, and fnding instances of
success to draw lessons for the way forward.
4.2 Roads
Rural roads constitute about 80 per cent of the
countrys road network. Roads are a lifeline for rural
communities, linking them to markets, education,
health and other facilities. A study on linkages between
government expenditure and rural poverty found that
investment in roads has a stronger impact on reducing
poverty than investment in education, health, irrigation,
FIGURE 4.4 A and B Distribution of Rural Households by Three Basic Facilities:
Drinking Water Within Premises, Latrine and Electricity by Monthly Per
Capita Expenditure (MPCE) Quintile Class and Social Group200809
P
e
r

C
e
n
t
40
30
20
10
0
5
35
27
21
18
14
39
8
18
20
8
13
020 2040 4060 6080 80100 All
Quintile class
All three facilities None of the facilities
Source: NSS 65th Round, 200809.
All
Others
OBC
SC
ST
0 20 10 30 40
Per Cent
All three facilities None of the facilities
18
20
33
11
17
17
9
10
27
33
Notwithstanding the
increased spending
on rural infrastructure,
outcomes have not
been commensurate
with the intentions and
fnances.
Infrastructure 121
power, R&D, and soil and water conservation. Tis
impact occurs through productivity growth, increases
in non-farm employment opportunities and higher
wages (Fan et al. 2000). Roads provide improved
market access which, in turn, results in more favourable
input and output prices; reduced travel times increase
school attendance of pupils and teachers, promoting
human capital formation; and greater access to timely
treatment, particularly in emergencies, ofers health
benefts (Bell 2012).
Over the years, both central and state governments
have intervened in the development of rural roads,
although roads are on the Constitutions State List.
Te central governments support for rural roads
started in the Fifth Five Year Plan (197479), with
the Minimum Needs Programme which proposed
to provide all-weather road connectivity to all villages
with a population of 1,500 or more, and to 50 per
cent of villages with populations between 1,000 and
1,500. But the quality of roads built under this and
other employment programmes in the 1970s and
1980s was poor and certainly not commensurate with
the resources allocated to the efort (Lall and Rastogi
2007). Anecdotal evidence suggests that, due to poor
construction and lack of maintenance, the same stretch
of road would be built every fve to six years.
By the year 2000, 44 per cent of Indias rural
habitations remained unconnected by roads. Even then,
the situation was very uneven across states. Te four
southern states and Punjab and Haryana had the most
habitations connected by roads (see Figure 4.5). But
states such as Bihar, Chhattisgarh, Rajasthan, Madhya
Pradesh and West Bengal and some north-eastern states
(particularly Assam and Arunachal Pradesh) had only
between 20 per cent and 30 per cent connectivity.
4.2.1 All-Weather Rural Roads
One of the Government of
Indias fagship programmes,
the Pradhan Mantri Gram
Sadak Yojana (PMGSY)
was launched in December
2000. Since then, over 3.5
lakh km of all-weather
rural roads have been
built, amounting to over
12 per cent of the total rural road network.
1
Madhya
Pradesh, Rajasthan and Uttar Pradesh have constructed
and upgraded the most in length of roads, with about
40,00050,000 km completed by March 2012. Most
progress in habitation connectivity has occurred in the
north-eastern states of Assam, Tripura and Sikkim, as
Source: PMGSY website (http://pmgsy.nic.in/, accessed on 22 August 2013).
100
80
0
20
40
60
H
a
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a
n
a
K
a
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M
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N
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P
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a
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B
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FIGURE 4.5 All-India Habitation Connectivity (Per Cent of Total Habitation)
Already covered habitation as on 1 April 2000 Habitation left unconnected
New Habitations connected under PMGSY as on 22 August 2013
PMGSYs distinctive
three-tier quality
management system
and composite
construction contract,
including maintenance,
have resulted in
markedly better roads.
1
Many states also have their own schemes for rural road connectivity. NABARDRIDF has contributed signifcantly to fund rural road
construction to supplement PMGSY. For instance, RIDF-fnanced roads accounted for almost 45 per cent of rural road length added in
Rajasthan in 201112 (Government of Rajasthan 2012). Until 2011, Madhya Pradesh constructed 6,260 km of roads with Asian Development
Bank (ADB) assistance as compared to 40,357 km under PMGSY. Bihar has numerous schemes that accounted for nearly one-third of rural
roads constructed between 2006 and 2012 (Government of Bihar 2013).
P
e
r

C
e
n
t
122 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
2
According to the Ministry of Rural Developments (MoRDs) computation, the state-wise Gini coefcient of percentage of habitations
connected has reduced from 0.214 in the year 2000 to 0.149 in 2012 (this is based on information provided by the Ministry of Rural Development).
BOX 4.1 PMGSY
PMGSY was launched as an anti-poverty programme and as a fully funded centrally sponsored scheme to provide all-
weather road connectivity in rural areas.
To reach more settlements, PMGSY switched from targeting villages to habitations. It deems a habitation unconnected
if it is at least 500 metres from an all-weather road or a connected habitation in plain areas, and at least 1.5 km in hill
areas.
PMGSY aims to connect all habitations with a population of 500 or more in the plain areas, 250 or more in hill states,
tribal and desert areas, and 100 or more in left-wing extremist blocks.
Each road work taken up under PMGSY is part of the core network, viz., minimal network of roads (routes) to provide
access to essential social and economic services.
Preference is given to roads that serve larger populations, with the exception of core-network roads that connect village
panchayat headquarters, market centres, educational or medical essential services, or that state governments have
identifed as places of tourist interest.
A three-tier system for planning, implementation and quality management comprises Programme Implementation
Units (PIUs) in districts, State Rural Road Development Agencies (SRRDAs) and the National Rural Roads Development
Agency (NRRDA) at the Centre. The PIU checks materials and workmanship while upper tiers make periodic and random
inspections.
The construction contract includes fve-year maintenance by the contractor. Maintenance funds are budgeted by the
state government and placed by the SRRDA in a separate account.
Source: Author.
well as Chhattisgarh and Madhya Pradesh, with over 25
per cent of habitations connected under PMGSY (see
Figure 4.5). Tis has also reduced the disparity in road
connectivity among states.
2
PMGSY, helped by a three-
tier quality monitoring system, has been distinctive
in linking maintenance with construction through
composite contracts awarded to the same contractor,
resulting in markedly better roads (see Box 4.1).
Evaluations of the PMGSY programme show clear
socio-economic benefts for habitations connected.
Farmers received better prices for their produce, incurred
lower transportation costs, had easier access to markets
and shifted cropping patterns towards commercially more
important crops (Bell and van Dillen 2012). Te study
also found fewer school days lost due to bad weather,
mainly due to lower teacher absences and a reduced
travel time to secondary school. Te acutely sick received
more timely treatment and were more likely to be treated
in a hospital. A randomised evaluation by Banerjee et al.
(2012) also found that farmers receive better crop prices,
but there was not much of a consequent behavioural
change in terms of investment in agriculture or intensity
of land use. Tey also found an increase in non-farm
employment, higher wages in government construction
projects, a reduction in under-fve mortality rates and
improved access to middle and secondary schools.
PMGSY also has made strong impacts on the lives of
women. More women work, their sources of livelihood
have expanded, they have better access to health care,
marriage prospects have an expanded radius, and
more teachers and girls attend school (Dewan 2012).
Te gender mainstreaming agenda must recognise the
constraints on womens economic and domestic roles:
women generally travel shorter distances with greater
frequency than men, making inter- and intra-village
connectivity essential. Tey often use basic modes of
transport, making sidewalks and securityparticularly
road lighting and restrooms at main bus stops
signifcant for road design and planning.
4.2.2 Challenges
Progress in the initial years was slow, but PMGSY
received a major boost in 2005 when it was incorporated
into Bharat Nirman. Since then, larger expenditures
Infrastructure 123
have been made and road
and habitation connectivity
increased (see Figure 4.6).
But this progress has been at
a high costan almost fve-
fold increase from 200506
to 201011 due to a major thrust in the programme and
signifcant cost escalations. Unit costs increased from
about Rs 810 lakh/km at the start of the programme
to about Rs 40 lakh/km currentlymuch more than
can be attributed to infation. Some of this overall
increase can be attributed to more PMGSY work in
the north-eastern and more-difcult-to-access states,
and higher transportation costs due to lack of materials
close to the construction site. But do these explain a fve-
fold increase in costs? It is not clear what accounts for
the very wide variations in unit costs among states
from under Rs 25 lakh/km in Rajasthan and Gujarat to
around Rs 40 lakh/km in Odisha, West Bengal, Punjab
and Bihar, to over Rs 55 lakh/km in Assam and Tripura
(NRRDA).
Despite eforts under PMGSY, habitation
connectivity has only improved by 13 percentage points
over 2000 levels, with 31 per cent remaining unconnected
(see Figure 4.7). Close to 130,000 habitations have been
connected in almost 13 years. By programme design, the
priority has been to connect more densely populated
areas, leaving 43 per cent of the habitations with fewer
Progress under PMGSY
has come at a high cost
an almost fve-fold in-
crease between 200506
and 201011.
FIGURE 4.6 PMGSYPerformance Summary
L
e
n
g
t
h

(
K
m
)

&

H
a
b
i
t
a
t
i
o
n

(
N
o
.
)
70
60
50
40
30
20
10
0
200405 200506 200607 200708 200809 200910 201011 201112 Apr-Dec
2012
E
x
p
e
n
d
i
t
u
r
e

(
R
s

c
r
.
)
25
20
15
10
5
0
Source: NRRDA Annual Report 201112; MoRD Outcome Budget 201314.
Road length (new + upgradation)
Expenditure (Rt. Axis)
New habitations connected
FIGURE 4.7 Progress in Providing Connectivity under PMGSY by Habitation Size
60
50
40
30
20
10
0
P
e
r

C
e
n
t
1000+ 999500 499250 Less than 250 Total
Habitation by population size
% habitations unconnected as on 1 April 2000 % habitations unconnected as on 22 August 2013
Source: PMGSY website (http://pmgsy.nic.in/, accessed on 22 August 2013).
Thousands Thousands
27
10
40
19
46
34
55
50
44
31
124 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
than 500 persons that were planned to be covered yet
unconnected. Tis defcit will be even higher as many
habitations were left out from the core network due to
inadequacies in the original survey and other reasons,
and MoRD has given in-principle approval to states to
revise their core network of roads to be covered.
Funds currently available will not cover the estimated
Rs 2 lakh crore needed for rural roads over the next fve
years, especially since the more remote areas remain.
3

Until 200607, PMGSY was almost entirely funded
by a dedicated Central Road Fund (CRF)
4
based on a
cess on high-speed diesel oil of 0.75 paisa/lt. But this
did not meet the programmes needs and reliance on
the cess reduced dramatically to around a third or less
of total funding from 200708. Other sources include
budgetary support, fnancing from NABARD and
multilateral funding.
5
In 201112, Rs 20,000 crore was
available, 28 per cent of which came from cess.
Tere are a number of other concerns:
Maintenance of the road network. A majority of PMGSY
roads are nearing the end of the fve-year contractual
maintenance period. Generating funds for road
maintenance through appropriate local mechanisms
remains a challenge. A few states have dedicated funds,
fnanced through various sources such as a cess on
agricultural produce, fuel levies and motor vehicle
fees.
6
Recognising that most state governments cannot
ensure adequate funds for maintaining rural roads,
the Tirteenth Finance Commission has granted
about Rs 20,000 crore of supplementary funds for the
maintenance of the core rural roads network.
7

Delays in execution. A recent evaluation report showed
that only 20 per cent of roads of the sample surveyed
were completed on time (Planning Commission
2010a) due to adverse weather conditions (e.g.,
monsoon mudslides), delays in acquiring land and
in forest clearance, law and order problems, and non-
availability of labour and material.
Ensuring adequate technical capacity. Additional
capacity is needed at various levels, in the contracting
industry as well as for programme implementation
units (PIUs), which lack technically trained staf to
execute and monitor road works. Qualifed contractors
who understand local conditions, and appropriate
stafng and training of PIUs will be critical to keep
project delays and cost overruns to a minimum. Since
those involved in rural road works are typically small-
time contractors, ensuring timely payments is crucial.
And as more and more habitations are connected,
managing a huge stock of roads requires better
coordination among local-level units.
Providing public transport services. Public transport
would enhance the benefts of rural roads, but while
attempts have been made, fnancial viability remains
an issue (see Box 4.2).
4.2.3 Te Way Forward
Going forward, cost overruns, road maintenance and
assuming responsibility for roads at the local level must
be addressed. A second generation programme, PMGSY
II, launched in August 2013, incorporates some of these
concerns in its design. PMGSY II aims to upgrade
selected rural roads based on their economic potential
and to facilitate the growth of rural market centres and
rural hubs. A condition for states to receive PMGSY
II funding is that they have completed awarding all
contracts for new roads and 90 per cent of contracts
for upgradation under PMGSY I. Another condition
3
Te Working Group of the XII Plan on Rural Roads Funds estimates are based on works yet to be sanctioned, new habitations to be
connected, the launch of the programmes next phase and state-specifc considerations.
4
Part of CRF is earmarked for rural roads. Te Fund is also used for development and maintenance of national highways and other state
roads.
5
World Bank has funded PMGSY projects in Rajasthan, Himachal Pradesh, Uttar Pradesh, Meghalaya, Punjab, Uttarakhand and Jharkhand,
while ADB has projects in Madhya Pradesh, Chhattisgarh, Odisha, West Bengal and Assam.
6
Some states have set up dedicated funds, through a cess on agricultural produce (e.g., Madhya Pradesh, Punjab and Haryana) or through
fuel levies (e.g., Uttar Pradesh and Rajasthan), while Kerala mobilises funds through motor vehicle tolls and fees. Karnataka has a Chief
Ministers Rural Road Development Fund, while Assams budgetary allocation funds road maintenance. Some funds, such as in Karnataka,
Punjab, Haryana and Madhya Pradesh, exclusively serve rural roads; others ofer a solution to fnancing maintenance. While earmarking
helps to approximate beneft taxation (i.e., only those who beneft are taxed) under certain circumstances, it imposes undesirable rigidity in
government spending decisions and creates distortions: for example, a high mandi tax on agricultural produce negatively impacts agri-marketing
and warehouse infrastructure (see the section on Storage).
7
Tese funds are provided through grants-in-aid to meet 50 per cent of the assessed need for non-PMGSY roads and 90 per cent for
PMGSY roads, for four years starting 201112. A rural road network of 3 million km at a routine maintenance cost of Rs 40,000 per km would
require about Rs 12,000 crore annually. Of this annual requirement, the Tirteenth Finance Commission grants could contribute approximately
Rs 5,000 crore per annum.
Infrastructure 125
BOX 4.2 Leveraging Rural Road Connectivity Through Minibus Services
A few states have tried minibus services in rural areas but these require large subsidies. In Karnataka, minibus services
became defunct after a year due to high operations and maintenance (O&M) and fuel costs, while Gujarat does have
minibus service in tribal areas with subsidy from the state tribal ministry.
Tamil Nadu has adopted an alternative model involving the private sector. Private operators ply over 4,000 minibuses in
rural areas that are not served by state transport companies. Each operator covers a 26-km route, of which at least 18 km
had to be unserved. These operators are incentivised through a lower passenger tax along with being able to cover 8 km
of high trafc routes. While issues have been raised on the legality of minibus operations in serviced areas, the state High
Court has repeatedly dismissed them. The government also is planning to launch a state-wide minibus policy in the near
future. Still, a 2002 CAG audit on Tamil Nadu observed that many minibus operators deviated from their routes so as to
cover high trafc areas and charged higher bus fares during periods of high travel demand. Sufciently incentivised and
regulated private sector services will help expand public transport for rural development.
Source: Comptroller and Auditor General (CAG, 2002); Indian Express (2011); High Court of Madras (2006, 2011).
is that these states should have set aside maintenance
funds and meet other maintenance guidelines.
Reducing costs. PMGSY has had substantial cost
escalations over time, although the wide variation
in unit costs across states is puzzling. One way of
reducing the costs of rural road construction and
frequency of road maintenance is the use of non-
traditional but durable and less expensive materials
such as iron and steel slag, fy ash and limethat are
locally and easily available.
8
Tis proven technology
can be mainstreamed to suit PMGSY with the help
of Indian Roads Congress. Popularising such options
going forward depends on the proper training and
capacity building of feld engineers.
Cost overruns due to delays also can and must be
avoided. Works should be scheduled after monsoons,
for example, and completed well before monsoons
resume. Proper scheduling of road construction
would also reduce the need for reconstruction and
maintenance.
Quality and maintenance. While good-quality
PMGSY roads have been built, all will be lost if they
are not well maintained. State governments must set
aside adequate funds to supplement the Tirteenth
Finance Commission grants for road maintenance.
Tat several states have set up a fund dedicated to
road maintenance is encouraging, but the source
of fnance in many cases is an earmarked cess on
sale of agricultural produce, which is distortionary.
Using general government revenues would be much
better than earmarked taxes, but the fact that general
government funds often cannot be sequestered
and end up giving way to other priorities creates a
dilemma. For states that have not allocated funds,
the central government could release PMGSY funds
contingent on the states allocation of funds or ring-
fencing expenditure for road maintenance.
Another option that addresses the issue of
maintenance and defers the need for upfront
government fnancing is developing rural roads on a
Build-Operate-Transfer (BOT) (Annuity) model or
variants of it. But this requires efective performance
monitoring (see Box 4.3).
Local responsibility for roads. Given the enormous
network of rural roads, local governments must
take greater ownership of roads, their lifeline.
Gram panchayats (GPs) should be involved in road
upkeep and empowered to monitor construction and
undertake minor road maintenance. GPs should also
be actively involved in planting trees alongside roads,
possibly through Mahatma Gandhi National Rural
Employment Guarantee Scheme (MGNREGS),
which would also help stabilise soil, thereby reducing
operations and maintenance (O&M) costs, and in
8
Iron and steel slag, produced in large volumes during steel production, can have adverse health and environmental efects if not properly
disposed. But slag can be disposed economically and productively in road construction, if done with the necessary monitoring for minimal trace
toxicity and appropriate process. Similarly, fy ash produced during coal and lignite combustion, if properly used, can be an extremely potent and
durable low-cost material for road construction. Te Ministry of Environment and Forests (MoEF) issued a notifcation in 2003 making use of
ash compulsory in construction projects within 100 km of a thermal power plant. . Other locally available materials such as lime have also been
recommended for use in road construction.
126 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
maintaining road sidings and drainage bunds to
enhance road durability.
4.3 Energy
Rural Indian households still have limited access to
energy even though the enormous positive impact of
access to modern, efcient energy on livelihood and
income, environment, education and social dignity is
well established. While electrifcation has a signifcant
impact on poverty reduction, that impact is felt more on
richer households that can use electricity for multiple
purposes (Khandker et al. 2012). About 45 per cent of
rural households lack access to electricity and rely largely
on kerosene for lighting purposes, and 87 per cent
depend on some form of solid fuel for cooking (Census
2011). Tis reliance is worrisome because, besides being
highly inefcient,
9
indoor pollution from burning solid
fuels like frewood and cow
dung has severe adverse
health consequences. Te
availability of modern
efcient energy, like power,
is crucial not only for
improved quality of life but
also for the growth of rural
industry.
4.3.1 Electricity
Although India has near universal village electrifcation,
in reality only 55

per cent of rural households have access
to electricity, according to Census 2011 (whereas 66
per cent of rural households have electricity according
to National Sample Survey Organisation [NSSO]
2010). Tis incongruity
arises from the defnition
of an electrifed village
electrifcation does not
mean universal household
coverage (see Box 4.4).
Rural per capita consumption of electricity is only 8
kWh per month as compared to 24 kWh in urban areas
(Planning Commission 2012c).
Progress in rural electrifcation can be divided into
three distinct periods:
Before 1992, rural electrifcation was geared towards
energising irrigation pump sets to increase agricultural
productivity, driven largely by the Green Revolution
aim of self-sufciency in grain production. In all, 2
lakh villages were electrifed during the Sixth and
Seventh Five Year Plans (198090) but with very
limited focus on electrifying households.
Between 1992 and 2005, there was a signifcant
slowdown, with only about 30,000 villages
electrifed. Tis coincided with a slowdown in
investment in infrastructure and deterioration
in the fnancial health of electricity distribution
companies (discoms). By 2004, 83 per cent of
villages were regarded electrifed, but this dropped
to 74 per cent in 2005 due to the change in the
defnition of an electrifed village (see Box 4.4).
Since 2005, rural electrifcation has progressed much
faster. Tis can be attributed to policy interventions,
such as the Rajiv Gandhi Gram Vidyutikaran Yojana
(RGGVY) launched in 2005 (see Box 4.5), that have
actively promoted rural household electrifcation.
While nearly 1.2 lakh villages remained unelectrifed
in 2001 (Lok Sabha 2012), by March 2012 only
BOX 4.3 Rural Roads Under BOT (Annuity)
The development of rural roads on an annuity basis has been discussed for some time. Under this model, a private developer
constructs and maintains the road, with built-in provisions for performance. Because the developer starts receiving annuity
payments from the government only after construction is completed, he has an incentive to complete construction early.
The government can also withhold annuity payment if maintenance is deemed inadequate. A number of concepts have
been developed like the modifed engineering procurement and construction (EPC) (also referred to as modifed annuity)
model, which can be a combination of upfront support and government annuity payments, as well as bundling of rural
roads along with district roads to enhance revenues through introduction of user charges/road tolls. State governments,
however, are yet to engage the private sector for rural roads using BOT models for rural roads.
Source: Author
9
Termal efciency of frewood, for example, is six times lower than that of liquefed petroleum gas (LPG), implying larger quantities of
frewood for the same quantum of heat generation (IIT Delhi n.d.).
About 45 per cent of
rural households lack
access to electricity and
rely largely on kerosene
for lighting purposes,
and 87 per cent depend
on some form of solid
fuel for cooking.
Rural per capita con-
sumption of electricity is
only 8 kWh per month as
compared to 24 kWh in
urban areas.
Infrastructure 127
about 36,293 of the total 5.9 lakh inhabited villages
(Census 2001) remained unelectrifed (Ministry of
Power 2012). About 94 per cent of villages thus are
currently electrifed.
Over 77 per cent of the unelectrifed villages are in
Odisha, Uttar Pradesh, Bihar, Jharkhand and Assam
(see Figure 4.8). Te three states with the largest
number of unelectrifed villagesBihar, Uttar
Pradesh and Jharkhandare also the lowest in per
capita state domestic product.
Te RGGVYs impact has been signifcant. While
the total rural households increased by just over 20 per
cent between Census periods, the number of electrifed
households increased by nearly 55 per cent, 66 per
cent of which were connected by the RGGVY (see
Table 4.3). Until March 2012, connecting 21 million
households cost the RGGVY a total of about Rs 28,000
crore, about Rs 13,200 per household or nearly Rs 8
lakh per village.
Inequity
Te RGGVY emphasises giving low-income groups
access to electricity. Te NSSO surveys (which use
expenditure as a proxy for income) show greater
BOX 4.4 Defnition of Village Electrifcation
Before 2004, a village with a single electricity connection was deemed electrifed. As a result, while only 44 per cent of rural
households were electrifed in 2001, 74 per cent of villages were reported as electrifed. Recognising the inadequacy of this
defnition led to a signifcant change in 2004 so that now a village is considered electrifed only if the following criteria are
satisfed:
At least 10 per cent of total households in the village are electrifed.
Basic infrastructure such as transformer and distribution lines is provided in the inhabited locality as well as the Dalit
basti hamlet if one exists.
Electricity is provided to all public places like schools, panchayat ofces, health centres, dispensaries and community
centres.
Source: Notifcation of the Ministry of Power, Government of India, February 2004, website (http://rggvy.gov.in/rggvy/rggvyportal/index.html,
accessed on 15 October 2012).
BOX 4.5 Policy Interventions for Rural Electrifcation
Legislations such as the Electricity Act (2003) and the Electricity (Amendment) Act (2007) mandated universal service
obligation for the frst time and called for the formulation of a national policy on rural electrifcation. The objectives of the
National Electricity Policy, 2005 (NEP) are:
All households to have access to electricity by 2010
Per capita availability of electricity to be increased to over 1,000 kWh by 2012
Minimum lifeline consumption of 1 kWh/household/day to be made available as a merit good by 2012
The NEP identifed the Rural Electrifcation Corporation as the nodal agency to expand access to all households and the
central government to provide capital subsidies prioritising weaker sections.
The Rural Electrifcation Policy, 2006, also provides for of-grid solutions to supply electricity to households in remote
locations.
The Rajiv Gandhi Gram Vidyutikaran Yojana (RGGVY) primarily involves extending the transmission grid to
unelectrifed villages, setting up the distribution infrastructure and giving free connections to all below poverty line
(BPL) households.
The 2009 Remote Village Electrifcation (RVE) programme of the Ministry of New and Renewable Energy (MNRE) provides
fnancial support for the electrifcation of remote villages and unelectrifed hamlets of electrifed villages using renewable
energy where grid-extension is not feasible or cost efective. The central government provides up to 90 per cent of the
capital cost, and the rest comes from state government and benefciaries.
Source: Author.
128 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
STs have lowest access
to electricity, followed
by SCs and OBCs
although these gaps are
narrowing.
The inequity in access to
electricity persists84
per cent of the top
quintile use electricity
compared to only 47
per cent of the bottom
quintile.
FIGURE 4.8 State-wise Number of Unelectrifed Villages as of April 2012
25 28 30 37
89 93 177
401 409
464 538 567
814
1153
1478
2986
3510
4604
4859
5496
S
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Note: All villages in Andhra Pradesh, Goa, Gujarat, Haryana, Kerala, Maharashtra, Punjab and Tamil Nadu are considered fully electrifed in the
Ministry of Power surveys.
Source: Rajiv Gandhi Gram Vidyutikaran Yojana (RGGVY) (2012b).
FIGURE 4.9 Percentages of Rural Households with Electricity by Expenditure Group
47
54
63
72
84
66
31
45
58
79
55
100
80
60
40
20
0
100
80
60
40
20
0
025 2550 5075 75100 All
020 2040 4060 6080 All 80100
200405 200809
Note: The x-axis represents the expenditure group. NSS 61st Round, 200405, gives electrifcation numbers across 12 expenditure groups while NSS
65th Round, 200809, gives numbers across quintiles. The 12 expenditure classes have been collated into 4 groups to facilitate comparison with
the 5 groups in 200809.
Source: NSS 61st Round, 200405; NSS 65th Round, 200809.
TABLE 4.3 Household Electrifcation Between
2001 and 2011
Census 2001 Census 2011
Total rural households 13,82,71,559 16,78,26,730
Electrifed 6,01,48,128 9,28,08,182
Unelectrifed 7,81,23,431 7,50,18,548
of which APL* 5,46,00,000
BPL* 2,34,00,000
RGGVY
BPL households electrifed
until March 2012
Target 2,14,22,002
Achievement 1,94,25,283
Note: *Approximate estimates.
Source: Census (2001, 2011); RGGVY (2012b).
improvement in access of
low-expenditure households
than higher expenditure
households between 2005
and 2009 (see Figure 4.9).
But inequity in access to
electricity persists84 per
cent of the top quintile use
electricity for lighting compared to only 47 per cent of
the bottom quintile.
Te socio-economic dis-
parity in access to electric-
ity remains markedit is
lowest among STs, followed
by SCs and other backward
castes (OBCs) (see Figure
4.10), although these gaps
are narrowing.
P
e
r

C
e
n
t
MPCE Quartile Class MPCE Quintile Class
P
e
r

C
e
n
t
Infrastructure 129
Merely extending the
grid network has limited
beneft without regular
quality electricity supply.
But cash-strapped state
distribution companies,
faced with high power
purchase costs, political
pressures to keep tarifs
low, high T&D losses,
and little regard for
regulatory directives,
seldom pay attention
to ensuring electricity
supply.
Quality of Electricity Supply
Improving the quality of life and encouraging local
industry is not assured by grid connection, but has to
be accompanied by regular electricity supply. Tus, to
meet RGGVY needs, it is estimated that India needs
an additional 20 GW of electricity-generation capacity,
a 10 per cent increase over
current generation capacity
(Vidyasagar 2007).
Te quality of the
distribution network also
needs improvement. Based
on a survey in Bihar, Uttar
Pradesh and Andhra
Pradesh, Greenpeace
(2011) reported that the
distribution network was in
very poor condition due to
low-capacity transformers
and poor maintenance,
resulting in frequent supply
disruptions and low voltage supply. It also found that a
large number of above poverty line (APL) families had
illegally hooked on to main distribution lines, which led
to transformer overload and damage. But cash-strapped
state distribution companies, faced with high power-
purchase costs, political pressures to keep tarifs low,
high transmission and distribution (T&D) losses, and
little regard for compliance with regulatory directives,
seldom pay attention to energising grids and ensuring
quality supply to households.
Alternatives to Grid Expansion
Given these challenges,
and the difculty and
expense of grid expansion
in remote areas, innovative
alternatives are being
explored. Te Ministry of
New and Renewable Energy
(MNRE) is promoting small, decentralised distributed
generation (DDG) systems with their own mini-grids
through subsidy-based initiatives. Tese DDG systems,
with capacities ranging from less than 1 kilowatt to a few
megawatts, ofer fexibility in design and operation (i.e.,
can be run for limited, high-demand periods) to meet
the very modest rural energy needs. Since electricity
is generated at the consumer end, transmission and
transformation losses, and the concomitant costs, are
reduced. Initiatives such as the Husk Power Systems
(HPSs) in Bihar have considerably lowered overhead
costs and included local considerations such as feedstock
supply and demand patterns in plant design (see Box
4.6). But such DDG systems are location-specifc and
still require subsidies to ensure wider application to
meet rural energy needs. In addition, independent DDG
systems lead to very high tarif levels because a small
number of households bear the entire cost of the system.
Use of Site-Specifc Renewable Energy
More generally, use of site-specifc renewable energy
depending on technology and number of customers
is being promoted. Tese of-grid solutions present
FIGURE 4.10 Percentage of Rural Households Using Electricity by Social Group, 200405 and 200809
All
Others
OBC
SC
ST
0 20 40 60 80
200405 200809
Per Cent
Source: NSS 61st Round, 200405; NSS 65th Round, 200809.
DDG systems are
location specifc and
require subsidies to
ensure wider application
to meet rural energy
needs.
55
66
64
74
56
68
47
60
43
57
130 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
opportunities for the use of renewables, because the
choice of technology and type of energy rests with the
developer. Certain sources such as rooftop solar power
currently may be expensive and difcult to maintain.
Although solar lanterns have emerged as a stopgap
measure to meet the shortfall in electricity availability,
studies in fact show that a one-time subsidy for 90
per cent of the cost of solar lanterns can be as little
as a quarter of the total kerosene subsidy for lighting
purposes spent over 15 years (Centre for Study of
Science, Technology and Policy 2010). But difculties
with operation and maintenance can hinder success;
mobile lanterns need frequent upkeep and batteries
need recharging facilities ftted with solar panels that get
marred by dust. Various business models are being tried
to increase the penetration of solar lanterns and to make
charging stations operate on a commercial basis, but
entrepreneur interest in such a business has not gained
much momentum. Bio-fuels also could be explored on a
larger scale for rural areas, but the governments national
mission for bio-fuels seems to have an uncertain future
with recent reports that favourable soil conditions and
fertilisers are in fact required to generate sufcient yields
of Jatropha for use as a bio-fuel, although the crop was
previously regarded as a miracle crop that could grow in
large quantities on degraded land.
4.3.2 Use of Biomass for Cooking
Te rural population continues to depend
overwhelmingly on biomassfrewood, crop residue
and dung cakesfor cooking. Over 84 per cent of
households use biomass and about 9 per cent liquefed
petroleum gas (LPG) for cooking (NSSO 200607).
Despite kerosene distribution through the public
distribution system (PDS), only 1 per cent of rural
households use it for cookingmost use it for lighting.
Using biomass in
traditional stoves and
open fres produces smoke
containing harmful pollutants
such as carbon monoxide,
hydrocarbons and particulate
matter, and thus has a strong
adverse impact on health. Tis indoor pollution in
poorly ventilated houses exposes people, particularly
women and children, to respiratory diseases, cancer and
other health hazards. A survey of rural households in
Uttar Pradesh, Rajasthan and Himachal Pradesh shows
that 5 per cent adult females sufer from respiratory
diseases and 11 per cent from some eye diseases (Parikh
et al. 2003). Te costs of these externalities are never
accounted for in the pricing of energy.
When drawn from nature at a rate faster than it can be
regenerated, the use of biomass as fuel is unsustainable
because the resource is being depleted. At the same time,
this depletion results in net greenhouse gas emissions.
Balachandras study (2012) reports that in India an
average of 40 per cent of fuel wood is obtained by
unsustainable means.
Afordability of commercial fuel may in part explain
the poors dependence on biomass as a cooking fuel.
About 90 per cent of BPL households use frewood
and only 1 per cent use LPG for cooking (Planning
Commission 2009). Higher and middle-income groups
(see Figure 4.11A) primarily use commercial fuels
kerosene and LPGand a limited number of STs and
SCs use LPG (see Figure 4.11B).
Yet, afordability is not the only reason. Easy
availability of biomass as compared to other fuels also
explains the rural populations dependence on biomass
for cooking. Even higher and middle-income rural
families depend on biomass for cooking. Urban and
BOX 4.6 Husk Power System (HPS) Low-Cost Business Model
Since August 2007, about 60 HPS plants in Bihar, each with a capacity of 32 kW, have helped meet the lighting needs of
remote habitations using modular low-cost biomass from locally available rice husk. The plants are installed on rented
plots, with standardised layouts and modular structures, allowing HPS to exploit economies of scale, procure generators
and gasifers in bulk, and incur negligible civil works expenses. Plants can also be relocated if the anticipated demand
does not materialise, implying low sunk costs. Its business model is based on supplying areas with assured electricity
demandclusters of at least 300 households with a minimum of two connections per household for lighting 15 watt
compact fuorescent lamps (CFL). Consumers willingly pay a monthly price of Rs 50 per connection or Rs 18 per kWh for
assured electricity for 6 hours each evening. While HPS has raised capital from external sources, supplementing subsidies
and low interest loans, replication of the model may be limited by access to equity investments.
Source: IDFC (2011b, Quarterly Research Note, March); OneWorld Foundation (2010).
The rural population
continues to depend
overwhelmingly on
biomassfrewood,
crop residue and dung
cakesfor cooking.
Infrastructure 131
rural households with similar income levels, in fact, use
very diferent cooking fuels; according to NSS 63rd
Round, 200607, 75 per cent of rural households with
an average MPCE of Rs 647 used frewood as their
primary cooking fuel, while only 22 per cent of urban
households with an average MPCE of Rs 691 did so.
10

Availability can explain this large diferencepoor
distribution networks make access to fuels like LPG
difcult while biomass is more accessible.
Policy eforts to improve energy use in rural areas,
initiated as early as 1970s,
11
have not met much success
in shifting consumption away from fuel wood towards
more efcient and clean cooking fuels, including biogas.
Only about 0.4 per cent of households use biogas as
a primary fuel for cooking and these tend to be the
higher income and social groups. Tis is due to the high
capital expenditure of setting up a biogas plant and the
need to have enough cattle or household waste to make
it run. Each household of 5 members, for example,
would need about fve cattle to deliver about 50 kg of
cow dung per day. Tis makes the rich best placed to
use such plants.
12
Only 22 per cent of all biogas plants
thus are operational or used as a primary fuel source for
cooking.
13
Low utilisation also stems from poor post-
installation services and absence of technical skills for
repairs and maintenance.
Te governments smokeless chullah programme
also failed to deliver for a number of reasons, including
inadequate domestic space and lack of awareness of
health issues. A randomised evaluation conducted
on the efects of subsidised, improved chullahs in
rural Odisha found penetration levels to be far from
universal and declining over time (Dufo et al. 2008)
due to stove breakages, insufcient maintenance and
inappropriate use. Households that received improved
chullahs continued to use traditional stoves along with
the new ones. Te smokeless chullah programme is now
associated with the Indira Awaas Yojana (IAY), which
implies that improved cook stoves are only distributed
to newly constructed houses and leaves open the
question of replacing inefcient chullahs with improved
cook stoves.
Te Integrated Energy Policy of 2006 emphasises
clean cooking fuel (LPG and kerosene) for rural areas
as a merit good, justifying the subsidies in place.
14
But
inefcient targeting has resulted in subsidies beneftting
the afuent more than the poor, the urban more than
the rural. Tis makes a case for reducing LPG subsidies.
690 & above
R
s
/
m
o
n
t
h
455690
0455
Others
Other Backward
Classes
Scheduled Caste
Scheduled Tribe
0% 20% 40% 60% 80% 100%
0% 20% 40% 60% 80% 100%
FIGURE 4.11A AND B Primary Fuel Sources Used for Cooking: Percentage Distribution of Rural Households
by MPCE and Social Group, 200405
Firewood and chips
Kerosene
Gobar gas
Dung cake
All others
LPG
Source: NSS 61st Round, 200405.
10
Te NSS 61st Round, 200405, survey covers energy sources for household cooking and lighting, whereas NSS 63rd Round, 200607,
covers consumption expenditure patterns. Te latest available data have been used.
11
Te frst concentrated eforts began in the 1970s in response to the oil crisis, with the major thrust being on fuel substitution by supplying
kerosene through the PDS and power through rural electrifcation (Balachandra 2012).
12
For households without their own supply, biogas can cost two to three times more than LPG and kerosene. While kerosene may be
cheaper than LPG, the PDS would not be able to supply the large quantities of kerosene required for cooking, which will force people to
purchase from the open markets at considerably higher prices.
13
According to the Ministry of New and Renewable Energy (MNRE), 4.6 million family-type biogas plants had been set up by end calendar
year (CY) 2012. Census 2011 shows 1.02 million households using biogas for cooking, implying that 22 per cent of all biogas plants are operational.

14
Te Integrated Energy Policy estimates that 1.5 billion persons need around 55 MTOE as cooking energy (2006a).
132 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Te original mandate to reduce the LPG subsidy by
entitling each household to a maximum of 6 subsidised
cylinders per year is estimated to afect 70 per cent of the
households in the richest quintile but only 3 per cent in
the poorest quintile (Lahoti et al. 2012).
15
Analysis also
shows that a subsidy on LPG restricted to the urban
and rural poor would result in an additional saving of
Rs 2,001 crore per year.
16

Alternative cooking stoves are needed. Table 4.4
presents a beneft matrix of such alternatives. Chullahs
clearly are inefcient whereas solar energy has several
inherent barriers. Box-solar cooking, for example, takes
about 24 hours, three to four times longer than a gas
burner. It also requires open rooftops and solar tracking
arrangements and entails high initial cost, training and
maintenance.
4.3.3 Te Way Forward
Since kerosene, both inefcient and unhealthy, currently
meets a large proportion of rural lighting needs, a shift
from kerosene to greater use of grid power and clean
renewable energy sources must occur.
Rural electrifcation programmes have focused
primarily on extending the grid. But ensuring electricity
supply to areas where the grid has been extended
remains a challenge. Many households in electrifed
villages in fact choose not to connect to the grid because
of the insufcient and poor quality of electricity supply.
An overemphasis on grid extension thus can merely lead
to wasteful and stranded investment. As for DDG and
diesel generators, people are often willing to pay a high
price for electricity as long as there is assured supply.
Equally important is a strategy for non-household use
of electricity, where possible. Te RGGVY and Remote
Village Electrifcation (RVE) currently are unlinked
to livelihood programmes. Promoting local industry
through assured electricity supply would eventually lead
to an increase in rural incomes and hence an ability to pay
for electricity. Interestingly, some private sector initiatives
with DDG have attempted to link the programme with
livelihood promotion, but have failed because projected
demand has not materialised in most areas. Building
DDG plants around pre-existing micro-enterprises and
demand centres is an alternative worth considering.
But high tarifs for use of DDG remain a concern
because the same category of consumers, usually poor,
would pay much less if supplied through the grid.
Tis is unfair. Developers also are concerned that their
investments will be stranded once the grid gets extended
TABLE 4.4 Beneft Matrix of Options for Cooking Stoves
Criterion Chullah Improved chullah Biogas stove Kerosene stove Solar box LPG stove
Cooking time (min.) 60 60 15 30 180 15
Durability (yrs) 1 4 5 15 10 20
Initial cost (Rs) 10 50 5000 200 2000 4000
Maintenance cost (Rs) 0 0 200 50 50 50
Available subsidy (Rs) 0 50 2000 0 500 0
Source: MNRE (2009).
15
Subsequently, the government revised the cap to 9 cylinders per year which is in efect from April 2013.
16
Authors estimation, assuming: (i) rural poverty line of Rs 673 and urban poverty line of Rs 860 as estimated by Planning Commission,
200910; (ii) percentage of poor households based on NSS 66th Round, 200910 (2011a); (iii) governments policy cap of 6 cylinder/
household/annum; (iv) subsidy on a domestic LPG cylinder (14.2 kg) taken as Rs 503; and (v) additional costs of setting up distribution
network in rural areas and transport costs not factored.
BOX 4.7 Electrifying Remote Areas
The mini grid or local distribution network set up by a DDG could be owned by the state discom and the DDG promoter could
be appointed as a franchisee. The discom and generator could enter into a power purchase agreement (PPA) and a franchise
agreement. Under the PPA, the DDG would get a generation tarif, similar to a feed-in-tarif, and the consumer tarif would
be the same as that for other grid-connected consumers. RGGVY funds can meet this diference. Since DDGs are likely to be
renewable energybased, the discom could use this for meeting its renewable purchase obligation (RPO). The model allows
for integration of of-grid projects with the grid when it becomes available, which has been of concern to developers.
Source: ABPS (2011).
Infrastructure 133
to the village. Box 4.7 explains a mechanism for defraying
the cost of electrifying remote areas that the Forum of
Regulators is considering.
No single solution for cooking stands out. While
biogas and solar cooking have proven technologies,
eforts need to be made to overcome their operational
challenges.
Efectively redistributing subsidies for modern fuel
could result in the rural poor getting access to LPG
because the more well of will then have to choose
between higher priced LPG and biogas. While this
cannot be achieved immediately, policy should be
directed towards it. Providing modern fuel to rural areas
also calls for infrastructure facilitiessuch as improved
rural roads, transportation and storage facilitiesto
increase reach and access. Providing basic infrastructure
is a pre-requisite for increasing access to modern energy
for cooking in rural areas. No doubt, the transition
from primitive cooking sources like frewood to modern
fuel will not be easy and will signifcantly increase the
requirement for LPG. But this provides an opportunity
to develop intermediate technologies and solutions to
bridge the transition.
4.4 Water and sanitation
Of all type of infrastructure, access to water is the most
fundamental. In rural areas, water is essential not only
for drinking and household use, but also for sustaining
livelihoods through irrigation. Irrigation accounts for
over 80 per cent of water use in India while drinking
water accounts for barely 8 per centa much smaller,
but critical share (Tiwari and Pandey 2011).
Mismanagement of water resources, an inefcient
irrigation network, over-extraction of groundwater,
almost non-existent water treatment facilities and
other poor and inefcient
practices have led to a water
crisis in India. Climate
change has accentuated
this crisis. As industries
and urban areas grow,
the demands on already
strained rural water supply
increase. Conficts over
waterwithin and between
villages, between rural areas and urban, between industry
and agricultureare escalating, with few eforts to
mediate them. Concerns regarding environmental
aspects of water use and depletion are discussed further
in Chapter 5, but this section explores access to, and
management of, irrigation and drinking water.
Inextricably tied to water is the issue of sanitation.
Over 600 million Indians practice open defecation.
Tis, in turn, contaminates water sources with faecal
bacteria leading to a host of water-borne diseases.
As much as 31 per cent of Indian children under fve
years of age die of diseases caused by poor sanitation
17

(Water and Sanitation Program [WSP] 2011a).
Studies show that poor sanitation is also a signifcant
contributor to height defcit and poor cognitive
development among Indian children (Spears 2012).
Access to safe drinking water and sanitation facilities
are the bedrock of public health and must be addressed
together. Overall, understanding and resolving the
issues of rural water needs a holistic approachone
that deals with the diferent sectors within water and
sanitation as a unifed whole.
4.4.1 Irrigation
Surface Water Systems
At the time of Independence, India had one of the
best managed canal irrigation systems in the world.
Te British had run canal irrigation as a commercial
venture, and surface water was the countrys dominant
source of water for irrigation. Soon after Independence,
ambitious dam projects were built that eventually set
the stage for the Green Revolution to take of. Over
time, the canal irrigation systems deteriorated due to
insufcient maintenance and management. Tis has
aptly been called a build-neglect-rebuild syndrome
as the government continued to pour money into
rebuilding systems without
any attempt to manage
them (Shah 2011). Poor
management has resulted
in a drastic decline in use of
the irrigation potential
from 100 per cent at the
time of Independence to
an estimated 24 per cent in
the Eleventh Plan period.
India is facing a water
crisis due to misman-
agement of water
resources, including
canal irrigation, over-
extraction of groundwa-
ter and almost non-
existent wastewater
treatment.
17
According to Water and Sanitation Program [WSP] (2011a), these fall into three categoriesdiarrhoea-related diseases, intestinal
worms and trachoma. Sustained diarrhoea causes malnutrition which in turn can lead to acute lower respiratory diseases, malaria, measles and
other unidentifed diseases.
Poor management
has resulted in a
drastic decline in the
use of potential canal
irrigationfrom 100
per cent at the time of
Independence to an
estimated 24 per cent in
the Eleventh Plan period.
134 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Another reason is that the irrigation potential has been
falsely overestimated to make the dams seem more
viable (ibid.). Compounding this problem, farmers at
canal heads often grew water-intensive crops, not leaving
adequate water for tail-end users. Water management
systems such as wara bandi (rotational water supply)
had traditionally addressed such water-sharing issues
but government management of canal irrigation led to
their demise.
Te key reason for poor management and maintenance
of distribution systems is the abolition of the Irrigation
Service Fee (ISF) or lowering it to the point that states
cannot fund management and maintenance. Te strong
farmer movements of the 1970s and 1980s made higher
user fees a politically charged issue (see Chapter 1) but
when users are not required to pay for irrigation, they do
not hold state irrigation departments accountable for its
performance. To incentivise the levy of ISF, a National
Irrigation Management Fund (NIMF) is being created
to provide grants to states in proportion to the ISF they
collect (Shah 2013).
Te few attempts to move beyond pure engineering
towards better management of built systems met with
limited success. A system of Participatory Irrigation
Management (PIM) was introduced that involved
farmers in distributing water from canals amongst
themselves and in improving water efciency. States
created water user associations (WUAs) (or Sinchai
Samiti, Pani Panchayat) to undertake this, with
the assistance of non-governmental organisations
(NGOs), cooperatives and donor agencies. Most
WUAs failed (with the exception of a few in Tamil
Nadu, Andhra Pradesh, Odisha, Maharashtra and
Gujarat) mainly because state irrigation departments
often reneged on their responsibility to have bulk
water distributed (Shah 2011). Te limited success
has largely been due to signifcant investment of skill,
time, efort and money by NGOs, cooperatives and
donor agencies which cannot be replicated on a large
scale (ibid.).
Today, expanding surface water irrigation is subject
to severe limitations (Shah 2013, and see Chapter 5).
Better management of existing systems to meet the
demands of competing users therefore is an urgent
need.
Groundwater
Given the limitations of surface water distribution, the
growth of groundwater irrigation has exploded over
the last four decades. By the 1990s, use of groundwater
through tube wells exceeded that of surface water,
although irrigation coverage varies considerably across
states, resulting in regional inequalities (see Figure
4.12).
As the result of massive overexploitation of
groundwater, aquifers have dried up in many locations.
Farmers preferred groundwater because they could
better control the timing and amount of water drawn
and, unlike canal irrigation, were not dependent on
seasonal fows. Supportive irrigation policies that
provided unmetered subsidised electricity, cheap diesel
and subsidies for building wells facilitated groundwater
extraction.
Being a largely private
activity, the groundwater
use of almost 30 million
farmers went unregulated.
Under current legislation,
landowners are the de
facto owners of the water
FIGURE 4.12 Irrigation Coverage by State200809
100
80
60
40
20
0
P
e
r

C
e
n
t
95
85
76
61
58
56
49 48
46
41
35 35
33 32
27
20
19
17
10
4
45
P
u
n
j
a
b
H
a
r
y
a
n
a
U
t
t
a
r

P
r
a
d
e
s
h
B
i
h
a
r
T
a
m
i
l

N
a
d
u
W
e
s
t

B
e
n
g
a
l
A
n
d
h
r
a

P
r
a
d
e
s
h
U
t
t
a
r
a
k
h
a
n
d
G
u
j
a
r
a
t
J
a
m
m
u

&

K
a
s
h
m
i
r
O
d
i
s
h
a
R
a
j
a
s
t
h
a
n
M
a
d
h
y
a

P
r
a
d
e
s
h
K
a
r
n
a
t
a
k
a
C
h
h
a
t
t
i
s
g
a
r
h
H
i
m
a
c
h
a
l

P
r
a
d
e
s
h
M
a
h
a
r
a
s
h
t
r
a
K
e
r
a
l
a
J
h
a
r
k
h
a
n
d
A
s
s
a
m
A
l
l

I
n
d
i
a
Source: Directorate of Economics and Statistics, DAC. Adapted from Figure 1.14, State of Indian Agriculture 201112, website (http://agricoop.nic.
in/sia111213312.pdf, accessed on 7 February 2013).
Encouraged by green
revolution polices
and subsidies on tube
wells and electricity,
groundwater has been
so overexploited that
aquifers are drying up.
Infrastructure 135
beneath their land. Tis has led to instances of water
landlords selling surplus water from under their land.
Te alarming fall in water tables has put small and
marginal farmers at a disadvantage as they are often
unable to invest in expensive deep tube wells. In many
areas, over-extraction through deep tube wells has also
resulted in high levels of geogenic (arsenic and fuoride)
contamination (see the section on Drinking Water).
Some Successes in Mitigating the Crisis. Today, both
ground and surface water systems are in an acute crisis.
Tis is leading to confict, declining water quality and
dire shortages.
Trough its Jyotigram initiative, Gujarat has
succeeded in breaking the energygroundwater nexus
by segregating power feeders for residential and
commercial use from agricultural use. Residential and
commercial users receive uninterrupted power supply,
but agricultural users receive 8 hours of full voltage
supply at of-peak hours. Tis was coupled with a
large-scale watershed development programme for
groundwater recharge. As a result, the power subsidy
has reduced, the groundwater table stabilised and rural
non-agricultural users have benefted from improved
power supply. Te Twelfth Plan envisages extending
the segregation of power feeders and use of high voltage
distribution systems (Shah 2013).
Te use of technology (micro irrigation through
drip and sprinklers) can also enhance water-use
efciency and energy savings. Micro irrigation enhances
productivity and addresses issues of water logging and
salinity. Te National Mission on Micro Irrigation
(NMMI), launched in 2010 with an initial outlay of
Rs 80 billion, encourages farmer investment in micro
irrigation through subsidies. Of course, because subsidy
payments are often so delayed that they fail as incentives,
an initiative to ensure timely payment and transparency
would be welcome (see Box 4.8).
4.4.2 Drinking Water
India has committed to the United Nations (UN)
Millennium Development Goals (MDGs), including
the promise to provide 80 per cent of its population
access to improved water sources
18
by 2015. Under the
MDG, a Drinking Water Ladder ranks water sources
as a proxy for the safety of drinking water. By 2009,
government estimates showed that about 90 per cent of
rural households had access to improved drinking water
sources (NSSO 2010). Te share of households using
taps or tube wells for water supply has signifcantly
increased and the share using unimproved sources such
as rivers and lakes has fallen (see Table 4.5).
Te Ministry of Drinking Water and Sanitation
adopts a diferent approach to measuring water access
under which a habitation is deemed fully covered
19
if
the average supply of drinking water equals or exceeds
the minimum lifeline amount of 40 litres per capita per
day (lpcd). Partial coverage is defned as habitations
with an average supply of drinking water less than 40
lpcd but equal to or more than 10 lpcd. Habitations
with an average supply of less than 10 lpcd of drinking
water are deemed not covered. But average supply does
not necessarily mean that all residents receive even the
basic minimum. Using these defnitions, latest available
fgures show 74 per cent of rural habitations as fully
covered and 20 per cent as partially covered (Ministry
BOX 4.8 Delivering Government Subsidy in Irrigation
Gujarat Green Revolution Company (GGRC) is an initiative to ensure that a government subsidy scheme reaches its ultimate
benefciaries. Farmer investment in micro irrigation is supported by government subsidies but is plagued by inefcient
processing of subsidy pay-outs. GGRC approves the list of suppliers and fxes the fnal price. Equipment vendors compete
on product quality and after-sale service to farmers. GGRC, the equipment vendor and farmer enter into a tri-partite
agreement. The farmer deposits his contribution with the GGRC. While the vendor is given a 25 per cent advance, GGRC
releases the remaining money, including the subsidy, to the vendor upon installation. This process takes four months and
eliminates the potential for misconduct. The scheme has brought about 4 lakh hectares under micro irrigation.
Source: Author
18
According to the World Health Organization (WHO)/United Nations (UN) defnition, improved water sources could be a mix of piped
water, public tap/stand pipe, tube well/borehole, protected dug well, protected spring and rainwater collection (see WHO/UNICEF, http://
www.wssinfo.org/defnitions-methods/watsan-ladder/, accessed 30 June, 2013.
19
A habitat must receive a minimum of 40 litres per capita per day (lpcd) of water to be deemed covered. Tis is based on water for drinking
(3 litres), cooking (5 litres), bathing (15 litres), cleaning (7 litres) and ablution (10 litres) needs.
136 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
of Drinking Water and Sanitation [MDWS] 2012).
Tus, 26 per cent of habitations do not meet even the
lifeline minimum of 40 lpcd.
But even these numbers belie the true rural water
crisis. As competing demands for water have grown,
many villages that previously received adequate water
have slipped back,their residents are no longer assured
of the previous adequate
quantity or quality of water.
Tis is because drinking
water aquifers dry up from
irrigation or industrial
use (Shah 2013) or water
supply system sources have
been poorly maintained
or become contaminated.
Simple coverage indicators thus neglect other critical
aspects of water access, some of which are described in
the following:
Source sustainability: Over-extraction of groundwater
and inadequate recharge undo gains in coverage.
Maintaining the sustainability of water sources to ensure
that they do not get polluted or dry up is therefore key to
preventing slip back. Mediating competing demands on
shared water resources and mapping ground and surface
water fows will be critical going forward (see Chapter 5
on Sustainability).
Quantity of water available: Almost 14 per cent of
covered households receive insufcient water from the
primary water source (see Figure 4.13). Tis is primarily
seasonalwater shortages typically appear in March
and only improve by August. But in years of poor rainfall,
drought conditions may appear sooner and villages
become forced to rely on government tankers. With
the majority of the country being rain-fed, storage and
recharge infrastructure is inadequate. Water shortages
hit the socially disadvantaged groups the most: almost
25 per cent of STs were afected (see Figure 4.13).
Distance from water source: Both the Census and NSS
show that more households get drinking water within
the premises, but that the numbers of people who must
travel some distance to get water has not reduced (see
Table 4.6). Te opportunity cost associated with such
travel is that girls miss school when household chores
take priority.
Again, socio-economic disparities are evident; 73 per
cent of the lowest expenditure quintile (used as a proxy
for income group) and 81 per cent of STs collect water
from outside their premises (see Figures 4.14 A and
B). Tis has to do also with the circumstances under
which most ST households live, viz., in more remote
settlements that are less likely to be connected to a
drinking water system. A larger share of higher-income
households has access to water on their premises.
Water quality at point of use: Deterioration of water
quality between source and point of use due to pipe
contamination or during transport or storage of
water taken from a public tap is a serious concern.
TABLE 4.5 Major Sources of Drinking Water Among Rural Households (Per Cent)
Major sources of drinking water 1981 1991 2001 2011 49th 58th 65th
Round Round Round
(1993) (2002) (2009)
Tap 10.3 20.6 24.3 30.8 18.9 27.5 30.1
Well 61.6 38.0 22.2 13.3 31.7 17.9 11.8*
Tube well/Hand-pump 16.2 35.0 49.0 51.9 44.5 51.3 54.7
Tank/Pond (reserved for drinking water) 3.4 1.7 1.3 1.1 2.1 1.2 0.8
Other tank/pond 0.3
River/Canal/Lake 4.9 2.5 1.3 0.8 1.7 1.1 0.7
Spring 0.9 0.7 0.9 0.8 0.7
Others 3.6 2.2 1.0 1.4 0.2 0.3 0.9
Total 100 100 100 100 100 100 100
Note: Naturally, achievements across the country vary; the 8 states of Bihar, Uttar Pradesh, Jharkhand, Odisha, Assam, Chhattisgarh, West Bengal and
Madhya Pradesh have less than 10 per cent rural piped water coverage versus the 30 per cent national average (NSSO 2009).
*This consists of 5.5 per cent protected wells and 6.3 per cent unprotected wells. The former is an improved source whereas the latter is
unimproved. Disaggregated data for previous years is not available.
Source: Census (1981, 1991, 2001, 2011); NSS 49th (1993), 58th (2002) and 65th (2009) Rounds.
With competing
demands for water
and the drying up of
aquifers, many villages
have slipped back and
no longer receive the
quantity or quality of
water they did.
Infrastructure 137
25
20
15
10
5
0
P
e
r

c
e
n
t

o
f

h
o
u
s
e
h
o
l
d
s
All
months
Jan Feb Mar Apr May June July Aug Avg (Sep-Dec)
ST SC OBC Others
FIGURE 4.13 Households with Insufcient Drinking Water from First Source*
by Month and Social Group (Per Cent)
Note:
*
First source means most often used source.
Source: NSS 65th Round, 200809.
TABLE 4.6 Households by Distance from Drinking Water Source (Per Cent)
Availability of drinking water by distance 49th Round 58th Round 65th Round Census Census
(1993) (2002) (2009) 2001 2011
Within premises 34.3 37.2 40.5 28.7 35
Near premises (< = 0.5 Km) 62.5 59.9 57.2 51.8 42.9
Away ( > 0.5 Km) 3.1 2.9 2.3 19.5 22.1
Total 100 100 100 100 100
Note: The discrepancy between NSSO and Census data on the distance travelled to get water may be because respondents cannot accurately
report/measure the actual distance to the water source. Figures may not add up exactly to 100 due to rounding of.
Source: Census (2001, 2011); NSS 49th, 58th and 65th Rounds.
FIGURE 4.14 A AND B Distribution of Households by Distance to the Source of Drinking Water for Each
MPCE Quintile and Social Group, 200809
80
60
40
20
0
P
e
r

c
e
n
t

o
f

h
o
u
s
e
h
o
l
d
s
020 2040 4060 6080 80100 All India
11
16
73
14
20
66
14
23
63
15
27
58
22
34
44
16
25
59
All
Others
OBC
SC
ST
41
54
44
31
19
60
46
56
69
81
0 20 40 60 80 100
Quintile class Per cent of households
Within dwelling
Outside dwelling but within premises
Outside premises
Within premises Outside premises
Source: NSS 65th Round, 200809.
138 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Maintenance of water sources and education on safe
storage, transport and water purifcation are crucial
components of any drinking water programme. Existing
data on water quality also is poor and more systematic
data collection is required.
Pollution. Pollution poses a severe threat to safety of
drinking water. Untreated efuent from urban areas
and industrial zones is
often pumped into the
sea or freshwater bodies
so that even villages with
improved water sources
may receive contaminated
water if sources are afected.
Agricultural run-of,
particularly of chemicals and pesticides, is another threat.
Digging tube wells to access groundwater has also caused
arsenic and fuoride contamination (see Box 4.9).
In sum, although simple coverage indicators show
signifcant progress, the day-to-day reality of rural
Indias access to drinking water is stark deprivation.
Government Action
Although providing safe drinking water is primarily
the state governments responsibility, over the years the
central government has contributed large programme
funds to this sector. From the 1950s to the early 1990s,
most government drinking water schemes focused
largely on digging deep wells to access groundwater while
ignoring traditional systems of watershed development
and rainwater harvesting. When wells dried up due
to over-extraction and a lack of focus on source
sustainability, they were abandoned. Te schemes also
focused on areas with sufcient groundwater, neglecting
water-scarce areas.
To redress this uneven focus, new schemes during
the 1990s emphasised universal drinking water
access to all the countrys habitations.
20
Unlike earlier
programmes, which were centralised and implemented
entirely by government departments (e.g., Public
Works Department), the new schemes emphasised
participatory/community management in execution
of water supply. Tese schemes typically focused on
Although simple
coverage indicators
show signifcant
progress, the day-to-day
reality of rural Indias
access to drinking water
is stark deprivation.
BOX 4.9 Mitigating Arsenic Contamination in Drinking Water
The geogenic contamination of drinking water by arsenic poses a serious risk to some 60 million people, primarily residing
in the Gangetic plains including West Bengal, Bihar and Uttar Pradesh. Arsenic occurs naturally and has been washed down
from the Himalayas over centuries, as sediment carried by the Ganga. Exposure to arsenic causes serious ailments from
pigmentation and skin lesions, to chronic lung and liver diseases and cancer. Arsenic poisoning became a problem once
people began to tap shallow aquifers for groundwater, using tube wells.
Despite the serious health risk, government responses have been weak. Government agencies have made few eforts to
build awareness amongst the at-risk population or provide medical aid. There is an utter lack of water testing facilities
at the village, block or district level, and whatever exists is mostly dysfunctional. Interventions have typically focused
on expensive piped water and overhead tank projects that remain incomplete or unused due to corruption or lack of
electricity. Government has neglected successful models that are more cost-efective and that engage local communities.
One sustainable long-term solution is to shift back to using surface water sources. Restoring and cleaning traditional dug
wells, combined with imparting technical knowledge and building awareness amongst villagers, has also proven to be
an inexpensive solution, promoted successfully by the Inner Voice Foundation, an NGO working in Ballia district in Uttar
Pradesh and in Bihar. Dug wells expose groundwater to sunlight and oxygen, which efectively removes arsenic from the
water. Recently, the government has made restoration and digging of dug wells permissible under Mahatma Gandhi
National Rural Employment Guarantee Scheme (MGNREGS).
Another solution is using community arsenic flters to clean contaminated water. An NGO installed flters in villages in West
Bengal that can be locally produced, are cheap and require no electricity. Villagers were trained to sample the fltered water,
dispose of removed arsenic, spread awareness about arsenic contamination in their communities and given technical skills.
The O&M model was based on community ownership and user charges.
Source: Ministry of Drinking Water and Sanitation (MDWS) (2011a); Inner Voice Foundation website (http://www.innervoicefoundation.in/,
accessed on September 5, 2013).
20
Tese include the National Rural Drinking Water Programme (NRDWP), later renamed Rajiv Gandhi NRDWP, Swajaldhara promoted
by the World Bank, and Bharat Nirman.
Infrastructure 139
creating piped water systems and, since they often used
one or two major sources per village, they could more
easily address source sustainability.
To engender a sense of ownership and value, in
2002, Swajaldhara promoted the concepts of paying
for water and community maintenance through village
water and sanitation committees (VWSCs), as a sub-
committee of the GP. Users were to bear 10 per cent
of the capital cost and all O&M costs. Tis succeeded
in many cases. Te Planning Commissions (2010b)
fve-state evaluation indicates that about 87 per cent of
households regularly paid water charges and 95 per cent
of them were satisfed with the value of water charges
paid by them vis--vis the quantity and quality of water
they received.
Even so, the Swajaldhara model was not implemented
equitably. Poor households and SCs that could not pay
were excluded (Sampat 2007; Krishnan 2003). VWSC
members were nominated by the panchayat and not
elected by villagers, making it an exclusive club. Village
elites infuenced the project design to ensure that main
lines fowed close to their homes, and even diverted
drinking water for irrigation. SC colonies were planned
at tail-ends of the water supply system and given less
and inconsistent water supply. Finally, paying for water
has been criticised as moving away from treating water
as a social right to treating it as a socio-economic good
(Cullet 2009).
Due to these concerns (particularly the ability of
the marginalised to pay capital costs), Swajaldhara
was merged with National Rural Drinking Water
Programme (NRDWP) in 2009, the main diference
between the 2 being that the 10 per cent capital cost
contribution was optional under NRDWP. O&M and
fxing of the user charge remains the responsibility of
panchayats through the VWSC. But because PRIs often
lack funds for O&M, water supply systems may not be
adequately maintained if user fees are not collected.
Community-Managed Approaches
Community management has enabled more efcient
water systems and better tax collection. Khambegaon,
Maharashtra, in which women-led SHGs maintain
drinking water supply and collect taxes, for instance, has
a better tax collection rate than GPs because their large
network enables them to make door-to-door visits to
explain the importance of paying taxes. Te SHGs also
require advance payment to instil the habit of payment
for services. Teir incentive is that they can use leftover
funds to give loans to SHG members (WSP 2011b).
Community management has also enabled
monitoring of water quality. In Alappuzha district,
Kerala, womens groups are trained by an NGO, then
hired by water user groups and block panchayats to test
the water supply regularly (Khurana and Sen 2008).
Tis responsibility is also an employment opportunity
and thus provides a fnancial incentive.
Communities also have helped ensure more equitable
distribution of water. For example, in the Dakshina
Kannada district of Karnataka, metering water supply
has reduced the inequitable distribution of drinking
water and misuse by advantaged groups. Tis has
enhanced services to poor households. Households
only pay for the water they consumeso that the poor
are not unfairly burdened. GPs bear connection fee and
installation costs for SC/ST households from funds
earmarked for these groups under various schemes
(WSP 2011b). All other households pay the cost
themselves.
4.4.3 Sanitation
Water and sanitation are in-
extricably linked and must
be considered together.
Without water, sanitation
cannot be hygienic, and un-
safe sanitation is a leading
cause of water contamina-
tion and disease. Beyond
direct health impacts, poor
sanitation also negatively afects girl school attendance
(WSP 2011a).
Only 30 per cent of rural Indian households have
toilets. Census 2011 data show that almost 70 per cent
of rural households lacked latrine facilities. Ministry of
Rural Development and Census data on rural sanitation
coverage matched almost exactly until 2001, but have
sharply diverged since then (see Figure 4.15).
Poor sanitation plagues almost all states, with Kerala,
Punjab and Himachal Pradesh being the only exceptions
(see Figure 4.16). Barely a handful of states improved
coverage signifcantly since 2001; in addition to the 3
aforementioned, these include Haryana, Maharashtra,
West Bengal and Uttarakhand. But data inconsistencies
sometimes challenge the government-proclaimed
improvements. Census data show that Jharkhand has the
highest open defecation rate of 92 per cent but Ministry
of Rural Development data show that Jharkhand
has paid considerable attention to building latrines for
BPL households.
Water and sanitation
are inextricably linked
and must be planned
together. Without
water, sanitation
cannot be hygienic.
Unsafe sanitation is a
leading cause of water
contamination and
disease.
140 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
75
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1981 1991 2001 2011
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73
(MoRD)
FIGURE 4.15 Percentage of Households with Latrine Facilities Within Premises
Source: Census of India (1981, 1991, 2001 & 2011) and MDWS (2011b).
FIGURE 4.16 Percentage of Households Without Latrine Facility Within Premises and Improvement
in Household Latrine Coverage from 2001 to 2011
100
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69
2001 2011 Improvement in coverage
Source: Census (2001, 2011).
As with drinking water, socio-economic disparity is
also evident in sanitation (see Figure 4.17). Roughly
85 per cent of rural households in the bottom MPCE
lack latrine facilities, while less than 42 per cent of the
richest quintile do. Sanitation coverage (exclusive plus
shared latrines) is 25 per cent for SCs and STs, 56 per
cent for others. Government interventions to date thus
have targeted BPL and other disadvantaged families for
fnancial assistance.
Usage Lags Construction
While 30 per cent of rural households may have sanitation
facilities, for a number of reasons, actual usage is lower.
Constructed toilets are often of poor quality, possibly
due to insufcient funds, poor construction knowledge
or lack of maintenance, and a large proportion of toilets
remains unused and fall into disrepair. Toilets are often
built with little planning for waste disposal. Numerous
studies have shown that overfowing toilets or those
with unhygienic drainage systems are abandoned (CMS
2011) and perpetuate the very health risks that toilets
are supposed to prevent.
Poor sanitation conditions also persist for attitudinal
and behavioural reasons. Rural Indians widely believe
that a toilet inside the
home is unsanitary and that
maintaining and cleaning
community latrines is
beneath caste dignity. Even
if toilets are used, people are
unaware of basic hygiene
practices to prevent disease such as the importance of
hand-washing. Numbers of physical latrines thus is not
the entire problem.
While only 30 per cent
of rural households
have sanitation facilities,
actual usage is even
lower.
(Census)
Infrastructure 141
Going forward, emphasis must be on total
sanitationan approach that encompasses improved
personal hygiene, school and institutional sanitation,
and proper waste management. While government
sanitation schemes have acknowledged the importance
of total sanitation by including it in their schemes,
actual implementation of elements beyond physical
construction has been poor.
Government Interventions
Te Central Rural Sanitation Programme (CRSP)
1986 was the frst national efort to improve sanitation
coverage. But, being supply-driven with little emphasis
on education and total sanitation, it failed to improve
sanitation through the 1990s. In 1999, the MoRD
initiated the Total Sanitation Campaign (TSC) that
aimed to eradicate open defecation by 2017 by providing
basic sanitation facilitieswhether individual or
communityin rural areas. Recognising CRSPs
shortcomings, TSC was designed as a demand-driven,
low-subsidy scheme that includes the panchayats and
communitys active participation. Te low subsidy
was a response to fndings that latrine construction
was often self-motivated.
21
Te programme had
several components; Information, Education and
Communication (IEC) to increase awareness on proper
hygiene, construction of Individual Household Latrines
(IHHLs), community sanitary complexes (CSCs), and
school and anganwadi toilets. Until recently, subsidies
were only available for BPL families. In 2003, the
Nirmal Gram Puraskar (NGP) was introduced under
TSC to reward local village, block and district level
governments that achieved full sanitation coverage for
households, schools and day-care centres (i.e., were
open defecation free).
Te TSC has had limited success. Improvements in
toilet access have been modest with a success rate of less
than 10 per cent of the total 244,398 GPs (WaterAid
2008; CMS 2011). Sixteen states have only 10 per cent
success. Kerala achieved close to full NGP status and
all 45 GPs in Sikkim were awarded NGP by 2008.
Unfortunately, many NGP villages are slipping back to
open defecation for reasons such as badly constructed
and unusable toilets, scarce water supply to fush the
toilets or inconvenient location of community toilets.
Often the push to achieve NGP came from a district or
block ofcial who wanted the prestige of the award, but
gave inadequate thought to proper planning (e.g., for
solid waste disposal) and education (see Box 4.10). Even
though TSC emphasised a community-led approach, in
reality it was largely state-led with district-level ofcers
pushing to achieve physical coverage targets with limited
community involvement (WaterAid 2008).
Te TSC has also been criticised for emphasising
IHHLs over community, school and anganwadi toilets,
which can have important demonstration efects for
100%
80%
60%
40%
20%
0%
All
Others
OBC
SC
ST
020 2040 4060 6080 80100 All 0% 20% 40% 60% 80% 100%
28
47
25
18
18
6
9
4
5
6
65
43
69
76
75
11
3
17
4
23
5
30
6
49
9
28
6
85
77
71
63
42
65
FIGURE 4.17 Sanitation Coverage by Monthly Per Capita Expenditure (MPCE) Quintile
and Social Group, 200809
No latrine
Shared latrine
Public/community latrine
Exclusive use
Source: NSS, 65th Round, 200809.
21
Te decision to move to a demand-driven scheme came partly from a comprehensive 199697 Baseline Survey on Knowledge, Attitudes
and Practices in rural water supply and sanitation under the aegis of the Indian Institute of Mass Communication (IIMC 1998). Tis study
showed that 55 per cent of those with private latrines were self-motivated. Only 2 per cent of the respondents claimed the subsidy as the major
motivating factor, while 54 per cent claimed to have been motivated by convenience and privacy. Te study also showed that 51 per cent of the
respondents were willing to spend up to Rs 1,000 to acquire sanitary toilets.
Quintile class
142 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
the community. Community education was sidelined,
reinforcing the gender insensitivity in villages, with
men not considering sanitation a priority. Tis in
turn hindered latrine use and adversely afected the
health and safety of girls and women who are forced
to defecate in the open, before sunrise or after sunset.
Solid and liquid waste management (SLWM) also was
sidelinedtoilets were built without considering their
impact on drinking water or public health.
Te size and targeting of TSC funds have also come
under question. NSSO data shows that the increase in
overall access to toilets among the top income quartiles
has been signifcantly higher than that of the lowest
income group. Tis is understandable since building a
toilet is often self-motivated. But for households that
required assistance, inadequate funding resulted in
poorly constructed latrines. APL families that could
not aford funding toilet construction were ineligible for
assistance.
According to a recent study, the biggest obstacles
to having a toilet are poverty, lack of access to land
and not being favoured by the PRI for fnancial or
other assistance (CMS 2011). Te survey also shows
that the main reason for not building latrines is a lack
of awareness of the health and other benefts. Tis
indicates that community support and quality of local
governancewhether to build awareness, provide
land or properly route subsidieswill have a crucial
impact on the delivery of sanitation. Spears (2012)
identifed village leaders as the most important driver of
governance for TSC.
Despite TSCs failures, Spears (2012) has shown
that if properly implemented, the scheme has signifcant
value. He also fnds that both TSC and the NGP are
a relatively inexpensive way to save babies livesthe
cost of TSC per life-year saved falls on the lower end
of the spectrum of costs of life-saving interventions
and is comparable to measures like household water
chlorination.
Te Onward Fight for a Clean India: Nirmal Bharat
Abhiyan (NBA). In 2012, the TSC was renamed
Nirmal Bharat Abhiyan (NBA), with aims to accelerate
rural sanitation coverage so that 50 per cent of GPs
attain Nirmal Gram status by 2017 and Nirmal Bharat
is achieved by 2022. Te main diference between NBA
and TSC is that the new scheme widens incentives for
IHHL to cover identifed APL SC/ST households,
small and marginal farmers, landless labourers with
homesteads, physically challenged and women-
headed households and all BPL households. NBA is
to be implemented in phases with GPs identifed in
accordance with defned criteria based on a consolidated
approach to sanitation and water supply. Villages with
piped water supply would get open-defecation-free
status on priority and vice versa.
What Can We Learn from Success Stories
to Date?
Successful interventions to date indicate that achieving
sustainable total sanitation requires a combination of
physical infrastructure and education. For instance,
Community Led Total Sanitation (CLTS) initiatives,
which are to some extent already part of TSC, have
succeeded in maintaining and incentivising toilet
coverage and safe sanitation practices in several countries.
Te success is attributed to educating communities
on the negative efects of unsanitary practices and
promoting hand-washing and safe disposal of domestic
and animal waste.
BOX 4.10 Toilets in Schools
Education is perhaps the most important medium for driving demand and usage of toilets. A WashCost study of 29 villages
in Andhra Pradesh found that only one in three of the over 52,000 school toilet blocks built between 2006 and 2009 were
used. These toilets were kept locked because maintenance costs were not provided for. The opportunity for children to
learn about safe sanitation and hand washing was lost and the investment wasted.
In contrast, the village of Hiware Bazar in Maharashtra strongly encouraged toilet use amongst children, which also had
positive spillovers for the wider community. The panchayat built toilets in the anganwadi and school and made sure that
children, including the sarpanchs children, used and cleaned them. Toilets were ftted with a jalli door so children could
look out into the open air as they were used to. As children became accustomed to toilet use, its health and other benefts,
they spread the message to their parents. By 2007, all villagers had built individual soak pit toilets at their own cost.
Source: WASHCost India (2011) and IDFC Quarterly Research Note (2012b).
Infrastructure 143
Within villages, several
eforts to build awareness
have succeeded. In Bhadrak
district, Odisha, a pilot
awareness drive launched
in 2006 helped increase
latrine coverage and use.
Social Mobilisation Teams
(SMTs), comprised of district ofcials and NGOs, and
VWSCs identifed and mapped village open-defecation
sites and spread knowledge on sanitary practices.
Community eforts led to signifcant increases in latrine
coverage as compared to a control group, along with a
10 per cent decrease in child diarrhoea rates and a 2
per cent increase in arm circumference, representative
of child growth (World Bank 2008). In contrast, while
it succeeded in increasing toilet coverage and reducing
open defecation through community-executed and
maintained projects, Maharashtras the 200309
Jalswarajya programme did not lead to signifcant
improvements in child health mainly because it sidelined
behavioural change.
To build awareness across several GPs, some states
like Kerala used television (TV) and other media to
reach a larger audience. A reality TV show called the
Green Kerala Express that aired from March 2010 to
July 2010 on Doordarshan evaluated panchayats on
their performance in sanitation, health, water, land
management, etc. Tis allowed for dissemination of new
models and awareness on the practices of other villages.
Finally, social contracts have succeeded in villages in
Meghalaya and Kerala. In the West Garo Hills district of
Meghalaya, each household signs a contract to commit to
total sanitation and the creation of an open-defecation-
free village. With CLTS, this has helped improve
latrine coverage, demonstrated by a signifcant growth
in household and anganwadi toilets (WSP 2010). In
Kerala, panchayats sign accountability contracts with the
Kerala Water Authority (KWA), the state body executing
the TSC, which specify the monetary contributions
of the state, GP and households, and outline social
commitments for the sustainability of village sanitation
facilities, including building latrines, developing education
programmes and monitoring latrine use.
4.4.4 Te Way Forward
Going forward, eight issues must be addressed in
the planning, delivery and management of water and
sanitation:
A holistic approach: A holistic and inter-sectoral
approach to water and sanitation must be adopted.
Water as a resource cannot be dealt with in silos as in
the past. Te multiple departments in charge of water
management must work together to ensure water
is used in a sustainable manner, and is addressed
in conjunction with sanitation and solid and liquid
waste disposal. Te National Aquifer Management
Programme proposed in the Twelfth Plan is critical for
water management. It entails mapping the countrys
entire groundwater resources, with their recharge
points and relationship with surface water units
(e.g., basins and watersheds). Tis will help ensure
that extraction and recharge can be maintained at
safe levels, and can serve as the basis for coordination
and negotiation between diferent actors who
draw on the same aquifer. Extensive groundwater
recharge will be critical to sustaining aquifers. Te
Twelfth Plan envisions using MGNREGS funds for
watershed development activities, including restoring
traditional water harvesting structures that are in a
state of disrepair.
A community approach to water management: Central
to managing water efciently is the decoupling
of land and water rights so that groundwater is
considered a common property resource. Mapped
water resources might be best managed by a
community of users. Communities must decide
among themselves how to manage their water, for
instance, by banning deep borewells, agreeing to
water sharing, crop or recharge plans, or setting
user fees. Some states have already taken steps in
this direction. In April 2012, Maharashtra passed
the Maharashtra Groundwater (Development and
Management) Act that treats water (both surface
and ground) as an integrated, shared resource to be
managed by local communities.
Efcient and participatory irrigation management:
Irrigation practices that increase the productivity
and efciency of water use must be vigorously
promoted. Compared to several other countries,
Indias use of water in agriculture (and industry)
is highly inefcient. Adoption of water-saving
irrigation technologies, such as drip irrigation, tends
to be low due to unafordability. Improvements in
afordable irrigation technology and more efcient
cultivation techniques should be promoted. Te
System of Rice Intensifcation (SRI), which
reduces water requirement by 4050 per cent by
Community
involvement and
awareness has proved
to be critical to the suc-
cess and sustainability
of water and sanitation
interventions.
144 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
maintaining reduced water supply in furrows instead
of fooding, and other eco-friendly interventions,
should be expanded so that irrigation water is used
as efciently as possible. Indiscriminate use and
pumping of water also must be addressed. Te
Jyotigram experience shows that power subsidies
can be better targeted to provide farmers more
certainty while limiting water extraction.
Irrigation departments also must shift their focus
from engineering to more efcient management and
better maintenance of existing systems.Te Twelfth
Plan underscores the need for more professional
management and provides for management training
of state irrigation staf and civil engineers. It also
emphasises the need for raising user fees to cover
maintenance costs. An incentive fund will make
contributions to state irrigation departments to match
user fees. A portion of this fund also will be shared
with WUAs to increase their sense of ownership.
Ensuring that state irrigation departments deliver
bulk water to WUAs is crucial.
Drinking water source sustainability: Drinking water,
the most crucial use of water and a fundamental
right, must be carefully planned for. Communities
must identify their water source and ensure that
both quantity and quality are not compromised.
Watershed development and planning play an
important role, as does proper solid and liquid
waste disposal and local pollution control.
Initiatives to date have largely focused on providing
piped supply from surface or groundwater sources
that are not necessarily in the village. To ensure
that communities protect sources, developing local
sources such as ponds and shallow protected wells
within villages is advisable.
Locally suited delivery systems: Beyond protecting the
source, it is important that water delivery systems
work. Piped systems are expensive, thus limited.
Poorer community members may not be able to
opt in to a piped water system if doing so requires a
contribution. Pipes get contaminated or broken, or
even circumvented if they pass through villages in
which confict over water exist. Piped systems also may
fail for lack of electricity to pump the water. Delivery
systems thus must be suited to local conditionsthey
can be lower-tech so that trained villagers can execute
them rather than relying on expensive contractors.
To adapt to the poor availability of electricity, in
Gadchiroli in Maharashtra, 200 solar-power-based
water systems have been set up and the government
plans to set up 10,000 similar systems in 78 Naxal-
infuenced districts (MoRD 2012b). Finally, both
source sustainability and proper maintenance of
delivery systems will help prevent slip back.
Sanitation requires a similar approach. Rural
areas have an urgent need for locally suited and low-
cost toilets that do not rely on piped or large amounts
of water or expensive disposal systems. Several
innovations in water-less latrines, for instance,
can accommodate the needs of water-scarce areas,
including a system for collecting waste inseparate
chambers that recycle solid waste for fertiliser use
or as cooking fuel and treat liquid waste for use in
irrigation.
Convergence: Ensuring convergence between drinking
water and sanitation is crucial. Water-supply projects
should not be approved unless they have a sanitation
component, such as a sanitation land-use plan that
maps areas around the water source where toilets or
drainage lines cannot be built, or that plans future
sewage lines.
The Twelfth Plan recommends a habitation-
saturation approachboth water and sanitation
projects must cover every village inhabitant. It
recommends removing the APL/BPL distinction
for subsidies. The shift towards full coverage is
an attempt to ensure quality and sustainability
of a habitations water and sanitation coverage.
Wastewater management also must be integrated.
The Twelfth Plan increases the subsidy for toilet
construction. Households, if presented a range of
options, can choose the toilet best suited to their
financial circumstances, habits, topography, etc.
Innovation in community management: Ultimately
communities are central to ensuring sustainability
of water and sanitation infrastructure. Communities
could be trained to use low-cost microbial indicator
test-kits to track water quality at source, for instance.
Members outside the VWSC could be given this
responsibility and the results could be conveyed
by text message either to block or district ofcials
or central monitoring centres, such as rural centres
already in place to test and monitor quality of
drinking and irrigation water. Te centres could
respond to the feedback, and the tests could be linked
to create a dynamic process of water improvement.
Such programmes have succeeded in South Africa
and other developing countries.
Infrastructure 145
Awareness and outreach: As numerous interventions
over the years have shown, awareness and outreach
are critical to ensuring both demand for and
sustainability of water and sanitation projects.
Education should include boiling or other forms
of disinfection to prevent illness and the use of
low-cost or community flters that ensure water is
safe at the point of use. Knowledge of the harmful
efects of fertilisers and pesticides in groundwater
similarly can help communities mitigate the risk of
birth defects. Education eforts are a major thrust
of the Working Groups recommendations for the
Twelfth Plan. GPs also must be taught to manage
groundwater in co-operation with neighbouring
panchayats for inter-sectoral allocation of water
between industries, agriculture, drinking water,
and so on. Physical infrastructure has often
remained unused because communities were
not aware of the importance of safe sanitation to
health and well-being. Te Twelfth Plan heavily
emphasises such awareness-building activities. In
sum, given their critical importance to rural health
and development, managing water and sanitation
largely depends on education.
4.5 Housing
Te number of homeless households in rural India
is steadily increasing and the large numbers of non-
permanent structures are not necessarily liveable.
As discussed in sections on Energy and Water and
Sanitation, basic amenities such as water, sanitation,
electricity and cooking facilities are largely absent from
rural homes. Te poor quality of permanent housing
constructionuse of poor quality materials, non-
plastering of walls and inadequate resistance to extreme
weather, like harsh sunlight and heavy rainfall
compounds the problem.
4.5.1 Status of Rural Housing
Te share of rural households facing a housing
shortage has increased from 18 per cent in 2001 to 26
per cent in 2012 (see Table 4.7). Te Working Group
on Rural Housing for the Twelfth Five Year Plan
estimates a total rural housing shortage of 44 million
units in 2012 (Planning Commission 2011a). Te 15
per cent that are homeless or live in temporary housing
face the most acute shortage; temporary shelters are
of as much concern as no shelters since they leave the
household exposed to natural calamities and severe
weather conditions.
Over the years, the number of rural households living
in pucca housing increased from 36 per cent in 2002
to 55 per cent in 2009 (see Figure 4.18). While this
increase has been across all income groups, the disparity
among groups has decreased with the lowest MPCE
group converging towards the national average ratio of
non-pucca (including semi-pucca
22
and kaccha) to pucca
faster than any other MPCE group.
Social disparity in ownership of pucca houses has
also decreased, as the least advantaged ST group has
shifted faster towards pucca housing than other groups
(see Figure 4.19).
4.5.2 Challenges in Building Permanent
Housing
Although 95 per cent of rural households reside in self-
owned houses, 45 per cent continue to live in non-pucca
houses and cannot make a transition to pucca housing
(NSSO 2010).
Access to fnance is a major constraint in making
this permanent shift. Households themselves have
22
NSSO defned semi-pucca as a shelter which is neither pucca nor kaccha, having walls, a foor and/or a ceiling, but not all three. It has
been grouped under non-pucca because semi-pucca houses also sufer from a lack of basic amenities and are exposed to extreme geo-physical
conditions (NSS 61st round defnitions, http://mospi.nic.in/mospi_new/upload/nsso/concepts_61R.pdf ).
TABLE 4.7 Estimate of Rural Housing Shortage
(Millions)
2001 2012
Households without houses 3.22 4.15
Temporary houses 11.5 20.21
Shortage due to congestion 5.0 11.30
Shortage due to obsolescence 4.3 7.47
Additional housing shortage arising 0.55
in next fve years
Total housing shortage 24 43.67
o.w BPL (assuming 90% of households 21.6 39.30
are BPL)
Note: There were 137.7 million rural households in 2001 and 167.8
million rural households in 2011 (Census 2011), and assuming yearly
growth rate of 2.1 per cent to determine rural households in 2012.
Source: Census (2011); Planning Commission (2006b, 2011a).
146 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
FIGURE 4.18 Type of Housing Structure by Expenditure (MPCE) Group in 2002 and 2009
100%
75%
50%
25%
0%
100%
75%
50%
25%
0%
025 2550 5075 75100 All 020 2040 4060 6080 80100 All
Quartile class Quantile class
37
39
24
47
32
21
53
29
19
58
26
16
73
18
9
55
28
17
23
46
31
36
46
25
38
42
19
55
35
9
36
43
21
Source: NSS 58th Round, 2002, and 65th Round, 200809.
2002 2009
FIGURE 4.19 Type of Housing Structure by Social Group in 2002 and 2009
Pucca Semi-pucca All kaccha Pucca Semi-pucca All kaccha
2002 2009
All
Others
OBC
SC
ST
All
Others
OBC
SC
ST
36 43 21
45 40 16
36 43 21
33 41 26
19 56 25
55 28 17
65 22 13
58 26 16
51 27 23
34 48 18
0 20 40 60 80
0 20 40 60 80
100
100
Per cent of households Per cent of households
Pucca Semi-pucca All kaccha Pucca Semi-pucca All kaccha
Source: NSS 58th Round, 2002, and 65th Round, 200809.
fnanced 66 per cent of rural housing, non-institutional
sources such as loans from relatives and moneylenders
have fnanced 17 per cent, and government and fnancial
institutions have fnanced just 18 per cent (NSSO
2010). Te two main reasons for low penetration of
formal housing fnance are the limited presence of
banks and other lenders
in dispersed rural areas
and the difculties in
establishing potential
borrower creditworthiness
because of informal and
variable income; some
borrowers do not meet
the minimum income or
collateral requirements.
Gruh Finance, one of
the few private fnancing
entities operating in rural areas, has largely succeeded
with its widespread, localised network. It uses
household and/or business expenditure as a surrogate
for income proof when appraising creditworthiness.
But microfnance institutions (MFIs) have played a
very limited role in the rural housing market because
they fnd it difcult to secure bank fnancebanks
need clear titles to land for collateral. A few MFIs
operate by giving mortgage loans only to persons with
known credit histories.
As demand for rural housing grows with population
growth, land availability will emerge as a key problem.
About 8 million already have no housing because they
lack access to land (Planning Commission 2011a).
Competing land uses are driving up cost. Due to poor
records and titles, and land largely being used by owners
and not for sale, the land market for rural housing tends
to be thin.
Households themselves
have fnanced 66 per
cent of rural housing,
non-institutional
sources such as loans
from relatives and
moneylenders have
fnanced 17 per cent,
and government and
fnancial institutions
have fnanced just 18
per cent.
Infrastructure 147
IAY has had limited
success due to poor
convergence with other
basic amenity schemes,
neglect of the landless,
use of inappropriate
design standards and
materials, payment
delays and problems in
identifying benefciaries.
4.5.3 Central and State Governments
Contribution to Rural Housing
Both state and central governments have played a
limited role in developing rural housing. Only 5 per cent
of all rural housing was government fnanced (NSSO
2010). Central government eforts had scheme design
problems and could not address the issues of access to
fnancing and land. Meanwhile, only about half the state
governments have even tried to design independent
schemes, with just a few employing inventive techniques.
Central Government
Most of the central governments achievements have
occurred in the last fve years; out of the 29 million
houses constructed or upgraded since 1985 under
the Centres fagship scheme IAY, 44 per cent were
constructed during the Eleventh Plan period (Planning
Commission 2012c). Te IAY, which aims to provide
houses to the rural poor, is the oldest and largest central
rural housing scheme. Launched in 198586, it became
an independent programme in 1996 and provides grants
and more recently loans to
socially disadvantaged and
other BPL households.
23

Funding is shared by central
and state governments
75:25, except in the north-
eastern states where it is
90:10. Te Centre allocated
Rs 190 billion in fnancial
year (FY) 201112, an
almost three-fold increase
since FY 200708, and houses constructed went from
2 million to 10.6 million during the same period (ibid.).
Despite rising allocation and benefciaries,

the scheme
has not made a signifcant dent in reducing the housing
shortage or providing quality, permanent shelters. Key
problems are:
Lack of design standards and basic amenities: IAY
does not specifcally outline the standard for housing
construction, except for mandating permanent
plastered walls and a roof. State governments
approve the designs of IAY houses. A variety of
designs are supposed to be collated and handed over
to the GPs for reference. But IAY houses have been
poorly constructed, with sagging foundations and
kaccha roofs (Planning Commission 2011e). Te
creation and quality of basic amenities also are not
always ensured. Although the IAY guidelines state
that houses should have a toilet, smokeless chullah
and electricity connection, the IAY has provided
few such amenities. Only 27 per cent of IAY houses
had convergence with the TSC in 201011 while
the smokeless chullah programme saw 24 per cent
convergence, and RGGVY convergence was even
lower at 1.1 per cent (ibid.).
Poor training and spreading of local practices and
resources: Benefciaries are expected to be involved in,
and be solely responsible for, housing construction,
including material procurement and type of
construction. But benefciaries may not have the
expertise to make these decisions. Rural Building
Centres (RBCs), aimed at ofering skill training and
know-how on technology and cost-efective and
environmentally friendly building materials, were
initially supposed to be created in each district in
1986, but these have not picked up well except in
Kerala. Even the help assigned to them by the IAY
guidelines, through the zilla parishads (ZPs) and
District Rural Development Agencies (DRDAs),
leaves too much scope for corruption. Such a neglect
of developing or spreading knowledge of locally
suitable material use and building practices, resource
efciency or skilling of labour has resulted in poor
quality housing and inadequate funding. Semi-
constructed housing is sometimes declared as fully
constructed.
Inadequate attention to landless households: Until
recently, policy measures have ignored the landless.
Accessibility to land still shows little improvement.
A scheme was introduced under IAY in 2009 to
provide a homestead site to benefciaries through the
DRDAs. Landless households currently are given
Rs 20,000 to purchase a homestead site of 100250
sq m. But only Andhra Pradesh, Bihar, Karnataka,
Kerala, Maharashtra, Rajasthan, Sikkim and Uttar
Pradesh, in which only 700,000 sites have been
purchased between 2009 and 2011, have requested
funds for this purpose (Planning Commission
2012c). PRIs generally have been unable to provide
land on the scale required to meet landlessness, or to
reserve land for public utilities due to encroachment
on panchayat land. Plots that PRIs do make available
for landless households are rarely located nearby,
23
Other benefciaries include freed bonded labourers, disabled persons and their families, retired military and ex-military personnel and
their families, and displaced, nomadic and tribal persons.
148 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
so the households cannot easily access common
infrastructure.
Lack of bank access: Te scheme requires funds to
be transferred to the benefciaries post ofce or
bank accounts. But many households face problems
in opening bank accounts (Planning Commission
2013). Tis also limits households from accessing the
schemes additional beneft of low interest credit.
Payment delays, low utilisation and poor monitoring:
Although grants are supposed to be disbursed to
benefciaries on a staggered basis, ideally in two
instalments, the signifcant payment delaysa
common feature of public welfare schemesoften
leave house construction incomplete (Planning
Commission 2013). Actual utilisation of funds
has been lower than ofcial statistics show because
funds have been diverted to other uses such as
administrative expenses or have been misused
(Comptroller and Auditor General of India [CAG]
2003). Monitoring of housing construction also has
been poor under the IAY. District- and block-level
governments are responsible for inspecting work
sites, but such inspections are not always enforced.
At the village level, a register is supposed to track
progress but this too is often not done.
Identifcation of benefciaries: Te states create IAY
waitlists from which the Gram Sabha (GS) is
supposed to select benefciaries. Te GS has not
always followed through. About 2050 per cent of
benefciaries were not selected during the Eleventh
Plan, PRIs and Members of Legislative Assembly
(MLAs) infuenced the allocation instead and
the neediest households were left out (Planning
Commission 2011e). Benefciary lists at times
include people who are already listed as benefciaries
of other schemes, such as military personnel, and
persons displaced by other development projects.
Such redundancy further hurts the neediest.
To address these issues, the MoRD released new
guidelines for the IAY in March 2013, aiming to revitalise
the scheme by providing benefciaries a supportive
framework with increased stakeholder participation.
Te GS will be involved in selecting benefciaries and
conducting social audits for the scheme. States will
have the discretion of encouraging the use of traditional
technologies and locally available construction material
in addition to using prefabricated structures, such
as doors and windows, if volumes are high enough.
Technology Facilitation Centres (TFCs) will be created
to encourage and disseminate information on alternative,
cost-efective and environment-friendly practices, such
as using bamboo for housing construction, or fy ash and
rice husk to make bricks. Community resource persons
(CRPs) and master masons also will be trained to aid
benefciaries in construction; the costs for maintaining
these resources will be covered under administrative
expenses, made up of 4 per cent of total funds released.
Whether states will adopt and efectively implement
these guidelines remains to be seen.
State Government
State governments also have not been able to make a
major impact on enhancing rural housing. In addition to
their required 25 per cent and 10 per cent contribution
to the IAY in plain and hilly states respectively, 15
states have set up their own rural housing schemes.
Tese schemes constructed 3 million homes under
the Eleventh Plan, with some innovations. Andhra
Pradesh provides subsidised construction material and
supplementary funds for strengthening foundations in
low-lying and weak-soil areas, especially important to
avoid forcing households to repeatedly rebuild houses
if topography and climatic conditions are overlooked.
Gujarat promoted earthquake-resistant housing
designs and construction; given the destruction
earthquakes have caused in the state, this is valuable
to ensure resistant, permanent shelters. Tamil Nadu
recently launched the Green House Scheme through
which households will be given grants to construct
300,000 solar-lit homes between 2012 and 2016.
Tis is an important green initiative to counter poorly
electrifed rural areas.
4.5.4 Te Way Forward
Te design of the IAY can be further improved in at
least the following ways:
State and district governments should design rural
housing prototypes that identify mandatory design
elements and promote local construction material
and building practices, tailored to rural lifestyle,
topography, climate, local resources and vulnerability
to natural calamities. Cost-efective, environment-
friendly building design elements, such as using
renewable energy and rainwater harvesting, can be
suggested. Te IAY should adopt the use of waste
materials, as in Andhra Pradesh where the use of rice
husk as a fuel in brick manufacturing, and of fy ash as
brick material led to 1035 per cent savings in school
building construction (MoRD 2012a). To ensure
that the designs are made public, IAY fund releases
Infrastructure 149
to the DRDA or ZP can be made conditional on
transparency initiatives, such as wall paintings.
Homeless families and those living in non-permanent
structures could register for housing grants with
PRIs instead of the state for better identifcation
of the target group. To improve transparency and
to check political misuse of authority, the GSs,
responsible for selecting benefciaries, should make
the process public (Planning Commission 2011e).
Benefciaries should be selected on the basis of
economic weakness rather than social status,
and priority should be given to the homeless over
upgrading existing housing.
Financial assistance could be enhanced by using
SHGs to facilitate access to bank accounts and avail
the diferential rates of interest ofered by fnancial
institutions. If banks are absent, the business
correspondence model should be enabled to help
households obtain grants. For households that do
not meet the banks income requirements, SHGs
could extend credit services by providing loans from
revolving funds, allowing easily monitored repayment
(Planning Commission 2013).
Te formation of central and state-level inter-
departmental committees could better provide basic
amenities. Te various departments in charge of rural
development schemes must coordinate their work
and delivery.
Local and state governments should work together to
identify unproductive land so that it can be allotted
as homestead sites to landless households. Land
also can be purchased from private landholders at
reasonable prices. An alternate model under the
IAY can be tried, by which the state, with fnancial
and technical support from Centre, could create a
fund and execute the construction of new houses
and upgradation. Given the poor quality of past
government construction, such a model would need
to be carefully crafted, with special measures for
monitoring and quality control.
4.6 Telecommunications
Enabled by technological advancement and a competitive
policy environment, telecommunication services in India
have seen unprecedented growth over the past decade.
Research shows a signifcant impact of Information
and Communication Technologies (ICTs)including
fxed lines, mobiles, internet and broadbandon
economic growth. Elasticities for fxed lines rank lowest
in the magnitude of impacts, and for broadband highest
(Qiang et al. 2009).
Among several reports published recently, Indian
Council for Research on International Economic
Relationss (ICRIER)
2012 study (Kathuria and
Kedia-Jaju 2012), based on
a rich data set of 19 states
for 10 years, found that
a 10 per cent increase in
mobile penetration leads
to a 1.5 per cent increase
in state gross domestic
product (GDP), while a 10
per cent increase in internet
subscribers leads to a 1.08 per cent increase in state per
capita GDP (ibid.).
24
Studies also have found micro
evidence on the pathways through which access to ICTs
results in efciency and productivity gains. Mobile
and internet access, for example, empowers farmers
with know-how, services, timely and relevant weather
information, transparent price discovery and access
to wider markets to maximise income. In a seminal
study in 2007, Robert Jensen showed how fshermen
in Kerala have been using mobile phones since 1997 to
call coastal markets while still at sea to fnd best prices
for their catch. Tis led to lower wastage, reduced
variability in prices, increased profts and reduced prices.
Initiatives like e-Choupal
also have successfully
leveraged the potential of
information to empower
small and marginal
farmers. Similar models
are being reproduced
across other sectors in
rural areasfor example,
health, education and rural BPOs (Business Process
Outsourcing), providing hope that Indias digital divide
can be signifcantly reduced, if not eliminated. Rural
communications therefore must be developed and
used as a key instrument to achieve inclusion, improve
governance and attain better health and education
outcomes.
A 10 per cent increase
in mobile penetration
leads to a 1.5 per cent
increase in state GDP,
while a 10 per cent
increase in internet
subscribers leads to a
1.08 per cent increase in
state per capita GDP.
Rural communications
must be developed and
used as a key instrument
to achieve inclusion,
improve governance
and attain better
health and education
outcomes.
24
Te impact of internet for India is lower solely because internet penetration (only 2 per cent internet connections) is way below the
threshold that generates the growth impacts.
150 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
4.6.1 Status of Communications
Indias subscriber base has exploded over the past decade.
Telephone connections stood at almost 900 million
in December 2012, although the Telecom Regulatory
Authority of India (TRAI) classifes only 700 million of
these as active.
25
Overall teledensity (i.e., subscriptions/
population) increased to 73 per cent in December 2012
compared to a mere 4.28 per cent in March 2002 (TRAI
2012a). Te majority of this vast growth has been due
to mobile telephony, which in turn has benefted from
intense competition. Private operators today account
for almost 90 per cent of all mobile subscriptions which
have become ubiquitous in urban areas (TRAI 2012a).
A luxury when frst introduced, millions of Indians
now use mobile service every day. Vigorous competition
among service providers has driven rates way down,
lower than in many countries.
26
Given its growth impact, telecommunication is now
recognised as an important infrastructure service that
should be universally available to facilitate, inter alia,
the policy agenda of inclusion. Although it has grown
rapidly, the distribution of teledensity across rural
and urban areas and across states has been uneven. In
March 2013, while urban teledensity was 147, that is,
each urban resident had 1.47 phones, rural teledensity
was much lower at 41 (TRAI 2013c). Because the
supply of rural telephony has been largely unproftable
(Hudson 2000), service providers have been reluctant
to invest in rural infrastructure. Until very recently,
fxed lines belonging to the state-owned Bharat Sanchar
Nigam Ltd (BSNL) dominated the rural landscape.
But a saturating urban market and rising rural incomes
encouraged private mobile operators to expand service
in rural areas, reducing BSNLs monopoly in rural India.
In September 2012, Bharti, Vodafone and Idea together
accounted for 215 million rural subscribers, while
BSNLs rural subscribers stood at 41.78 million (TRAI
2013a).
With the advent of smart phones, the profle of rural
and urban mobile users has become somewhat distinct.
Hand-held devices are routinely customised to meet the
demand of rural users focusing on features such as music,
camera, dual SIM cards, banking and education. In a
recent survey conducted by National Council of Applied
Economic Research-Centre for Macro Consumer
Research (NCAER-CMCR 2011), comprising 8,000
rural households across four states, mobile phones
emerged as a dominant source of entertainment ahead
of traditional modes such as TV and radio. In urban
areas, mobile phones serve as a multipurpose device for
communication and data exchange.
Te success of mobiles in India has not been matched
by other forms of access to telecommunication services.
Indicators of internet and broadband use, for example,
pale in comparison to mobile telephony and the rural
urban divide is far deeper for internet and broadband
than for mobile (Kathuria and Kedia-Jaju 2012). Indias
meagre broadband penetration is all the more worrying
because what qualifes as broadband would be deemed
inadequate in most countries.
27
According to TRAI
(2013b), the fxed network had about 24 million internet
connections and about 447 million wireless subscribers
accessed data servicesor four users per connection
as of September 2012. Te I-Cube Report on Internet
(Internet and Mobile Association of India [IAMAI]
2011) estimates that India has 90 million active internet
users. Even so, India ranks a distant second after China
for internet users in Asia. Only 0.7 per cent of rural
households have home internet access as compared to
about 8 per cent of urban households (Census 2011).
Including other access points (ofce/college labs/
cyber cafes) and users of mobile internet reinforces the
conclusion that internet is still an urban phenomenon,
due to language barriers, lack of local content, power
shortages, poor connectivity and tarifs.
As with mobiles, rural India exhibits a diference in
nature of internet usage. Te vast majority of rural users
across the seven surveyed
states in the I-Cube report
(IAMAI 2011) used
internet for entertainment,
to download music, videos
and photos, whereas most
urban users accessed the

25
See TRAI (2012b); Press Information Bureau Release, December 2012 (http://pib.nic.in/archieve/others/2013/feb/d2013021101.pdf ).
26
A survey by New America Foundations Open Technology Initiative, comparing costs and types of mobile cell phone packages available to
consumers worldwide, concluded that Canadians pay 70 times more than Indians for voice calls (2010, http://newamerica.net/publications/
policy/an_international_comparison_of_cell_phone_plans_and_prices). Indians pay $0.01 per minute and only people in Hong Kong pay
rates almost as low as Indians.
27
Te qualifying speed for a connection to be categorised as broadband in India is greater than 256 kbps, while in most other countries the
minimum requirement is 512 kbps or 1 Mbps.
Internet usage in rural
India has been low due
to language barriers,
lack of local content,
power shortages, poor
connectivity and high
tarifs.
Infrastructure 151
internet for emails and education. Tis reinforces the
problem of inadequate local language content for rural
users. Promoting internet usage in rural India therefore
must advocate its use for socially gainful activities
at the local level. Productive deployment will allow
rural areas to realise multiple benefts. To illustrate,
HarVaHarnessing value of rural Indiais a private
sector rural BPO that ofers urban areas services to
rural population at very competitive rates by extending
training in digital literacy to the rural youth. Tis also
addresses the employment challenge in rural areas
(Kathuria and Kedia-Jaju 2012).
Te digital divide also prevails at the state level. Te
richer and more literate states report better telecom
indicators than the poorer ones, and a strong positive
correlation between wireless density and per capita
income is evident. States with higher per capita GDP
in general also have higher internet penetration (ibid.).
Because per capita income does not alone explain
inter-state disparities in penetration and usage, fnding
robust explanations for
such disparities is difcult
(Kathuria et al. 2009). Many
studies show that wherever
they are given a choice, poor
communities often spend
on communications as
much as urban communities, in terms of percentage of
available income (Navas-Sabater 2002: 4). A National
Council of Applied Economic Research (NCAER)
survey (200405) on income demographics across
India reports that the absolute number of middle to
higher income households in rural areas is almost at par
with urban areas. It is posited here that, at given prices,
demand between urban and rural areas should not
difer signifcantly. Te stark diference in ruralurban
teledensity thus cannot be attributed to purchasing
power diferences alone.
Rural India presents huge opportunities, but
also calls for large investments. Lower population
density poses a major challenge for fnancial viability
because coverage drives cost and population drives
revenue. Indias fxed-line network and internet
and broadband have until recently been associated
with Public Switched Telephone Network (PSTN)
infrastructure (the fxed line) and the cost of providing
access through this platform is high, particularly in
low-density rural areas. Although wireless promises to
change the economics of modern ICT infrastructure,
the government must play a more efective role in
managing scarce frequencies for optimal use. Te
policy implication is clear. Universal service can only
happen if market failures are addressed efciently and
in a competitively neutral manner, that is, without
preference to any single operator, public or private.
4.6.2 Review of Government Programmes
and Policies
Te state-owned BSNL, tasked with fulflling
rural obligations, used the customary cross-subsidy
mechanism to build rural connectivity. Since there was
no funding to cover rural expansion losses, BSNL used
inordinately high tarifs for domestic and international
long-distance calls to generate revenue. But competition
made it harder to sustain the cross-subsidy scheme
28
and
roll-out obligations had to be imposed on new entrants,
forcing them either to incorporate the cost of providing
rural services in their entry plans or to pay a penalty for
non-compliance.
29
Unfortunately, operators chose the
cheaper option of fnes (TRAI 1998). An innovative
proposal to expand rural services through specialist
niche players under the unifed licence category met
with stif resistance and could not be implemented.
Inability to get rural telephony of the ground led
the government to enunciate the New Telecom Policy
(NTP) in 1999 which conceptualised the Universal
Service Obligation Fund (USOF) to help provide
telecom services in less viable areas and to achieve the
objective of universal access (see Box 4.11).
International best practice for determining the amount
of subsidy is the reverse auction method or minimum
subsidy bidding. Since the USOF Administrator will
have less information about the cost of specifc projects,
this allows competition to discover the best price for the
project in the form of minimum subsidy required from
the Fund. Due to its dominance in rural areas, BSNL
Promoting internet
usage in rural India,
therefore, must
advocate its use for
socially productive
activities.
28
Substantial evidence suggests that new entrants focused on lucrative customers, undermining the ability of the incumbent to generate high
revenue to meet rural obligations.
29
Post New Telecom Policy 1999, Basic Service Operators in a Service Area are required to provide PoPs (Point of Presence), in all SDCAs
(Short Distance Charging Areas) within seven years and that too in an identifed ratio of Urban, Semi-Urban and Rural SDCAs. Te roll out
obligation of CMSPs (Commercial Mobile Service Providers) is to cover 10 per cent of DHQs (District Headquarters) in the frst year and 50
per cent of DHQs in frst three years. CMSPs are allowed to cover any town in lieu of DHQ in that district. Tese obligations continue to exist
under the Unifed Access Service License (UASL).
152 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
BOX 4.11 The Universal Service Obligation Fund (USOF)
An ofce attached to the Department of Telecommunications (DoT), headed by the USOF Administrator, administers the
USO Fund (USOF), a fund created by charging 5 per cent of adjusted gross revenues (AGR) from all licensed telecom operators
except internet service providers (ISPs). The USOF provides subsidy support to incentivise telecom service providers to
provide services in less viable areas due to sparse population, low income, absence of supporting infrastructure (roads,
power, etc.) remote area, insurgency, and difcult terrain. Initially only for basic telephony service (wireline or wireless),
the scope of USOF support was expanded to cover rural broadband and wireless infrastructure by amending the Indian
Telegraph Act in December 2006. Although disbursements have risen, the balance in the Fund remains very large, at about
Rs 21,000 crore.
Source: Author.
leveraged its existing infrastructure to emerge the winning
bidder in most of the reverse auctions or minimum
subsidy bids and, in fact, in most cases was the only
bidder. Tis is refected in the fact that BSNL received
about 80 per cent of the total subsidy disbursed by the
USOF.
30
Although worldwide experience convincingly
demonstrates that reverse auctions can substantially
reduce subsidies (with average winning bids lower than
the reserve price in several Latin American countries),
BSNLs dominance prevented full exploitation of the
process (Wallsten 2008). When BSNL was the only
bidder, the winning bid exactly matched the reservation
price; lack of competition in bidding resulted in inefcient
utilisation of funds.
USOFs two biggest weaknesses have been the inability
to introduce wider bidding competition and the failure
to encourage deployment of new technologies. Mobile
telephony and wireless
broadband, the two services
that have the potential to
generate massive positive
externalities, received less
than 2 per cent of the total
funds disbursed by 2012.
Te fact that USOF is
accumulating funds faster
than spending them also refects this failure. USOF
funds have only recently been used for the National
Optic Fibre Network (NOFN). Given the fast pace
of technological advancement, policy should support
the most efcient technology and the most efcient
operator. While the USOF has become agnostic
towards technologies and operators and expanded its
mandate to infrastructure, current telecom indicators in
USOFs two biggest
weaknesses have
been the inability to
introduce wider bidding
competition and the
failure to encourage
deployment of new
technologies.
rural areas refect the USOF regimes failure to achieve
its aims.
Supply-side focus is another of USOFs weaknesses.
While purchasing power in rural areas has increased,
internet and broadband cannot succeed in the absence
of a well-orchestrated eco-system (Kathuria and
Kedia-Jaju 2012). Creating enabling conditions on the
supply side worked for voice telephony, but data-based
communication requires demand-side focus. Access
should be consciously promoted to achieve a level of
usage that helps drive network efects. It is critical to
push for services, applications and afordable pricing
to improve penetration of data-based communication.
Te experience of cable TV and mobile phones both
demonstrate that a price point of around Rs 200 can
trigger brisk demand-side expansion of internet services.
In a positive development, the USOF has initiated
a number of schemes to promote the use of renewable
energy sources for ensuring operation of rural
communications technology (e.g., solar chargers for
code division multiple access, fxed wireless terminal
and village public telephones). Tis is particularly
important because lack of power supply continues to be
a huge constraint for operation of telecom equipment in
rural areas and leads to poor service quality. By March
2012, although 87 per cent of villages had mobile
coverage through telecom service providers (Planning
Commission 2012c), they did not necessarily have
access to quality service.
E-government applications also can drive digital
literacy. Te National E-Governance Plan, Electronic
Services Delivery Bill and Common Service Centres are
good examples of government initiatives to accelerate
the adoption of internet, especially in rural India. In
30
Sourced from Subsidy Disbursed to Various Service Providers upto 31.7.2013, USOF, http://www.usof.gov.in/usof-cms/usof_
currentnew.htm.
Infrastructure 153
encouraging the development of advanced internet
technologies, such as cloud computing, the National
Telecom Policy 2012 is envisioned as a game changer
for the communications industry.
4.6.3 Te Way Forward
From a macro perspective, the reform and development
of Indias telecommunication sector has been a huge
success, but the distribution of benefts has been
distressingly unequal. Although recent trends indicate a
slow narrowing of the gap, rural teledensity lags far behind
urban teledensity. Several factors create this disparity,
including the cost of providing access, poor revenue
due to low population density and lack of commercial
activity. Against this backdrop, wireless technology
should be leveraged to increase rural penetration. Te
focus on convergence among telecom, IT and media
broadcasting will create newer technologies and services
for deployment of afordable access.
Te National Telecom Policy 2012 envisions rural
teledensity to increase to 70 by 2017 and to 100 by 2020.
But the current UFSO scheme is too mechanical and
ignores the benefts of technological advancement and
making competition more broad based. Te fact that
only licensed access providers can bid is too restrictive
opening up bidding will lead to more competition and
better performance. And, since providing rural service is
not fnancially attractive because signifcant economies
of scale cannot be exploited, specialised infrastructure
providers should be subsidised to increase rural
teledensity using wireless technology.
Policy and regulation must more actively bridge the
ruralurban schism. In contrast to international best
practice, which recommends simple enforceable levies
that are less prone to manipulation, Indian government
levies based on revenues are so high that they de-
incentivise investment and expansion, and encourage
manipulation because they vary across diferent services.
Te uniform structure that the new policy proposes
would end this perverse incentive.
Empirical evidence suggests that local rural economies
have benefted immensely from projects such as Indian
Tobacco Company (ITC) e-Choupal, n-Logue, Air
Jaldi and Chanderiyaan, as have health, education and
governance. USOF or other government funds must
be used to establish broadband networks to connect
schools, government agencies and hospitals. In addition
to assisting rural projects that generate high externalities,
the subsidy mechanism should reward early roll-out and
penalise non-compliance.
As mentioned earlier, expanding internet service
requires further intervention both from the supply and
demand sides. Te government plans to connect all
248,000 GPs with broadband infrastructure, of which
about 54 per cent are currently connected. Once the core
network is established, last mile access can be wireless
or wireline. Government policies must simultaneously
focus on driving the usage of internet and broadband.
Both central and state governments must proactively
promote adoption and creation of content, especially in
regional languages. Mobile handset applications in local
languages will further drive the adoption of internet
and broadband in rural areas. Other recommendations
include rationalisation of broadband tarifs and
subsidisation of access by conditional cash transfers to
make internet more afordable for users in rural India.
Policy should have leveraged mobile technology
to increase penetration in rural areas much earlier.
Estimating the cost of this delay is difcult, but the
divide certainly would have been bridged faster with
innovative schemes. Considering the fast pace of
technological advancement in the sector, timing is
crucial. Policy interventions, if not made at the right time,
lose their efectiveness. Te institutional framework
and harmonisation among diferent regulatory bodies
is also critical to the sectors growth. Focus should be
on creating an eco-system to drive impacts, rather
than simply supply-side eforts. If broadband takes
of, it could transform lives and livelihoods, not just
by connecting Indias poor to the infrastructure of the
digital economy, but by allowing them to become digital
producers and innovators.
4.7 Storage
Year after year food grains rot due to inadequate storage
and post-harvest facilities, resulting in losses of about
1020 per cent of food grains and 3040 per cent of
fruits and vegetables (Planning Commission 2011f ).
Te inability to store food often forces distress sales
by farmers. Indias current food grain storage capacity
is 108 million metric tonne (MMT),
31
of which 78
per cent is in the major wheat- and rice-producing
states (India Microfnance 2011), mainly storing
31
Tis includes Cap and Plinth (CAP) facilities for open storage of food grains with adequate precautions such as rat- and damp-proof
plinths and covering of stacks with specially fabricated polythene covers.
154 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
grains procured by Food
Corporation of India (FCI)
for PDS, bufer stocks and
strategic reserves. Te
shortage is estimated at 35
MMT
32
for food grains and
31 MMT for cold storage
(Planning Commission
2011g; Ministry of
Agriculture [MoA] 2012a,
2012b). Much of the operational storage capacity also
is severely outdated.
seeking to attract private participation in enhancing
capacity elsewhere. Te several government schemes
subsequently launched to engage the private sector in
adding storage capacity are discussed in the following.
4.7.1 Government Interventions
Grameen Bhandaran Yojana (GBY) or Rural Godown
Scheme: Launched in 200102, this is the Government
of Indias largest scheme to promote private investment
in warehouses. It provides a subsidy of 1533 per
cent
33
of the capital investment for construction and
renovation of rural godowns through NABARD and
NCDC. As of March 2012, the scheme had created
about 32 MMT of storage capacity, that is, 30 per cent
of the total storage capacity (Global Agri System n.d.).
Other government initiatives have had limited success
in promoting private sector investment.
Private Entrepreneurs Guarantee (PEG) Scheme:
Launched in 2008, this is the scheme for private sector
construction of godowns
for FCI with 10-year rental
guarantees. As of November
2012, a warehouse capacity
of 3.2 MMT had been
created against the approved
capacity of 18 MMT (CAG
2013). FCI currently takes
on the complete investment
and operational risk with
little incentive for the private
party to enhance utilisation
levels and explore other revenue sources. But the high
capital cost (mainly land) at many locations has made it
unattractive for private entrepreneursrental fees simply
are insufcient for reasonable returns on investment.
PublicPrivate Partnership (PPP) initiatives: In
2005, the Government of India initiated PPP for the
construction of modern food grain storage silos (bulk
storage). A pilot as a build-own-operate (BOO) project
with a concession period of 30 years has been operational
since 2009.
34
FCI plans to develop additional silos
Rot due to inadequate
storage and post-
harvest facilities leads
to losses of about 1020
per cent of foodgrains
and 3040 per cent of
fruits and vegetables.
The lack of storage
facilities often forces
distress sales by farmers.
TABLE 4.8 Foodgrain Warehousing Capacity
(million MT)
Foodgrain storage 108
Public sector 74
Food Corporation of India (FCI) 32
Central Warehousing Corporation (CWC) 10
State Warehousing Corporation (SWC) 21
State Civil Supplies Corporations/Depts 11
Cooperative sector 15
Private sector 19
Cold storage (6,488 cold storages) 30
Source: Planning Commission (2011g); Ministry of Agriculture (2012a,
2012b).
Over 70 per cent of Indias storage capacity is in the
public sector (see Table 4.8.), but the development of
warehouses has failed to keep pace with rapidly growing
demand, primarily due to fnancial and managerial
challenges. To meet the gap, the FCIs hired capacity
increased by almost 80 per cent between 200607 and
201112, leading to an almost four-fold increase in
expenses (CAG 2013). To encourage investment and
bring modern technology to storage facilities, handling
and transportation, policy thus has shifted towards
involving the private sector through the National
Policy on Handling and Storage of Food Grains 2000
(NPHSFG). With this policy, FCI has limited the
construction of facilities to special category states,
Private entrepreneurs
fnd godown
construction unattractive
due to high capital costs,
mainly land. Rental fees
do not refect high land
prices, and if they did,
they would be unviable
given the low value of
basic food stufs being
stored.
32
Estimates of required capacity are: (i) for consuming areas, storage capacity to meet four months requirement of PDS and other welfare
schemes; (ii) for the procurement areas, the highest stock level in the last 3 years.
33
Male farmers receive a subsidy of 25 per cent, women farmers 33 per cent, and private entrepreneurs and corporate 15 per cent. National
Bank for Agriculture and Rural Development (NABARD) and National Cooperative Development Corporation (NCDC) release subsidies
through banks.
34
Adani Agri Logistics developed the project, under which two base silos of 2 lakh MT capacity each were built at Moga and Kaithal in
Punjab, with feld depots at Chennai, Coimbatore, Bangalore, Navi Mumbai and Hoogly of 0.25 lakh MT storage capacity each. Te total cost
was Rs 640 crore including silos, silo sidings and special railway wagons for transportation. FCI paid Adani Agri Logistics a service charge of
Rs 160 per MT per month.
Infrastructure 155
with a total capacity of 2 MMT across 42 locations in
nine states through similar PPP initiatives, but there
has been little progress so far. Tis may be due to: (i)
FCIs difculty in procuring suitably located land at a
reasonable cost and (ii) limited interest on FCIs part,
as it considers the rental payments it will have to pay to
be too high.
Rural Infrastructure Development Fund (RIDF)
Warehousing: NABARD has formulated this scheme
with a budgetary allocation of Rs 2,000 crore in 2011
12 and Rs 5,000 crore in 201213 (PIB 2011 and
TOI 2012). Under the scheme, NABARD lends state
governments funds to construct warehouses through
State Warehousing Corporations and co-operatives. In
201112, NABARD provided banks refnancing for
private warehouse sector lending but has discontinued
doing so. Te private sector has not beneftted from
this scheme.
4.7.2 Policy for Private Sector
Participation not Conducive
to Competition
Private-sector, third-party warehousing (commodity
owners outsourcing of warehousing) was introduced
to meet rapidly growing demand. Despite the
announcement of a policy to attract private participation,
several barriers to entry and to inducing competition
persist, including the plethora of legal approvals and
clearances required (see Box 4.12). Tese are not
insurmountable, but add signifcantly to time and
transaction costs.
Warehousing is highly capital-intensive and the land
requirements are difcult to meet. It is location-specifc
and requires large tracts of land at the mandis, close
to mandis and railway sidings or along the highways.
Land-related issues, such as non-availability, high costs
and difculties in conversion to non-agricultural use,
make warehouses expensive.
In addition to capital costs, cold storage has high
operational costs, mainly due to its use of power
generator back-up
35
to overcome unreliable power
supply. Frequent power cuts also reduce the efciency
of storing fruits and vegetables, which are subject to
chilling injuries and high perishability. Financial returns
currently are unattractive because the value of basic food
stufs is low compared to the cost of storing it.
Te private sector fnds investment in the business of
storing agricultural products as involving high risks due
to its dependence on weather, and often fnds the returns
on investment not commensurate with the high risks.
Government incentives have to be attractive enough so
that the private sector is motivated to participate.
Te warehousing sector is consolidating with a
few large nationwide private sector entities emerging
as warehouse operators, while small operators fnd it
difcult to manage their operations. A large number
of private sector warehouses currently are small and
fragmented, and operated mainly by traders with limited
investment and management capacity. Because these
small operators also cannot provide additional value-
added services such as procurement, cleaning, grading,
certifcation and transportation, commodity owners are
BOX 4.12 Key Regulatory Constraints
The Essential Commodities Act (ECA): Because storing goods is sometimes deemed hoarding, warehouses for essential
commodities must obtain state government licences before buying or storing commodities. They also must comply
with government orders regarding storage and stock limits. During emergencies, state governments set storage limits
and restrict movement of commodities across state lines. Inspections, licences and movement restrictions from surplus
warehouses to defcit warehouses across state lines increase transaction costs.
Food Safety and Standards Regulation 2010: Each warehouse must obtain a licence for operations from the District
Food Safety Ofcer and is subject to periodic inspections, but the inspection procedures are not standardised across
districts and states.
Agriculture Produce Market Committee (APMC) Laws and State Warehousing Acts: State-specifc regulations determine
licensing and standards of warehousing and cold storages. Since licences are issued to the warehouse/cold storage
itself rather than the company, each location needs a separate licence. The lack of standardisation across states also
hinders operations for nationwide warehouse operators.
Source: FICCI (2009); Gujral and Joshi (2011); Virmani and Rajeev (2001).

35
Power tarifs range between Rs 5 and Rs 7 per unit, and the cost of operating generators is around Rs 1415 per unit.
156 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
unwilling to pay them good rental fees. Even though it
is classifed as an industry, warehousing also does not
qualify for the 10-year income tax holiday unless it is
an integrated grain handling and transportation project.
Small operators that do not have such an integrated
business thus cannot claim the beneft.
Agricultural product marketing is within the states
purview, and states need to enact appropriate legislative
amendments and implementing rules to make private
sector investment in the sector attractive. Without this,
or with inconsistent legislation, private sector is deterred
from participating. Mere substitution of the public
sector monopoly with private sector, without favourable
provisions for greater private participation, would only
breed private monopoly. Over the past 5 years, a few
large, professional warehouse operators have set up
nationwide warehousing operations.
36
Tey provide
end-to-end integrated servicesprocurement, testing,
certifcation and liaising with banks for credit against
commodities stored
37
at the back end, and transportation
at the front end with state-of-art warehouse facilities.
Such integration, using hub and spoke models instead
of standalone warehouses, enables large operators to
reduce overall operating costs and enhance revenues
through value-added services. Although procurement
of major food grains such as
wheat and rice is still largely
with FCI, opportunities
exist for warehouse
operators to undertake
procurement in other crops.
Large warehouse operators
thus are expanding their
procurement functions
nationwide through mandis and connecting directly to
farmers, which the small operators cannot do.
Large warehouse operators have succeeded in
cornering much of the business because they have
higher investment capacity to take greater risks and
set up large, state-of-the-art warehouses, expand to
other businesses along the value chain and provide
better client service. Large operators, in the absence
of appropriate PPP models that could encourage
greater private participation, thus are increasing their
monopoly power to infuence the market. To survive in
such a market, small operators must either protect their
margin by providing poor quality services or shut down,
and sell or lease their warehouses to the large operators.
In such a risky and capital-intensive sector, states need
to put in place appropriate and several plausible PPP
structures and model contracts to ensure better risk
sharing and better leveraging private sector fnancial,
operational and managerial efciency as well as wider
private participation.
4.7.3 Warehouse (Development and
Regulation) Act, 2007
Under the Act, the Warehousing Development
and Regulatory Authority (WDRA) registers and
accredits warehouses, and specifes that the registered
warehouses can issue Negotiable Warehouse Receipts
(NWRs). WDRA administers standards for storage,
quality certifcation and
grading of commodities in
warehouses. Creating and
empowering the WDRA
is intended to improve
warehousing standards
across the country and
across operators. NWR
is intended to arrest the
problem of distress sales
by farmers, as it allows the
farmers to scientifcally store their produce and obtain
credit for the commodity stored (see Chapter 2).
Certifed warehouse operators are central to the
NWR system because they assess the quality, quantity
and value of goods stored. Currently, about 280
warehouses have been accredited under WDRA and
are eligible to issue NWRs (Warehousing Development
and Regulatory Authority 2012). Of these, only
24 are in the private sector. Achieving scale in the
implementation of the NWR faces several challenges.
Given the WDRAs limited capacity to evaluate,
accredit and monitor, the large number of warehouses
nationwide cannot be accredited. Small warehouse
operators with low fnancial net worth and operational
credibility cannot meet accreditation norms and issue
36
Tese include National Collateral Management Services, National Spot Exchange Limited, National Bulk Handling Corporation
(NBHC), Adani Agri Logistics, Staragri and Shree Shubam Logistics Ltd. Staragri operates about 450 warehouses across nine states, providing
integrated services. NBHC is operating 437 storage facilities across 15 states.
37
Banks pay warehouse operators commissions of about 0.50.6 per cent for obtaining bank credit for their customers against the
commodities stored and provide the bank documentation service free to their customers.
End-to-end integration
rather than standalone
warehouses, enables
large operators to
reduce overall operating
costs and enhance
revenues through value-
added services.
The Negotiable
Warehouse Receipt is
intended to arrest the
problem of distress
sales by farmers, as
it allows the farmers
to scientifcally store
their produce and
obtain credit for the
commodity stored.
Infrastructure 157
NWRs, and could eventually be edged out. Warehouses
operated by farmer groups and cooperatives under the
GBY, like small operators, also may not be able to meet
accreditation norms, thereby excluding farmers who
store commodities in them from the benefts. Currently,
NWRs are issued in paper rather than electronic form,
leading to problems of slow transactions, loss of receipts
and forgery.
4.7.4 Te Way Forward
Limited availability of land and its high and rising cost
is critical in limiting the expansion of storage capacity.
Several steps could be taken to boost the inertia in
adding capacity.
First, state governments and Indian Railways could
consider providing land to operators on lease of 2030
years. Second, given that warehousing is a capital-
intensive sector with long gestation periods, the PEG
scheme should be made more attractive through well-
defned cost-plus formula for rentals, which would
cover investments and allow reasonable returns on
investment. Public agencies that provide infrastructure
support such as power, road access and water supply,
especially in villages and remote locations, are essential
to ensure better operational efciency and cost savings.
Warehousing also should be allowed tax benefts, even
without upstream or downstream integration, thereby
allowing small operators to beneft. Te plethora
of approvals and clearances needed due to multiple,
state-specifc licensing and regulatory structures are
not conducive to private participation and must be
simplifed and standardised. Various PPP structures
should be considered and states should put in place
standard contractual agreements to ensure better risk
sharing and demonstrate transparency as well as greater
certainty. Government incentives and compensations
should match the risks perceived by the private sector.
In sum, a supportive investment environment that
encourages fair and equitable competition is important
to increasing warehousing capacity and efciency for users.
Conclusion
Te lack of convergence among diferent government
agencies and diferent schemes for related infrastructure
is one of the main problems described in this chapter.
Te starkest example is rural water, which involves at
least 10 central government departments and agencies
and numerous ones in each state government. Planning
and executing programmes in an integrated, timely,
efcient and cost-efective manner is obviously difcult,
and a house lacking basic amenities (electricity, cooking
chullah, water and latrine) can be under various diferent
government schemes. Investing in one facility without
a complementary facility may negate investment gains:
for example, latrines without water are unusable
and water supply without latrines (open defecation)
leads to contamination. Decentraliseddistrict/block
levelplanning is one way of achieving convergence
(see Chapter 6). An attempt in the Eleventh Plan to
develop a district plan that converges agriculture, animal
husbandry and related agricultural activities with
PRI involvement, however, encountered various
problems, such as lack of PRI capacity and reluctance
of district authorities to acknowledge the need for
decentralised planning.
Large inequities in access to infrastructure services
persist and do not seem to be decreasing signifcantly,
except for access to electricity for lighting and pucca
housing. Of particular concern is that the STs have the
least access to all infrastructureespecially marked
for housing and drinking water. One reason is that
they live in remote areas and in hamlets that may not
even be covered under several government schemes.
Another is that many government schemes are target-
driven, and addressing more densely populated areas
makes meeting targets easier. Te government recently
has made special provisions in various schemes, such
as PMGSY and the water habitation-saturation
approach in NRDWP, and has even developed special
programmes to target these groupssuch as RVE and
IAPbut results are not yet visible. Clearly, there is
still a long way to go.
Targeting BPL or marginalised households has not
always worked, especially if the households lack land,
fnances or awareness to avail the schemes benefts.
Such an approach also ignores APL families who may be
resource-constrained and require some assistance, albeit
less than BPL households. For some interventions that
are efective in covering the entire habitation rather than
just a few householdssuch as sanitationremoving
the APL/BPL distinction makes sense, as proposed in
the Twelfth Plan.
All programmes focus heavily on capital expenditure
and facility construction, but almost completely neglect
maintenanceirrigation being the worst example.
Adequate funds simply are not allocated, PMGSY
being a notable exception. And panchayats and other
local institutions lack the capacity, awareness or sense of
ownership to maintain facilities.
158 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Certain communities nonetheless have been
mobilised, with remarkable results. Villagers have
managed their water resources, paid for services and felt
a stake in maintaining the assets well, while ensuring
equity and sustainability. Community-managed
systems that prevailed relied on local, environmentally
sustainable solutions and resources. Use of local
resources to construct roads and housing also brings
down costs. In addition to drawing on such practices,
innovative and green technologies adapted to local
conditions and resources should be developed. Several
innovations in water-less latrines, for instance, can
accommodate the needs of water-scarce areas.
Building rural infrastructure clearly is largely
state-driven because many services cannot be
priced appropriately due to externalities and lack
of afordability. Even for Indias most successful
infrastructure, the telecom sector, rural expansion
needs viability gap funding. Re-orienting the USOF
to incentivise competition, the key to telecoms urban
success, is also key for advancing rural penetration.
Policy design and incentives are important in leveraging
private participation and encouraging competition.
Finally, to get the best value for its investment, the
government must know how well it is achieving its
objectives and whether programme design or policy need
to be modifed. Te MoRD will thus set up the concurrent
evaluation ofce (CEO) as an ofce of the ministry to
take primary responsibility for evaluating various rural
development schemes and programmes through a
network of independent research institutions. Te CEO
will replace the Economic and Monitoring Division in
the MoRD, which was understafed and only focused
on monitoring aspects. Te CEO, with the help of a
quality database that needs to be put in place, will review
evaluation results and provide policy recommendations.
Whether these evaluations will provide constructive and
impartial feedback to the respective departments and
whether such recommendations will be implemented
remain open questions.
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Inspiring Stories
Image credit: Ministry of Rural Development
LANGUISHING WATERSHED TRANSFORMED
Hiware Bazar, Maharashtra
Image credit: Popatrao Pawar, Hiware Bazar
Facing severe water scarcity, the village developed its watershed by:
undertaking reforestation on hilly forest land
building trenches to trap and slow rainwater runof
levelling cultivation plots and framing them with barriers
It maintained its recharged groundwater table levels by:
prohibiting tree cutting and open grazing in development areas
prohibiting bore-well drilling except for drinking water
prohibiting water-intensive crops like sugarcane and banana
preparing an annual water budget and planning crops by area, crop type and number of cultivation cycles depending
on rainfall in the year
With watershed development that permitted cash crops and dairying, Hiware Bazar turned from a poor village to a
prosperous one in the top decile in the country. It also has safe water and sanitation for all and almost universal literacy.
Success hinged on:
community involvement to collectively decide priorities and regulations
benefciaries contributing labour
addressing everyones livelihood concerns, including the landless
treating water as a community resource

Hiware Bazar now has assured drinking water even in droughts.
Source: IDFC. 2012. Hiware Bazaar: A Water-led Transformation of a Village. IDFC Quarterly Research Note No. 16.
BIOMASSBASED POWER SYSTEMS FOR REMOTE HABITATIONS
Bihar
Image credit: www.acumen.org
Power systems in rural Bihar using locally available rice husk as fuel:
generate and supply power locally for lighting to clusters of at least 300 households
using low-cost generation plants built on rented plots with standardised modular structures and running insulated
wires along bamboo poles to distribute electricity
and cater to household demand as long as each household assures minimum demand of two light connections
(2 x 15 watt CFL) and monthly payment of Rs 100 for 6 hours of daily supply

Bihar currently has over 80 plants built by Husk Power Systems, enabling village life after darkbusinesses and shops can
stay open and children are able to study.

Success hinged on:
lowering power-generation cost through technological innovation and exploiting scale economies
lowering fnancial costs through higher equity share relative to debt, supplementing capital subsidies and low interest
loans
efective management of feedstock by running own rice mills and providing husking service to local farmers free or at
low prices
training and involving villagers in managing plant operations
Remote villages in Bihar now have reliable, clean-energy lighting.
Source: IDFC. 2011. Biomass-based Decentralized Distributed Generation for Universal Energy Access. IDFC Quarterly Research Note No. 11.
Image credit: IDFC
FORESTPROTECTING COMMUNITY PAVES WAY FOR BAMBOO SALE
Jamguda, Odisha
Image credit: www.downtoearth.org.in
To combat forest degradation, since the 1970s local communities formed over 10,000 self-initiated forest protection groups in
Bihar, West Bengal, Odisha, Jharkhand and Andhra Pradesh. In Odisha 4,500 groups protecting 10 per cent of the forest area
improved biodiversity and forest density but
their right to sell non-timber forest products (NTFPs), and inclusion of bamboo as an NTFP, was not legally recognised
until the Forest Rights Act, 2006 (FRA).
Jamguda in Kalahandi, Odisha:
has protected the forest since 1990
got community forest rights under FRA in 2010 but, denied a transit pass, was unable to sell harvested bamboo outside
the village
became the frst village in Odisha to get a remunerative price for bamboo by getting permission to sell outside the
village in March 2013
Success hinged on:
the communitys eight-month long struggle and political pressure on the forest department to issue a transit pass to
sell bamboo
Proper FRA implementation can empower forest dwellers and boost incomes.
Source: Ajit Kumar Banerjee. 2010. Multiplicity of Indian Forest Management and Its Relative Contribution to Livelihood. RULNR
Monograph. Hyderabad: CESS; Mark Pofenberger and Prodyut Bhattacharya. 1996. Grassroots Forest Protection: Eastern Indian Experiences.
Berkeley: University of California; Yashmita Ulman and Sudhansu Sekhar Deo. 2013. JamgudaA New Beginning Under FRA. Community
Forestry 27, JanApril. Odisha: Regional Centre for Development Corporation.
To address high neonatal mortality rates, in 199398, the Society for Education, Action and Research in Community Health
started a feld trial of home-based neonatal care through
health education to mothers
supported breast-feeding
monitoring body temperature of new-borns, and
regular home visits during the neonatal period to monitor for danger signs in mothers and babies.
Home-based care reduced the neonatal mortality rate by 70 per cent and infant mortality by 56 per cent. In 2001, the
project was replicated in other Maharashtra sites where mothers had limited access to neonatal care.
Both neonatal and infant mortality rates declined 50 per cent
in replication sites.
Source: Abhay Bang, Hanimi Reddy, Mahesh Deshmukh, Sanjay Baitule and Rani Bang. 2005. Neonatal and Infant Mortality in the Ten
Years (1993 to 2003) of the Gadchiroli Field Trial: Efect of Home-Based Neonatal Care. Journal of Perinatology 25: S92S107; SEARCH. 2006.
Replicating the Home-Based Newborn Care in India: New Evidences from 12 Sites and Implications for National Policy. Report of the Convention,
New Delhi, 10 August 2006. Available at http://nipccd.nic.in/mch/fr/nbc/erl27.pdf.
NEONATAL MORTALITY RATE REDUCED BY 70 PER CENT
Gadchiroli, Maharashtra
Image credit: www.indiatodayimages.com
CHILDREN ENCOURAGE USE OF TOILETS
Hiware Bazar, Maharashtra
Image credit: Popatrao Pawar, Hiware Bazar
The village of Hiware Bazar, Maharashtra, used children as a medium to encourage toilet-use.
The panchayat built toilets in the anganwadi and school and made sure that:
the children used them
the toilets were built with a jalli door so children could look out into the open air, as they were used to, and
the children, including the sarpanchs, cleaned them.
As children became accustomed to toilet-use, its health and other benefts, they spread the message to their parents.
By 2007, all residents had built individual soak pit toilets at their own cost.
Source: IDFC. 2012. Hiware Bazaar: A Water-led Transformation of a Village. IDFC Quarterly Research Note No. 16.
Before mobile phones were available, Kerala fshermen often wasted their catch because they had no way of knowing the
daily demand, best markets or prices (on average 58 per cent of the catch would remain unsold).
Robert Jensen: On January 14th 1997 11 fshermen ended up throwing away their catches, yet on that day
there were 27 buyers at markets within 15 km who would have bought their fsh. There were also wide variations
in the price of sardines along the coast.
After fsherman started using mobile phones to call coastal markets while still at sea:
they were able to fnd the best price
fsh were no longer wasted, and
variation in prices along the coast fell dramatically.
Fishermens profts rose by an average 8 per cent and consumer prices fell by 4 per cent.
Source: Robert Jensen. 2007. The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries
Sector. The Quarterly Journal of Economics 122 (3): 879924.
FISHERMEN USE MOBILE PHONES TO OPTIMISE SALE
OF THEIR CATCH
Kerala
Image credit: www.thehindumages.com
THE BIRTH OF THE SOCIAL AUDIT: A FORUM FOR ALL TO
PARTICIPATE IN GOVERNANCE
Rajasthan
Pioneered by the Mazdoor Kisan Shakti Sangathan in the mid-1990s, social audits had two core elements:
demanding access to government records of local development works, bringing in the notion of the right to
information (RTI); and
Jansunwai, a public hearing at which details of of cial records were read out and local residents invited to give
testimonies, and government of cials and local politicians to publicly defend their actions.
Rajasthan may be considered the birthplace of social audit.
Source: Mazdoor Kisan Shakti Sangathan (www.mkssindia.org, accessed on 22 July 2013).
Image credit: Ministry of Rural Development
Andhra Pradesh is the only state with regular social audits, improving transparency and accountability:
Youth trained as village social auditors cross-verify of cial records, examine worksites and gather information through
interviews
Findings are shared with the villagers at gram sabha meetings, then taken up at mandal level with a group of villages,
where of cials are answerable
Social audits have led to improved scheme implementation, empowered villagers and strengthened their ability to interact
with government of cials.
Success hinged on:
top level political and bureaucratic commitment
local representatives and lower level bureaucrats brought on board so that they did not feel threatened by social audits
social audit starting quietly, and once it gathered momentum with huge turnouts, it became dif cult for political set-up
to oppose the process
Andhra Pradesh has a model state-driven social audit system.
Source: Yamini Aiyar and Salimah Samji. 2009. Transparency and Accountability in NREGAA Case Study of Andhra Pradesh.
Accountability Initiative Working Paper No. 1, Accountability Initiative, Centre of Policy Research, Delhi; Ritesh Singh and Vinay Vutukuru. n.d.
Enhancing Accountability in Public Service Delivery through Social Audits: A Case Study of Andhra Pradesh, India. Engaging Accountability:
Working Paper Series, Accountability Initiative, Centre of Policy Research, Delhi.
STATESPONSORED AND SUPPORTED SOCIAL AUDITS
Andhra Pradesh
Image credit: Ministry of Rural Development
WOMENS SELFHELP GROUP SHG REAPS A HARVEST
AND GAINS CONFIDENCE
Tripura
In a backward tribal hamlet, an 11-member womens self-help group (SHG) used members own savings and a bank loan to
transform their livelihoods.
Against a Rs 6,050 deposit, they obtained credit with which they leased a 1-acre plot for Rs 15,000.
Contributing their own labour, they grew and reaped a crop harvest.
In a single cropping season, they were able to both repay the borrowed amount and save for the future.
The formation of the SHG has allowed:
women to achieve fnancial independence, and
the power to make their own decisions
With new confdence, the group now undertakes other economic activities such as weaving traditional tribal garments.
Source: National Bank for Agriculture and Rural Development (NABARD) (www.nabard.org/microfnance/successstories.asp, accessed on 20
June 2013).
Image credit: Ministry of Rural Development
Commercial farming increased farmer indebtedness and degradation of productive lands due to heavy use of expensive
pesticides and other inputs. Chemical inputs accounted for one-third of the cost of cultivation. CMSA was introduced,
which:
encourages a shift to non-pesticide management (NPM) based on an understanding of the crop ecosystem, adopts
suitable cropping patterns that maintain soil health, and uses natural fertilisers
draws on farmers traditional knowledge and skills, and on locally available materials
is implemented using experienced farmers working as community resource persons
is implemented through farmer feld schools and the use of information and communication technologies (ICT) to
share information and encourage community participation and learning
sets up community seed banks to eliminate purchase of commercial seeds, and NPM shops to assist farmers.
With lower costs without lower yields, farmers now have higher net incomes and signifcant health and
ecological benefts. About 2 million farmers have now adopted CMSA on over 1.5 million hectares.
Source: Vijay T. Kumar, D. V. Raidu, Jayaram Killi, Madhavi Pillai, Parmesh Shah, Vijayasekar Kalavakonda and Smriti Lakhey. 2009. Ecologically
Sound, Economically Viable. Learning Note. Washington, D.C.: The World Bank. Available at http://www.csa-india.org/sites/csa-india.org/
fles/Ecologically_Sound_Economically_Viable-_Community_Managed_Sustainable_Agriculture_in_Andhra_Pradesh_India_1.pdf; Society
for Elimination of Rural Poverty (SERP). 2013. Indira Kranti Patham: Progress Report for the Month of April, 2013. Hyderabad: Society for
Elimination of Rural Poverty.
COMMUNITY MANAGED SUSTAINABLE AGRICULTURE CMSA
IMPROVES YIELDS
Andhra Pradesh
Image credit: csa@csa-india.org
BICYCLES IMPROVE HIGH SCHOOL GIRLS ENROLMENT
Bihar
In 2006 the Government of Bihar provided bicycles to all girls studying in classes IX and X.
Each student was given Rs 2,000 (now Rs 2,500) and receipts for bicycles were collected.
The bicycles improved school access by reducing the cost of attendance.
The programme improved girls school enrolment and completion in grade IX by 40 per cent.
Most of the improvement was in villages where the nearest secondary school was more than 3 km away.
The programme increased the number of girls appearing for the secondary school certifcate (SSC) exam by
10 per cent and bridged the pre-existing gender gap in enrolment by 40 per cent.
Source: Karthik Muralidharan and Nishith Prakash. 2013. Cycling to School: Increasing Secondary School Enrollment for Girls in India.
Powerpoint presented at the IGC South Asia Growth Conference, 1819 July, Delhi.
Image credit: Abhinav Nayar, Yale University
REFORMATION OF A PUBLIC DISTRIBUTION SYSTEM PDS
Chhattisgarh
Since 2004, the Government of Chhattisgarh plugged leakages, improved delivery and extended coverage of its PDS by
turning over management of ration shops from private dealers to community organisations
replacing private transporters and directly delivering food to ration shops by the frst week of each month
introducing wall painting of PDS shops with card holder names, pricelist and toll-free number for complaints
using technology such as digitisation of ration cards to eliminate bogus cards and global positioning system on trucks
to limit diversion of PDS grains
Success hinged on:
breaking the powerful private dealer lobby
extending coverage and involving villagers in running the shops gave people a stake in their local ration shops
commitment of the government to implement the reform and pay for it
Chhattisgarh reformed its PDS into a transparent and ef cient one, reducing leakages while reaching
80 per cent of the rural population.
Source: Jean Drze and Reetika Khera. 2011. PDS Leakages: The Plot Thickens. The Hindu, 12 August; Raghav Puri. 2012. Reforming the
Public Distribution System: Lessons from Chhattisgarh. Economic and Political Weekly 47 (5): 2123; R. Khera. 2011. Revival of Public
Distribution System: Evidence and Explanations. Economic and Political Weekly 46 (4445): 3650.
Image credit: www.thehinduimages.com
Image credit: Sudhir Shivaram/Sanctuary Photo Library
Summary
N
atural resources sustain
rural life in several ways.
Agriculture sustains a
majority of rural Indians
who depend on land for cultivation and
fodder, forest products for fuel, food and
medicine, water for drinking, cooking
and irrigation, and fsheries for food
and sale. But these resources have been
over-exploited and are rapidly depleting,
exacerbating already severe rural poverty
and vulnerability to climate change. Tis
chapter explores the reasons and evaluates
initiatives taken to turn things around.
Policymakers have often overlooked
the crucial need to strike a proper balance
between protecting natural resources and
enhancing livelihoods. Often, policies
aimed at catalysing growth in rural
incomes unintentionally introduced
perverse incentives at the expense of the
environment. Green revolution policies,
for instance, helped India achieve food
security. But, aided by subsidies, farmers
intensifed the use of fertilisers and
groundwater irrigation, which has not
only degraded land but has also led to the groundwater
crisis that now threatens even the basic right to drinking
water. Farmers have become caught in a vicious cycle: land
degradation reduces crop yields so they increase inputs,
which in turn raise costs and further degrade land.
Certain initiatives intended to protect and conserve
natural resources, on the other hand, have failed to
consider the livelihoods of those critically dependent
on those resources. Te notifcation of forests as
reserved and protected under government control, for
example, was intended to conserve these ecologically
diverse and fragile areas, but these measures have in fact
disenfranchised the Scheduled Tribes and forest dwellers
who traditionally protected forests and depended on
them. State control over resources previously managed
by local residents led to the disintegration of community
stakes in several places. Eforts to cultivate wastelands
or acquire local commons for public projects also
have alienated communities from common property
resources and led to the disintegration of their stake in
natural resources.
Te preservation of natural resources is essential
to securing rural livelihoods. Te vicious cycle of
degradation and depletion of resources that impacts
livelihoods must be reversed, though the zeal to protect
resources (such as forests) should not come at the cost
of livelihoods.
5
CHAPTER
Sustainability
174 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Conservation and efcient use of natural resources can
be achieved through sustainable farming practices such
as the use of organic composite fertilisers and reduced
water-intensity. Tis must be encouraged through a
mix of fnancial incentives, technology, regulations and
institutional support. Top-down eforts to arrest land
degradation and increase agricultural productivity
have had limited success. But experience shows that
communities, either spontaneously or aided by NGOs,
can efectively ensure equitable sharing, conservation
and maintenance of natural resources.
Te success of initiatives such as community-
managed sustainable agriculture and decentralised
rainwater harvesting highlight the importance of a more
participatory approach. Te importance of community
management has now been acknowledged in two
legislationsthe Panchayats (Extension to Scheduled
Areas) Act 1996 and Forest Rights Act 2006that
entrust forest dwellers with certain rights over forests.
Tese Acts must be implemented in letter and spirit.
Eforts to address climate change must be integrated
into rural development policy. Tese eforts should
address mitigation, such as through organic farming
which simultaneously reduces environmental stress and
cost of cultivation, and to build the rural populations
capacity to adapt and become more resilient to sudden
impacts of climate change.
5.1 Balancing Livelihoods
and Natural Resource
Conservation
Rural India depends heavily on natural resources for
sustenance and livelihood. Land is used for cultivation
and fodder, wood and other forest products for fuel, food
and medicines, crop and animal waste for fuel, water for
drinking, cooking and irrigation, and local fsheries for
human consumption and export. Products and services
derived from natural resources also provide an ever-
expanding range of income-generating opportunities,
crucial to those who lack adequate employment,
particularly during the lean agricultural season.
But population growth, market forces and
industrialisation have led to over-exploitation of natural
resourcesi.e. use rates exceeding natural regeneration
ratesand regeneration or conservation eforts
have been inadequate. Environmental degradation,
thus, is shrinking the rural economys input base and
exacerbating already severe rural poverty ( Jodha 2000).
Tensions and conficts over natural resources are
increasing. Steps to ensure
the sustainability of natural
resources and arrest damage
to the ecosystem and rural
livelihoods are urgently
needed before the situation
becomes irreversible.
Past policies governing
natural resource use and
management often failed, in part because they failed
to recognise the importance of natural resources in
sustaining rural livelihoods. Only now have we realised
that rural development strategies must aim to conserve
natural resources, increase efciency of resource use,
reduce negative environmental impacts, and strengthen
climate resilience of communities and contribute to
climate change mitigation (MoRD 2012a). Policies
emphasising inter-temporal and inter-generational
equity must be framed so that short-term gains are
not achieved at the cost of long-term sustainability.
Protecting land, water, forest and fshery resources is
necessary to ensure long-term eco-balance, food security
and livelihoods.
Because most natural resources are community-
owned, local institutions play a critical role in managing
them. Te capacity of local institutions to plan,
implement and manage resource conservation through
various government programmes, such as Mahatma
Gandhi National Rural Employment Guarantee Scheme
(MGNREGS), thus needs to be strengthened (see
Chapter 7), as does their role in ensuring that gains from
conservation are equitably distributed (see Chapter 6).
Tis chapter explores issues related to the
sustainability of land, water, forest and fshery resources
in rural India. It examines how these resources are
threatened and evaluates the initiatives taken to
overcome challenges. It also discusses the rural sectors
vulnerability to climate change and the steps being taken
to increase its resilience against its adverse impacts.
Various sustainability issues that are intrinsically linked
to rural livelihoods are discussed in detail in the chapter
on Livelihoods (Chapter 2).
5.2 Land
Land provides habitat and sustenance. But the increased
pressure of population growth and competing land uses
have caused a serious decline in the availability and
quality of land resources with huge impacts on ecological
sustainability and rural livelihoods.
Steps to ensure the
sustainability of natural
resources and arrest
damage to the ecosystem
and rural livelihoods are
urgently needed before
the situation becomes
irreversible
Sustainability 175
5.2.1 Declining Land Availability
India occupies only 2.4 per cent of the worlds area,
yet supports 17 per cent (as of 2011) of the worlds
population and about 11 per cent (as of 2007) of the
worlds livestock. Over
the years, land use has
signifcantly intensifed due
to population and livestock
growth, economic forces,
weakening of institutions
that regulate land use and
various natural factors
(MoA 2012a).
1

Tis declining land
availability has had a major impact on rural livelihoods.
Agriculture, the largest category of land use, sustains a
majority of the rural population and is the mainstay of
the rural economy. Farmers have tried to increase yield
or productivity through increased irrigation and use of
other inputs, resulting in higher cropping intensity. So,
although the net sown area
2
has remained at 46 per cent
of total geographic area since 197071 (it increased in
the frst two decades after independence from 42 per
cent in 195051 to 46 per cent
3
), the gross cropped
area
4
has signifcantly increased due to higher cropping
intensity
5
(see Figure 5.1).
Industrialisation, urbanisation and infrastructure
projects have also increased the demand for land. Te
area under non-agricultural use has increased from
16 million hectares (mha) in 197071 to 26 mha in
200910 (MoA 2012a), leading to vast displacement
and resettlement. And the history of implementing
resettlement and compensation packages for people
displaced by land acquisition for non-agricultural
purposes is not encouraging. But the Right to Fair
Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act 2013which
attempts to balance such concerns with the needs
of industrialisation and developmentofers some
relief to those historically dependent on land for their
livelihood (see Chapter 2).
5.2.2 Land Degradation
Land degradation is the main cause of reduced land
potential, which, in turn, afects the livelihoods of
those dependent on land. Many farmers are caught in
a vicious cycle: land degradation reduces crop yields,
so they increase the use of farm inputs, which in turn
raises costs and contributes to further degradation of
the land. Since the minimum support price (MSP)
is determined at the national level, farmers in regions
with higher cultivation costs sufer more than those in
Over the years, land
use has signifcantly
intensifed due to
population and livestock
growth, economic forces,
weakening of institutions
that regulate land use
and various natural
factors.
FIGURE 5.1 Gross Cropped Area, Net Cropped Area and Irrigated Area
200
150
100
50
0
m
h
a
1
9
5
0

5
1
1
9
6
0

6
1
1
9
7
0

7
1
1
9
8
0

8
1
1
9
9
0

9
1
1
9
9
5

9
6
2
0
0
0

0
1
2
0
0
5

0
6

(
P
)
2
0
0
9

1
0

(
P
)
21
119
132
153
25
133
166
141
31
173
39
140
186
143
48
187
142
53
185
141
55
193
141
61
192
140
63
Gross cropped area Net cropped area Net irrigated area
Note: PProvisional
Source: MoA (2012a).
1
Per capita availability of land declined from 0.89 ha in 1951 to 0.27 ha in 2011, and is projected to decline to0.19 ha by 2050. Te average
size of operational holdings decreased from 2.3 ha in 197071 to 1.2 ha by 201011 (MoA 2012c).
2
Net sown area is the total area sown with crops and orchards with areas sown more than once in the same year counted only once.
3
Land-use statistics are available for 200910 for 306 mha (covering 93 per cent of the total land area).
4
Gross cropped area is the total area sown with areas cropped multiple times counted as many times as they are sown in a year.
5
Te cropping intensity represents the ratio of the gross cropped area to the net cropped area.
176 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
By far the leading cause
of land degradation is
soil erosion due to water
run-of and loss
of vegetation cover.
Many farmers are
caught in a vicious
cycle: land degradation
reduces crop yields, so
they increase input use,
which raises costs and
further degrades land.
fertile regions. In addition
to crop cultivation, land
degradation also adversely
afects livestock and forest
production.
In 2005, the National
Bureau of Soil Survey and Land Use Planning
(NBSS&LUP), Nagpur, reported that around 147
mha of land sufered from various kinds of degradation.
According to a study by the Indian Space Research
Organisation (ISRO), as much as 57 per cent of Indias
total area has been subject to degradation (32 per cent)
or desertifcation (25 per cent), the degradation of
dryland areas (Ajai et al. 2009). Various factors caused
such degradation:
Soil Erosion. By far the leading cause of land degradation
is soil erosion due to water run-of and loss of vegetation
cover. In 2008, the NBSS&LUP estimated that soil
erosion by water accounted
for 70 per cent of total
land degradation (see
Figure 5.2). In particular,
more than half the area of
Chhattisgarh, Jharkhand,
Madhya Pradesh, Uttar
Pradesh, Uttarakhand and the north-eastern hill states
has been degraded due to soil erosion, with 11 per cent
of the area classifed as under very severe soil erosion
(NAAS 2012).
Inappropriate Input Use. Land also has been degraded
as an unintended consequence of policies that
encouraged inappropriate input use. Tat the green
revolutionwhile it increased output and assisted in
attaining self-sufciency in foodgrain production using
irrigation, high-yielding varieties of seeds, chemical
fertilisers and pesticidesalso resulted in inefcient
input use and degradation
of natural resources is now
widely acknowledged. Poor
management of water for
irrigation coupled with
inadequate watershed
management and over-
exploitation of groundwater
has also led to land degradation and other environmental
problems and, in turn, these have afected livelihoods
and health (see section 5.4.3).
Fertiliser subsidy has led to a huge increase in fertiliser
consumption: from 13 kg/ha in the early part of the
green revolution (197071) to 145 kg/ha by 201011
(NAAS 2012). Te disproportionate use of chemical
fertilisers, particularly nitrogen (out of nitrogen,
phosphorous and potassium, i.e. N, P, K), has reduced
soil nutrients and thereby soil fertility. Overuse of urea
(discussed in section 5.2.4) has destroyed the natural
nitrogen-fxation process and led to salt imbalance in
the soil in many parts of the country. About 90 per cent
of soils are now low to medium in nitrogen, 80 per cent
defcient in phosphorus, and 50 per cent defcient in
potassium (MoA 2012a).
Insufcient Fallow Cycles. Te recent trend of shorter
fallow periods has increased concerns regarding soil
fertility, crop yield and food security (Grogan et al.
2012). Tough debated, it is widely held that shifting, or
jhum cultivation, in hilly areas with growing population
and pressure on land, and the absence of appropriate
environmental measures, is detrimental to the soil and
ecosystem.
Increasing Pressure for Fodder and Fuel Wood.
In ecologically fragile arid and semi-arid regions,
degradation has also resulted from increasing pressure
for fodder and fuelwood on common lands and forests.
About 70 per cent of Indias geographical area is
categorised as dryland (16 per cent arid, 37 per cent
semi-arid and 17 per cent dry sub-humid). Tese areas
not only have uncertain water availability but also a
restricted natural resource base that ofers limited
livelihood options. Communities in these regions
have evolved survival strategies, but desertifcation is
a growing concern. Changes in frequency and amount
of rainfall, reduction in vegetal cover, inappropriate
agricultural practices, over-exploitation of natural
resources and excessive grazing have resulted in 25 per
cent of land undergoing desertifcation (Ajai et al. 2009).
Land also has been
degraded as an unin-
tended consequence
of policies that encour-
aged inappropriate
input use.
FIGURE 5.2 Land Degradation
120
m
h
a
100
80
60
40
20
0
Water
erosion
Wind
erosion
Chemical
degradation
Physical
degradation
Total
73
12
17
104
1
Source: Based on NBSS&LUP (2008).
Sustainability 177
Te discharge of industrial efuents has afected surface
and subsurface water which, when used in agriculture,
damages cropped land and leads to a decline in yield.
Mining. While mining has gained importance in recent
years due to its role in industrial development, energy
security and export earnings, it has also negatively
impacted local communities. It has exacerbated land
degradation due to increased soil erosion caused by the
loss of green cover or disturbances such as the dumping
of overburden soilthe layers of soil above the mineral
deposits, excavated during extractionin mounds
which prevent natural plant growth.
5.2.3 Common Property Resources
In addition to individual land plots, common or
community lands have also undergone degradation.
Common property resources (CPRs)most
prominent in arid, mountainous and rainfed areas
where agriculture poses high risks (Agarwal and Narain
1989)play an important role in rural life and economy.
On average, about 48 per cent of rural households
collect materials from
CPRs, mostly fuel wood,
and the livestock of 20 per
cent of households graze on
CPRs (NSSO 1999) (see
Table 5.1). A signifcant
number of households also
depend on common water
resources for irrigation, livestock and other household
enterprises.
Almost 15 per cent of Indias total area falls under
CPRs, but the per capita and per household common
property land resources are low at about 0.06 ha and
0.31 ha respectively.
6
Over time, there has been a
substantial decline in the area and the quality of CPRs. A
study across 80 villages in six states found that between
the early 1950s and mid-1980s, the area under CPRs
declined by as much as 31 to 55 per cent ( Jodha 1995).
Tis has severe consequences on the poor who lack
other income-generation options and depend heavily
on CPRs for their livelihood. Judicious management of
CPRs, including forests, could also play an important
role in arresting water and wind erosion that account for
a majority of land degradation.
Two of the main causes identifed for decline are:
Land redistribution. A key component of the govern-
ments post-Independence land reforms, land redistri-
bution was intended to beneft the rural poor. But state
governments, often unable to acquire surplus land from
large farmers, resorted to distributing common lands.
Tese eforts turned out to be counterproductive
because a signifcant share of the redistributed land
went to non-poor households (ibid.). Tese com-
mon lands were often of poor quality, more suited to
natural vegetation and therefore low yielding and re-
quiring signifcant investment to develop and, over time,
between 23 and 45 per cent of the poor households
had to lease our or sell their land ( Jodha 1986).
About 48 per cent of
households collect
materials from CPRs,
mostly fuel wood, and
the livestock of 20 per
cent of households
graze on CPRs.
TABLE 5.1 Use of Common Property Resources
Item Estimate
Households reporting collection of any material from CPRs 48%
of which: collection of fuel wood 45%
Average value of annual collections per household Rs 693
Ratio of average value of collection to average of consumption expenditure 3
Households reporting grazing of livestock on CPRs 20%
Households reporting use of common water resources for:
i. Irrigation 23%
ii. Livestock rearing 30%
iii. Household enterprise 2.8%
iv. Fishing
Note: CPRs include village pastures and grazing grounds, village forests, protected and unclassifed government forests, wastelands, watershed
drainage, ponds, rivers, tanks, reservoirs, canals, and irrigation channels.
Source: NSSO (1999).
6
Tere are wide variations in CPR availability; for example, per household availability of CPRs in Mizoram is more than the area owned
per household.
178 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Breakdown of Traditional CPR-Management
Institutions. Te deterioration of CPRs can also
be attributed to the breakdown of traditional
institutions of CPR management and the failure
of new institutions to adequately protect CPRs
(Rao 1988; Jodha et al. 2012). State rules for
natural resource management replaced traditional
informal community practices that protected CPRs.
Tis alienated communities from CPRs, leading
to increasing indiference among them and the
disintegration of community stakes in protecting
these resources ( Jodha 1998). Te acquisition of
large tracts of local commons for public projects in
many places has helped compound the problem.
Grasslands. Grasslands
7
have starkly reduced from
about 70 mha in 1947 to 38 mha in 1997 and roughly
12 mha in 2003 (Planning Commission 2011a; Dubey
et al. 2007). Any grazing lands that remain are either
degraded or in the process
of degradation, efectively
feeding less cattle than their
full potential (Planning
Commission 2011a). Tis
has occurred for a number
of reasons, including: (i)encroachment for agricultural
and other purposes; (ii) large-scale transfers to other
uses; and (iii) invasion by non-native plant species
that do not support the livelihood of villagers. In many
instances, traditional village-level institutions that
ensured sustainable management of grasslands have
broken down. But we lack a comprehensive national
policy on pasture management and grazing to ensure
adequate nutritional quality and livelihood to those who
depend on them (Planning Commission 2013).
Wastelands. Wastelands are barren and degraded
common lands. Five statesRajasthan, Jammu and
Kashmir, Madhya Pradesh, Andhra Pradesh and
Maharashtracontain over 60 per cent of the countrys
wastelands. Tough degraded, they produce biomass
which is commonly used for fodder and fuel. A study of
60 villages in Gujarat, for instance, found that livestock
grazed on wastelands in over 90 per cent of villages
during the monsoon when cultivable lands were sown
and over 50 per cent did so even during the lean season
(Bharwada and Mahajan 2012).
Recent eforts to regenerate wastelands have reduced
them from around 20 per cent of the total area in 1986
2000 to around 15 per cent in 200506 (MoRD and
Grasslands have starkly
reduced from about 70
mha in 1947 to 38 mha
in 1997 and roughly 12
mha in 2003.
7
6
5
4
3
2
1
0
P
e
r

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FIGURE 5.3 Share of Wastelands in Total Geographical Area
7
Grasslands may be clearings within or around forests. Natural grassland is defned as plant community in which the dominant species are
perennial grasses with few or no shrubs and trees (Misri and Singh 1995: 61).
19862000 2003 200506 200809
Source: Based on MoRD and NRSC (2010, 2011) and http://dolr.nic.in/dolr/wasteland_atlas.asp (accessed in 2013).
Sustainability 179
NRSC 2010). Since then, watershed development and
other eforts to bring wasteland under cultivation
such as, creating additional water bodies in wastelands
under the MGNREGS and regenerating forest land in
some stateshave helped further reduce wastelands
to 14.75 per cent of the total area in 200809 (MoRD
and NRSC 2011) (see Figure 5.3). But because about
two-thirds of this decrease is due to the conversion
of wastelands into cropped area and plantations, the
disappearance of the commons emerges as a concern.
5.2.4 Alleviation Eforts
Numerous eforts have been made to reverse land
degradation, including watershed development and
construction of water and soil conservation structures.
Watershed Development
Eforts to arrest land degradation and increase
agricultural productivity have taken a watershed
approach, particularly in rainfed and resource-poor
areas. Such an approach works towards conservation,
regeneration and judicious use of natural resources.
8

Te programmes that adopted such an approach
aimed to improve water conditions, soil fertility and
crop productivity, and reduce erosion in cropped
areas, while promoting socio-economic development
in these resource-poor areas. Interventions under such
programmes involved construction of structures to
prevent soil erosion (such as vegetative barriers, contour
bunds and small water-harvesting structures), changes in
agricultural practices (such as in-situ soil and moisture
conservation), agro-forestry, pasture development and
horticulture.
But watershed programmes that largely took a top-
down approach and focused mainly on engineering and
construction activities, without community participa-
tion, have had limited success. Because they originated
from initiatives that protected dams from silting, they
had a conservation bias and followed a ridge-to-valley
approach
9
that neglected
livelihoods and lacked clear
development goals (Plan-
ning Commission 2012a).
Community participation
was generally low, and user
groups and community-
based organisations often
became inactive after projects
Watershed programmes
that largely took a
top-down approach
and focused mainly
on engineering and
construction activities,
without community
participation, have had
limited success.
BOX 5.1 Watershed Transformation in Hiware Bazar, Maharashtra
Like most drought-prone regions, Hiware Bazar faced severe water scarcity. This fuelled migration and left the remaining
population dependent on forest resources for sustenance. Over 90 per cent of families lived below poverty line. The village
began watershed development eforts after the return of Popatrao Pawar, who had completed his M Com in Pune and was
elected as sarpanch (head of Gram Panchayat, the village council) in 1990.
Watershed eforts were informed by village plans based on local priorities. The village undertook reforestation on hilly forest
land and built trenches along contours to trap and slow down rainwater run-of. The overall approach involved activities
restricting resource degradation, and joint groundwater use and crop planning. For instance, the village prohibited felling
and grazing in watershed development areas, and the drilling of borewells except for drinking water. Cultivation plots were
levelled and framed with earthen barriers, or had shallow ponds to hold rainwater within felds. The village budgeted water.
Water was allocated according to use and crop plans (by area, type of crop and number of cultivation cycles) were made
based on water availability.
Although the village received an average annual rainfall of just 315 mm, due to these measures taken over the past 11
years, it has maintained its water table at a safe level. Hiware Bazar now has assured drinking water. Irrigated area has
increased and a rabi crop is cultivated. This has helped increase farmers incomes and allowed them to invest in cattle.
Increased grass-cover due to a re-vegetation programme has helped increase milk yield. Hiware Bazar is now in the top
income decile in India, with less than 2 per cent of households living below poverty line. Success hinged on community
involvement which created a sense of ownership among villagers.
Source: IDFC (2012).
8
Te Drought Prone Area Programme, Desert Development Programme and Integrated Wasteland Development Programme were the
countrys most important programmes that adopted such an approach.
9
In watershed development, ridge-to-valley approach is one in which watershed measures are initiated at the highest level and gradually
move downward.
180 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
were completed. Maintenance in the post-implementa-
tion phase accordingly was poor, and often led to silt-
ation, damage and leakage in some watersheds. Fortu-
nately, watershed eforts undertaken with community
participation, such as Hiware Bazar (see Box 5.1), did
succeed. Tey demonstrate the potential of watershed
development.
Recognising the various problems with watershed
treatment and thatwith funds allocated to
datewatershed treatment would take 75 years
(MoRD 2006), the government consolidated the
three watershed programmes into the Integrated
Watershed Management Programme (IWMP) in
2009. Te IWMP aims to grant greater fexibility in
project selection and envisages greater community
participation in planning and executing watershed
development programmes. It has incorporated
livelihood enhancement as a key focus. Watershed
projects under IWMP are implemented by dedicated
agencies at the state, district and project levels with
community participation. Representatives of agencies
implementing MGNREGS and Backward Regions
Grant Fund (BRGF) at the district level are to be
included in periodic review meetings for convergence.
IWMP focused on completing ongoing projects
under the three previous programmes during the
Eleventh Plan (200712). Tis led to a sharp increase in
the completion of projectsfrom 2465 in 200809 to
9302 in 201011 (Planning Commission 2012a). Yet,
overall performance of IWMP has been unsatisfactory
(ibid.). Practical impediments such as shortage of funds
to deploy high quality human resources and inadequate
direction have hampered
implementation (Shah
2013). Recognising the
programmes persistent
gaps, Ministry of Rural
Development constituted
a committee chaired
by Dr Mihir Shah to
recommend changes,
efective from April 2013.
Te recommended changes include allocating 10 per
cent of project costs for human resources, introducing a
national strategy for capacity building, creating a central
nodal agency for greater support and following a ridge-
to-valley approach. Te committee also listed indicators
and green metrics to be tracked to ensure good quality
of physical outcomes.
Correcting Inappropriate Input Use in Agriculture
Green revolution policies ignored soil health by
subsidising chemical fertilisers. In 2010, the government
moved from a regime of subsidy per fertiliser product
to a regime of nutrient-based subsidy (NBS). Under
NBS, the government subsidises each macronutrient
(P and K), a secondary nutrient (sulphur) and two
micronutrients (zinc and boron). Producers can sell
products at decontrolled prices. After the introduction of
NBS, prices of P and K fertilisers increased signifcantly.
But NBS does not include
urea, the main source of
N. While the global urea
price averaged 80 per cent of
the wheat price during
19802005, and is
presently around 150 per
cent, the urea price in India
consistently declined from
over 150 per cent of the wheat MSP in the 1980s to
about 40 per cent at present (Planning Commission
2013). Because urea is priced lower than other fertilisers,
farmers have been replacing decontrolled fertilisers with
cheaper N, jeopardising soil health. Eforts to bridge the
gap between the price of urea and NBS fertilisers have
been inadequate. If left uncorrected, this may further
reduce crop productivity (ibid.). Unfortunately, subsidy
for chemical fertilisers has also discouraged the use of
organic manure (ibid.).
Eforts are now underway to promote sustainable
farming methods. Organic farming frst received
attention in 200405 with the introduction of the
National Project on Organic Farming (NPOF). Te
government has promoted organic farming through
NPOF along with the National Horticulture Mission,
the National Project on Management of Soil Health
and Fertility and the Rashtriya Krishi Vikas Yojana,
by providing fnancial assistance for the creation of
compost units and bio-fertiliser and bio-pesticide
production units and compensating farmers for a
part of cultivation costs. As a consequence, between
200405 and 2010 there was a twenty-fve-fold
increase in the area certifed under organic farming.
But organic farming still accounts for less than 1 per
cent of Indias total cultivated area (PIB n.d.). Sikkim
has made marked progress and has already brought
40 per cent of its total cultivated land under organic
farming, with the intention of bringing the entire state
under organic farming by 2015 (ibid.). Bihar too has
Overall performance
of IWMP has been
unsatisfactory. Practical
impediments such as
shortage of funds to
deploy high quality
human resources and
inadequate direction
have hampered
implementation.
Because urea is priced
lower than other
fertilisers, farmers
have been replacing
decontrolled fertilisers
with cheaper N,
jeopardising soil health.
Sustainability 181
From an equity
perspective, the
conversion of wastelands
into cropped land
reduces availability of
village commons and
also denies pastoralists
grazing lands which,
though degraded,
support their livelihood.
sanctioned a scheme to promote organic farming on a
large scale.
Many farmers are also switching to sustainable
agricultural methods even in the absence of organic
certifcation, in part because eco-friendly methods have
brought them better returns. Recognising the benefts,
including lower expenditure on chemical fertilisers and
pesticides, reduced water requirements coupled with
consistent higher yields, many states have adopted
sustainable farming practices.
10
Te National Rural
Livelihoods Mission also has a component on promoting
sustainable agricultural methods (see Chapter 2).
Converting Wastelands into Cropped Land
Both the central government and some state governments
have tried to bring marginal lands unsuitable for food
production under productive use. Many wastelands
were cultivated with jatropha and pongamia that
produce oil, which can be used as bio-diesel, using
limited water, nutrients
and capital. But adoption
rates have been low due to
inadequacies in extension
services, price support and
lack of experience among
farmers (Axelsson et al.
2012). From an equity
perspective, the conversion
of wastelands into cropped
land reduces availability
of village commons and also denies pastoralists grazing
lands which, though degraded, support their livelihood.
Following recent studies that have found jatropha
cultivation unviable, the practice has been stopped (see
for instance, Varadharajan et al. 2008; Ariza-Montobbio
and Lele 2010).
5.3 Forests
Native forests with ecosystems that have evolved over
millions of years are rich in biodiversity and play a crucial
role in providing resources that sustain us. Forests are
critical to water security, as the countrys rivers are born
in large forests that trap sufcient rainwater. Forests also
aid in soil and water conservation by preventing and
reducing the severity of foods, avalanches, erosion and
drought. Te role of forests in carbon sequestration also
puts them in the centre of climate change mitigation
strategies.
In addition, almost 27
per cent of Indiansabout
300 million rural people,
including the majority of
the tribal population
depend partly or completely
on forests for their
livelihood (Planning Commission 2011c). Various non-
timber forest products (NTFPs), including bamboo,
canes, fodder, leaves, gums, waxes, dyes, resins and
food items such as nuts, wild fruits and honey, form a
major portion of their food and medicines. Selling these
products provides rural inhabitants cash income net;
around 100 million Indians derive their livelihood from
the collection and marketing of NTFPs (MoEF and
MTA 2010). Because women use or sell most NTFPs
collected, NTFPs also are strongly linked to womens
fnancial empowerment in areas near forests (Planning
Commission 2011c).
Intense and growing humanforest interaction,
mainly due to the concentration of valuable mineral-rich
land in forested areas, is threatening forest regeneration
rates. While this is cause for grave concern, any
discussion on forest sustainability must consider not
only the imperative of forest conservation but also the
livelihood concerns of forest-dwelling communities, the
role they can play in managing and protecting forests
and issues relating to the growing demands for forest
resources and land.
5.3.1 Changes in Forest Cover
Indias recorded forest area is 77 mha, but in 2011, the
Forest Survey of India (FSI) estimated a forest cover
of 69.2 mha or 21 per cent of the total geographical
area.
11
Te recorded area is larger because it includes
barren area classifed as forests. With its large
population and low area under forest cover, Indias per
capita forest cover is only 0.06 ha compared to a world
average of 0.64 ha (FSI 2011). Te North-eastern
states and others, such as Goa, Kerala, Uttarakhand,
Himachal Pradesh, Chhattisgarh, Odisha, Jharkhand
Almost 300 million rural
Indians, i.e. about 27 per
cent of the population,
depend partly or
completely on forests
for their livelihood.
10
Tese include the Community Managed Sustainable Agriculture in Andhra Pradesh and SRI cultivation in Bihar (see Chapter 2).
11
Very dense forests cover 8.34 mha (2.5 per cent), moderately dense forests cover 32.17 mha (9.8 per cent), open forests cover 28.78 mha
(8.8 per cent) and mangroves, in 12 states and union territories, cover 4,63,900 ha.
182 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
and Madhya Pradesh, have
a higher forest cover (see
Figure 5.4), and many also
have a high proportion
of tribal population
concentrated in the forest
areas who largely depend on them for their livelihoods.
According to ofcial surveys, years of forest
degradation were reversed in the 1980s. Pressure on
land following Independence led to the clearing of about
3.4 mha of forest until 1972, primarily for agriculture
(Enters et al. 2004; Manoharan 2011). During the
1970s deforestation accelerated to about 1.3 mha per
year (Manoharan 2011). Tis led to eforts to conserve
forests, such as social forestry and later Joint Forest
Management. In addition, the Forest Conservation Act
1980 prohibits the conversion of forest land without
government approval, and approval is subject to
compensatory aforestation of an equivalent area.
But numerous independent researchers and civil
society groups have questioned ofcial estimates of
forest cover on several grounds. First, the defnition of
forest has become looser over the yearsthe minimum
area required to qualify as a forest has (as 10 per cent
area having tree cover) has fallen from 400 ha in 1987
to just 1 ha in 2001. Tis means that, now even city
parks may be counted as forest area. Second, the satellite
technology used for measuring Indias forest cover
cannot distinguish between forest area and orchards
and tea and cofee plantations, and cannot detect forest
destruction, due to illegal felling and coal mining in
the East Garo hills of Meghalaya, for instance (Gilbert
2012). Many studies have also concluded that the quality
of Indias forests has been declining. Some estimates say
that more than 40 per cent of the forests in the country
are degraded (MoEF 2006; Aggarwal et al. 2009a).
Also of concern is the fact that aforestation has often
not been with indigenous and native species. Plantations,
grown to meet needs for timber, teak, rubber sap and
other forest produce, are frequently cut down and do not
ofer the complex biodiversity of natural forests and also
may not support local livelihoods. A recent study shows
that plantations have driven forest-cover growthfrom
1,46,200 sq km in 1995 to double that of 3,00,280 sq
km in 2005while native forests have declined at an
alarming rate of between 0.8 to 3.5 per cent per year or
from 5,14,100 sq km in 1995 to 3,90,000 sq km in 2005
(Puyravaud et al. 2010).
Compensatory aforestation programmes to replace
degraded forests or to replace forests lost to industrial
projects have largely failed because either the money is
spent elsewhere or land is not available within the same
ecosystem to be able to replicate the biodiversity of the
forest lost (Kohli et al. 2011; Rajshekhar 2012).
5.3.2 Te Disenfranchisement of
Forest Dwellers
Rural communities that historically depended on forest
resources also managed the forests. But under colonial
forest policy, which was geared towards commercial
exploitation, valuable forests were notifed as reserve
forests and rural commons were often declared as
state forests (Sarin 2010; Sharma and Kohli n.d.).
After Independence, large areas of forest land of
princely states and zamindars (landlord)including
village commonswere notifed as protected forests,
disenfranchising forest dwellers of their customary
rights (ibid.).
100
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FIGURE 5.4 Distribution of Forest Cover as a Share of States Geographical Area, 2011
Source: FSI (2011).
Indias per capita forest
cover is dismally low
at 0.06 ha compared
to a world average of
0.64 ha.
Sustainability 183
Te government owns 97 per cent of Indias forest
area, mainly through state forest departments (FDs)
(MoEF 2006). Communities cannot reside in and have
very restricted access to NTFPs from reserved and
protected forests, which constitute roughly 83 per cent of
recorded forest area (see Table 5.2). Even in the North-
eastern states, which are accorded special Constitutional
status such that communities can manage roughly
two-thirds of the forest area, the legitimacy of
community-based systems is threatened due to lack
of formal mapping, boundary registration and titling
(Pofenberger et al. 2006).
Te Wildlife Protection Act 1972 was enacted in
response to concerns about loss of biodiversity and
extinction of species. Te Act protects a range of
animal species and their habitats, and notifes national
parks and wildlife sanctuaries, but lacks a long-term
programme for assessing, monitoring and recovering
threatened species or habitats (Planning Commission
2011c). And rights of local communities continue to
be ignoredforest-dwelling communities lost their
customary rights in national parks and had their
rights severely restricted in sanctuaries. Tey were
classifed as encroachers and evicted in many states
(Springate-Baginski et al. 2009). Following conficts,
a programme of eco-development was pursued.
Communities continued to be prohibited from using
forests, but were provided funds for development and
alternative income-generating opportunities. However,
this measure, i.e. fnancial compensation, assumed that
forest dependency is only economicrather than an
integral part of a lifestyleand thus failed to enhance
livelihoods (Badola 1999).
Te National Forest Policy of 1998 marked a
changed approach by entrusting socio-economically
weak, forest-dependent people with forest
management. Te JFM programme (discussed in sub-
section titled Joint Forest Management in section
5.3.3), operational on 28 per cent of the forest area,
was the frst initiative to involve communities in forest
management. However, communities are completely
excluded from management of nearly 70 per cent of
the forest area and play only a minor role in many
JFM areas (Aggarwal 2011). In this regard, two recent
legislationsPanchayats (Extension to Scheduled
Areas) Act (PESA) 1996
and Scheduled Tribes and
other Traditional Forest
Dwellers (Recognition of
Forest Rights) Act (FRA)
2006are important
because they aim to change
the pattern of forest
governance.
TABLE 5.2 Ownership Rights of Indian Forests
Category Rights Status of Local Population Ownership Share of
Forests (%)
Reserve Forests
Reserve forests No right to reside or collect NTFPs
unless permitted
Protected areas (wildlife No right to reside or collect NTFPs State government (FD) 55
sanctuaries, national parks)
Notifed village forests Management role; can collect NTFPs
if permitted
Protected Forests No right to reside; limited rights, such as State government (FD) 28
NTFP collection for household use
Unclassifed Forests
Unclassifed state forest Rights not recognised; tribal disputes State government (District
in North-East India Administrator, FD)
Tribal community forests Disputed by the government Tribal councils in the North-East 17
Village commons Village administration
Tree cover outside Private institutions and owners
government recorded forests
Source: FSI (2011).
Recent legislations
Panchayats (Extension
to Scheduled Areas) Act
(PESA) 1996 and Forest
Rights Act (FRA) 2006
are important because
they aim to change
the pattern of forest
governance.
184 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Te achievements and issues of the various policies
and programmes relating to forest management are
discussed in the following sections.
5.3.3 Initiatives for Aforestation
and Forest Protection
In the late 1970s, two types of government programmes,
viz. social and farm forestry, became popular as a means
of promoting rural livelihoods and increasing forest
cover. While both these government initiatives had
certain shortcomings in design and implementation,
they nevertheless assisted in improving forest cover and
density, and dry wood collection. Community groups in
several states also took up forest protection.
Social Forestry. Government social forestry initiatives
included planting of trees in village commons, and along
roads, canals, rivers, ponds and lakes, normally to hold the
banks of rivers or to provide shade. Several aforestation
programmes also promoted artifcial reforestation in
open degraded forests, bare lands or scrub forests. But
these aforestation programmes were criticised because
the species selected were not native to the area and were
often resource-intensive. In the 1980s, for instance,
there was a controversy over planting eucalyptus which
was not useful for communities and drew a lot of
subterranean water (Banerjee 2010). Recognising this,
more recent aforestation and reforestation programmes
have included indigenous species.
Tese initiatives mainly beneftted rural communities
only indirectlythrough wage earning opportunities
and did not directly address their need for access to
NTFPs. Even when availability of NTFPs improved,
the collection and sale of NTFPs was difcult due to
complications in obtaining permits and paying taxes.
Farm Forestry. Farm forestry, or farmers planting
trees on private lands, was arguably more successful.
It became popular in the late 1970s when the central
government promoted it through subsidies for tree
planting, following recommendations of the National
Commission on Agriculture. Te private sector (mainly
paper and plywood industries) also promoted farm
forestry to meet its raw material requirements. Farm
forestry was largely implemented in areas of Gujarat,
Uttar Pradesh and Karnataka and helped supplement
rural livelihoods.
Farm forestry initially made a signifcant economic
impact. But with market saturation of wood and
subsequent price collapse in the 1990s, farm forestry
declined. Moreover, farmers did not fnd the long
gestation nature of fnancial returns attractive, as in
the case of teak plantation which takes two decades to
yield proper results. Also, farm forestry only marginally
reduced the rural populations dependence on natural
forests because the production of timber and fuelwood
mostly went to industries instead of home consumption.
Self-initiated Forest Protection. While government-
led social and farm forestry helped increase tree cover
in many forests across the country, local forest-dwelling
communities led forest protection. In response to forest
degradation and NTFP scarcity in the late 1970s and
early 1980s, self-initiated forest protection groups
took up community forestry and forest protection.
Over 10,000 groups in Bihar, West Bengal, Odisha,
Jharkhand, Andhra Pradesh and Maharashtra have been
managing and protecting forests with such initiatives
being particularly prevalent in Odisha and Jharkhand
(Pofenberger and Bhattacharya 1996). Te areas under
self-initiated protection showed vast improvement with
respect to biodiversity and forest density and also helped
supplement the income of the poor through NTFPs
and dry wood collection (Banerjee 2010). Te FD did
not recognise this system for many years, viewing it as
an informal management system, but these groups have
gained acceptance more recently.
Joint Forest Management. Te success of the 1972
Arabari experiment, in which a community worked
with the FD for forest regeneration (see Box 5.2), laid
the foundation for the JFM programme. Te JFM
programme, developed as part of Indias National Forest
Policy of 1988, was implemented in various states under
guidelines prepared by the Ministry of Environment
and Forests (MoEF).
It was the frst ofcial efort aimed at involving rural
communities in forest fringe areas in conservation,
protection and management of forests by sharing benefts
with them towards sustainable livelihoods. Under JFM,
communities assisted the FD in conservation and
aforestation activities and, in turn, were provided access
to forest land and subsistence NTFPs through usufruct
benefts to grass, tree branches and minor forest produce.
Te FD also gave them a share of proceeds from the sale
of timber and other forest produce.
JFM is estimated to cover about 28 per cent of the
countrys forest area (Aggarwal 2011). Although not
uniformly so, it has had a positive impact on plant
diversity and biomass production in degraded sites
Sustainability 185
JFM improved plant
diversity and biomass
production but failed to
adequately include local
communities.
(Murali et al. 2004). Some
case studies show that as
JFM provided people with
wage-earning opportunities,
it helped reduce out-
migration (Banerjee 2010).
But a major drawback of JFM is that its
implementation was left largely to local forest ofcers
and the FD retained control over forest management. In
many places, JFM committees were constituted by the
FD. As a result, though JFM was envisaged to remedy
the exclusion of forest dwellers from forest management,
in many cases, it merely institutionalised the restrictions
on their access to land and forest produce (Planning
Commission 2008). In places where local communities
had been protecting forests on their own JFM, which
was meant to strengthen their role, often led to their
losing their grip on the forests. Te main focus of JFM
therefore remained conservation and tree cultivation on
a grand scale, with little attention paid in practice to the
livelihoods of communities.
Te fact that the FD did not recognise bamboo
which has multiple uses in tribal areasas an NTFP
also refected the lack of support to the community.
Finally, although JFM was based on MoEF guidelines,
it has no legislative backing and has thus not been taken
seriously by other ministries despite its existence for
over twenty years (Unnikrishnan 2009).
Given their dependence on forest resources, various
peoples movements arose against the marginalisation of
forest communities. Two landmark legislations emerged,
though, to take forward the underlying spirit of JFM
that of making communities integral to sustainable
forestry management. Tese legislations are PESA 1996
and Scheduled Tribes and other Traditional Forest
Dwellers (Recognition of Forest Rights) Act 2006 (FRA).
5.3.4 Legislative Support for Community
Management: PESA and FRA
PESA and FRA underscore
the centrality of community
management and aim to
transfer certain powers of
forest management back to
communities.
Te frst legislation, the
PESA, applies to Schedule
V areas
12
with a high proportion of Scheduled Tribes
(STs). It empowers the Gram Sabha as the legal
custodian of land and other natural resources in PESA
areas and has provisions for management of community
resources, including forests and ownership of NTFPs.
In so doing, the Act envisaged a shift in power from the
state apparatus to local communities. But due to various
problems in the legislative and executive framework
(discussed in Chapter 6), decentralised governance
of forest resources has not succeeded under PESA
and its implementation in scheduled areas has been
very limited. Many states have not aligned their rules
with PESA. Consequently, Gram Sabhas and Gram
Panchayats have had severely limited roles in the use
and management of NTFPs (Planning Commission
2011c). Studies also show that PESA has failed to
support the sustainable use and management of NTFPs
BOX 5.2 The Arabari Experiment, West Bengal
The Arabari forest in West Midnapore, West Bengal, is spread over 1271 ha and used by 11 villages. The area became
degraded from continuous felling for local subsistence needs. The Arabari experiment aimed to promote community
participation in forest management under certain reciprocal conditions, including mutually agreed-to incentives to
manage the degraded forest jointly with the FD. The FD and the villagers agreed that the villagers would protect the forest
if they were allowed to use frewood and some NTFPs that did not adversely afect vegetation, and if they were given
regular employment. This employment was generated by the promotion of paddy cultivation on bare land, planting fruit
trees in open portions of the degraded forest and regularly planting sabai grass (Eulaliopsis binata), bamboo, Eucalyptus
tereticornis, Acacia auriculiformis and Cassia siamea. In a few years, degradation was fully arrested and new shoots of the
felled stumps started growing. This success led many villagers in the vicinity to take the initiative to protect adjacent
forests, supported by local ofcials, in the early 1980s and later inspired the national adoption of JFM.
Source: Based on Banerjee (2010).
Decentralised
governance of forest
resources has not
succeeded under PESA
and its implementation
in scheduled areas has
been very limited.
12
Special provisions are made for Schedule V areas mentioned in Article 244(1) of the Constitution of India.
186 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
for the livelihood of rural communities (Saxena 2003;
Planning Commission 2011c).
Te more recently enacted FRA, in efect since 2008,
aspires to undo historical injustices. Te Act broadly
defnes forest rights to include:
Te right to hold and live in forest land under
individual or common occupation;
Nistar (community rights) to collect, use and dispose
NTFPs;
Entitlements to fsh and other products of water
bodies;
Te right of nomadic or pastoral communities to
access grazing and traditional resources; and
Defning community forest resources to mean custom-
ary forest land within traditional or customary village
boundaries or seasonal use of landscape in the case of
pastoral communities, including reserve forests, pro-
tected forests and protected areas such as Sanctuaries
and National Parks to which the community had tra-
ditional access. (quoted from FRA 2006)
Te Act also supports any other traditional rights
that forest-dwelling STs or other traditional forest
dwellers customarily enjoy, even if not mentioned.
Collection, however, remains a usufruct right
13
and the
FD continues to play a management role.
Some states made progress in granting individual
rights, so that by the end of March 2013, over 12,64,000
individual titles had been distributed under the Act
(MTA 2013). But inter-ministerial friction, coupled
with other impediments in constituting Gram Sabhas at
the habitation level, led to unsatisfactory implementation
of FRA (elaborated in Chapter 6).
Te N. C. Saxena Committee Report found wrong
recognitions and claim rejections common, in part due
to hasty enquiries by senior ofcials or higher level
committees, or because state tribal departments failed to
monitor progress at the village level (MoEF and MTA
2010). Consequently, sub-division level committees
often rejected claims arbitrarily and without informing
claimants the reasons for rejection and their right to
appeal (CSD 2010). Importantly, the claims process has
generally excluded other traditional forest dwellers on
the basis that they had not cultivated the claimed plot
for 75 years, this despite their eligibility under the Act
if they had primarily resided in forest land for three
generations and depended on forests as of December
2005 (MoEF and MTA 2010).
Community claims, which are important from
the perspective of livelihoods as well as conservation,
were not granted until quite recently. Mendha Lekha
in Gadchiroli, Maharashtra, which has been engaged
in community conservation activities since the 1970s
(elaborated in section 6.4.2), was the frst village granted
community forest rights 2011. In many other places too,
forest-dwelling communities have played an important
role in protecting forests, which demonstrates the
importance of the recognition of community rights
under FRA from a conservation perspective.
Overall progress on the community forest rights
front continues to be slow. By end-March 2013, less
BOX 5.3 Jamguda, Odisha, Sells Bamboo under FRA
The community residing in Jamguda in Kalahandi, Odisha, is one of about 4500 groups in the state that protect about 10
per cent of the states forested area. Most villagers completely depend on the forest. Recognising its importance, Jamgudas
youth committee has protected the forest from illegal timber felling since 1990, allowing harvest of timber and bamboo
only for personal use and collection of NTFP for sale. In 2010, the village got recognition of community forest rights in the
reserve forest area under the FRA.
While bamboo is recognised as an NTFP under FRA, being denied a transit pass by the FD, the gram sabha of Jamguda was
unable to sell its harvested bamboo at a remunerative price outside the village. It had considerable difculty in obtaining
a transit pass. Finally, after months of struggle and political pressure, in March 2013, Jamguda received the transit pass
and became the frst village in Odisha and the second in the country to exercise its community right to harvest and sell
bamboo under FRA. This will allow the village to augment its income, and going forward, the Gram Sabha has planned to
harvest bamboo on a rotational basis so as to ensure a sustainable income stream. Proper implementation of the FRA and
recognition of community rights simultaneously helps achieve the dual objectives of forest protection and development
of the most marginalised communities.
Source: Based on Banerjee (2010) and Ulman and Deo (2013).
13
Ownership remains with the FD and the local community can use and access certain products provided it does not degrade the forest.
Sustainability 187
than 18,000 community rights claims had been granted
out of nearly 67,000 claims received (MTA 2013). Little
information is available on the areas granted community
rights. A study in Andhra Pradesh showed that claims
that were granted were often made by the FD on behalf
of JFM committees, and claims by communities were
rejected or approved for fewer areas than actually claimed
(Reddy et al. 2011). Even where granted, communities
have had trouble efectively implementing their rights,
particularly to sell bamboo (see Box 5.3).
State governments, acting through tribal co-operative
societies control markets of economically important
NTFPs by fxing prices and procurement. Tese
societies are meant to ensure
fair remunerative prices
to gatherers and reduce
exploitation. But because
they are managed by the
tribal department and
controlled by middlemen,
in practice, the monopoly
procurement policy of the
tribal societies prevents
collectors from receiving
the right market price.
Government inefciencies have led to delayed payments
and widespread corruption has allowed contractors to
continue to make profts at the expense of the tribals
(Burra 2008). Recognising the need for support until
competitive markets for NTFPs develop and gatherers
build capacity and form self-help groups or producer
companies, the Haque Committee recommended
intervention in the form of MSP for NTFPs (MoPR
2011). But this has not yet happened.
Various instances of community management
of forests have shown the crucial role of forest-
dependent communities in protecting forests and
ensuring their sustainability. Tis suggests that efective
implementation of the FRA could go a long way in
meeting the twin objectives of ensuring sustainability
of forests as well as protecting the livelihoods of the
marginalised societies that depend on forest resources.
5.4 Water
After decades of over-extraction and mismanagement of
water resources, India faces a water crisis that threatens
even the basic right to clean drinking water and puts at
risk the livelihoods of a large section of the population.
With increasing demand for water from a rapidly
growing economy, water scarcity will be one of the key
limiting factors of development (WWAP 2003). With
limited potential to further augment supply, falling
water tables, deteriorating water quality and the adverse
impacts of climate change, managing our existing water
resources is critical.
5.4.1 Water Resources: Imbalances in
Availability and Use
India receives an average
annual precipitation of
4000 billion cubic metres
(BCM), but after allowing
for evapo-transpiration
and minimum ecological
fow, the annual amount
usable for human use is
only 1123 BCM, i.e. about
a quarter of the total annual
precipitation (CWC 2010),
available in the form of both
groundwater and surface
water (see Table 5.3).
Over the years, the per capita availability of water
has declined from 1816 cubic metres in 2001 to
1588 cubic metres in 2010 (CWC 2010). Climatic
and microclimatic changes have also afected water
availability. Climate change, for instance, has impacted
the rate of glacial melt in the Himalayas with strong
implications on the fow of Himalayan rivers. Changes
in precipitation patterns in many regions too have led
to changes in water availability, often stressing already
water-scarce regions.
Te availability, accessibility and quality of water
vary considerably by season and region. Most rainfall
is concentrated in four months, i.e. from June to
Efective implementa-
tion of the FRA could
go a long way in
meeting the twin
objectives of ensuring
sustainability of forests
and protecting the
livelihoods of the mar-
ginalised communities
that depend on forest
resources.
TABLE 5.3 Water Availability
Items Quantity
Annual precipitation (including snowfall) 4000
in BCM
Average annual availability in BCM 1869
Per capita availability in cubic metres 1588
Estimated utilisable water resources (Total) 1123
in BCM
Surface water resources in BCM 690
Groundwater resources in BCM 433
Source: CWC (2010).
India faces a water
crisis that threatens
even the basic right to
drinking water and puts
at risk the livelihoods
of a large section of
the population. With
increasing demand for
water from a rapidly
growing economy,
water scarcity will be
one of the key limiting
factors of development.
188 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Small reservoirs and
micro-storage facilities
are not only more
operationally efcient
than large dams, but
also can be located
close to the point of
use and are easier to
manage. Despite this
evidence, building small
storage capacities such
as tanks and ponds
have not drawn enough
attention.
September. While some regions face a continuous
threat of excessive water fow and fooding, others
face extreme drought. Tis section discusses some of
these challenges, their impacts and steps being taken
to address them.
5.4.2 Surface Water
Surface water accounts for over 60 per cent of the
countrys total estimated usable water resources. But
due to topographical constraints, time and period
of precipitation, utilisation levels vary signifcantly
across water basins, with the Mahanadi and southern
peninsular rivers having the most usable water and
Brahmaputra the least (see Table 5.4).
Water Storage
Te utilisation of surface water can be enhanced by
storing water. Storage currently stands at only 219 BCM
or 32 per cent of usable fow, the southern peninsular
and west-fowing rivers accounting for 62 per cent of the
countrys total storage capacity.
But storage is constrained by the fact that a majority
of the annual river fow occurs during the four months
of the Southwest monsoon ( June to September). And
the potential for capturing such peak resources through
large dams is again limited because in the plains large
areas would need to be inundated due to the fat
topography, which would displace large populations.
Te scope for increasing current storage capacity is also
limited by other factors. Te rivers in the Himalayas
create much soil erosion which leads to sedimentation in
dams. Also, the North-eastern region is ecologically very
sensitive and thereby, building large dams in the North-
East raises environmental concerns (Shah 2013).
Te peninsular rivers have almost reached maximum
capacity and very little additional storage can be created
in that basin due to the threat posed to the rivers natural
regenerative capacity. Increase in storage capacity in the
Krishna river basin, which now leads with 41.8 BCM of
storage capacity, has reduced river discharge and outfow
into the sea from an average annual fow of 57.22 BCM
during 195060 to 24.94 BCM during 19952000
(Gaur et al. 2007). Tis upsets the delicate ecological
balance in the sea, which requires freshwater infow to
sustain marine ecosystems. Utilisation levels are also
afected by a reduction in vegetation cover which has
led to an increase in soil erosionthe top soil fows
away with water and results in siltation of water-storage
structures and reduces the
water content of rivers.
Small reservoirs and
micro-storage facilities, on
the other hand, are not only
more operationally efcient
than large dams, but can
also be located close to the
point of use and are easier to
manage (Keller et al. 2000).
Te southern peninsular
rivers which have the most
small storage capacity
and have helped states
TABLE 5.4 Distribution of Estimated Usable Surface Water Across Major River Basins
Name of the Average Annual Share of Estimated Utilisable Live Storage Live
River Basin Potential in River Basin Utilisable Flow as % Capacities Storage
the River (% of total) Flow of Average Completed Capacity
(BCM) (excluding Annual (BCM) Completed
groundwater) Potential as % of
(BCM) Utilisable
Flow
Indus and Ganga 598 32 296 49 58 20
Brahmaputra, Barak and others 586 31 24 4 2 8
Southern peninsular rivers 216 12 160 74 78 49
Mahanadi 67 4 50 75 12 24
West-fowing rivers 291 16 105 36 59 56
Others 111 6 55 50 9 16
Total 1869 100 690 37 218 32
Source: Authors compilation from MoWR (2008); CWC (2010).
Sustainability 189
Today, more than 70 per
cent of Indias surface
water resource is unsafe
for drinking and farming.
like Andhra Pradesh, Karnataka and Maharashtra to
increase the utilisation potential of their surface water,
are a good example in this case.
Despite this evidence, building small storage
capacities such as tanks and ponds have not drawn
enough attention. In fact, the share of tanks has
declined signifcantly in the past few decades and many
small surface water bodies have languished in a state of
disrepair and disuse (Planning Commission 2012a). In
many instances, micro-storage facilities are even being
flled up to create valuable land for other uses.
Impact of Pollution
Pollution is increasingly having a severe impact on
the utilisation potential of surface water. Today, more
than 70 per cent of Indias surface water resource
is unsafe for drinking and farming (MoEF 2009).
Tis adversely afects
aquatic life, contaminates
drinking water and afects
human and animal health.
Surface water resources
are contaminated from
indiscriminate discharge of wastewater containing
biological and toxic pollutants from industry, agriculture
and households. Most polluted stretches of rivers are
found around urban centres, with municipal sewage
contributing 75 per cent of point-source pollution.
Only about 10 per cent of Indias wastewater is currently
treated; the rest is discharged untreated into water
bodies (CAG 2012). Tough the nutritional content
of wastewater containing organic compost may be
high, it allows disease-carrying organisms and algae to
proliferate, slows water fow, increases sedimentation
and adversely afects the aquatic ecosystem. Agricultural
run-of containing pesticide and fertiliser residue also
afect surface and groundwater.
5.4.3 Groundwater
Rural India depends
heavily on groundwater
for agriculture; roughly
88 per cent of the total
annual groundwater drawn
from over 27 million tube
wells is used for irrigation.
Groundwater irrigation has
helped ensure food security
in times of defcit rainfall and increased agricultural
productivity (see Chapter 4 for more on groundwater
irrigation). Groundwater also provides 85 per cent of
Indias drinking water supply (World Bank 2010).
But groundwater is fast depleting due to heavy
over-exploitation that threatens aquifers in many parts
Roughly 88 per cent
of the total annual
groundwater drawn from
over 27 million tube wells
is used for irrigation.
Groundwater provides
85 per cent of Indias
drinking water supply.
140
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58
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FIGURE 5.5 Stage of Groundwater Development Across States
Note: Stage of groundwater development is the share of annual groundwater draft
14
in the net annual groundwater availability. States exceeding
100 per cent have average annual groundwater consumption greater than the average annual groundwater recharge (CGWB 2011).
Source: CGWB (2011).
14
Groundwater draft is the quantity of groundwater withdrawn from groundwater reservoirs. For a given structure, it is computed as the
product of the average water discharge and annual working hours, or based on the irrigation requirement of crops in the command area of a
structure (MoWR 2009).
190 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
of the country. Te green revolution and supportive
irrigation policies had spurred massive development of
groundwater potential. Because farmers began to adopt
more water-intensive crops (incentivised by procurement
and price-support policies) and used fertilisers that
required protective irrigation, groundwater use in some
states exceeded water recharge rates (see Figure 5.5). In
addition to threatening agricultural livelihoods, this is
responsible for the drinking water crisis in many parts
of the country (discussed in Chapter 4).
Not surprisingly, the green revolution states are
amongst those with the worst groundwater over-
exploitation. A majority of blocks/districts in Punjab
and Haryana are in the over-exploited category, most in
West Bengal are in the semi-critical category and some
in Uttar Pradesh are critical and semi-critical. Tese
are the states that were fortunate to have deep aquifers,
yet they are now experiencing signifcant decline in
groundwater availability due to man-made reasons. In
addition, some semi-arid and arid states that have poor
aquifers have also experienced groundwater depletion,
including areas in Rajasthan with low recharge, and parts
of Karnataka and Tamil Nadu with shallow aquifers. In
total, of the 5842 monitored assessment units (blocks/
mandals/talukas) in India, 14 per cent are categorised
as over-exploited, 3 per cent critical and 9 per cent are
semi-critical (CGWB 2011).
Groundwater over-extraction has severe health
and environmental implications. Deeper groundwater
contains higher concentrations of contaminants such as
arsenic and fuoride (see Chapter 4). In coastal areas, often
there is also salt water contamination as seawater seeps
into deep wells. When this contaminated water is used
for irrigation, it poses the threat of sodifcation (excessive
accumulation of sodium) and salinisation (excessive
accumulation of salts) of the soil and reduces soil fertility
and nutrient uptake of crops, which in turn negatively
afects agricultural productivity and food security.
Because an increasing number of aquifers approach
unsustainable levels of exploitation, reduction in
groundwater availability will threaten water security and
exacerbate drinking and irrigation water shortages. Te
implications of groundwater depletion and pollution
on health and livelihoods and on economic growth and
environmental sustainability are severe, demanding urgent
remedial measures and limits on groundwater withdrawal.
Escalating Conficts over Water Use: Rural versus
Industry and Urban
Increased demand from industry and urban areas also
contributes to water scarcity in rural areas. Decades
ago, talabs (artifcial lakes) were used within cities to
capture and store rainwater, but these have gradually
been blocked and lost to commercial development.
As a result, growing urban water demands are met by
sourcing water from rural areas, sometimes at the cost
of depriving rural communities of irrigation water and
even basic drinking water, and often meeting strong
resistance from villages and farmers. A few instances of
resistance of this kind are listed below:
In 2009, the Chennai municipal water board in Tamil
Nadu, Metrowater, faced severe resistance from
villages around Veeranam Lake from which water is
drawn for the city.
In 2009, in Madhya Pradesh, when water scarcity led
to water rationing in some cities, water from rural
areas was sought; Dewas had to impose a curfew to
protect its 122-km pipeline from damage by farmers,
leading to violence and riots.
Farmers in Maharashtras Vidarbha region protested
diversion of irrigation water to the Sophia Power
Plant in 2010.
In 2010, villagers in Andhra Pradesh resisted
irrigation water being diverted for the Jindal Refnery.
Since 2010, farmers in Gujarat have been protesting
against Nirmas takeover of a water body.
Villagers along the Mahanadi have been protesting
against the diversion of water to power, iron and steel
plants since 2010.
Industrial pollution too has threatened farmers
surface and groundwater sources. Working out more
equitable water-sharing agreements between sectors
has to be an integral part of crafting water management
plans and policies.
5.4.4 Alleviation Eforts
Clearly, urgent steps must be taken to alleviate the water
crisis and efectively manage existing water resources.
Several attempts have already been made with varying
degrees of success. Tis section examines some of these
eforts, their impacts and some lessons learnt.
To address the wide regional disparities in water
availability, the Centre is planning a National River
Linking Project to link all major rivers of the country
through 30 interlinking canal and dam systems. Te
rationale for this is that it may help mitigate foods by
retaining fowing surface water in the monsoon and
ensuring water availability in drier areas, simultaneously
combating food and drought. It would also bring
additional land under irrigation, generate hydroelectric
power and facilitate transportation through inland
waterways. Many, however, have criticised it, arguing
Sustainability 191
Instead of large projects
such as river interlinking,
other local and cheaper
options, such as
decentralised water
harvesting and artifcial
recharge of aquifers
practised in some areas,
may be considered.
that the social and environmental costs exceed the
economic benefts. Tey calculate that the construction
of reservoirs and canals in the peninsular component
alone will displace over 2,50,000 people and submerge
large areas of forest, agriculture and non-agricultural
land causing destruction to many local ecosystems
(Shah, Amarasinghe and McCornick 2008). Te project
is also predicted to have high environmental costs and
impact the monsoon cycle.
Instead of large
projects such as river
interlinking, other local
and cheaper options, such
as decentralised water
harvesting and artifcial
recharge of aquifers
practised in some areas,
may be considered (see Box
5.4). Tese have proven
successful in raising and maintaining water tables,
particularly when implemented and managed by the
local communities themselves.
In addition to local eforts, aquifers should be
mapped, monitored and managed at the national level.
A proposal for this is discussed in Chapter 4, along with
Twelfth Plan recommendations to dovetail watershed
and water harvesting eforts with MGNREGS.
Overall, there has been a gradual shift in approach
from groundwater development to management. At
the national level, the Model Bill for the Conservation,
Protection and Regulation of Groundwater 2011
15

identifes groundwater as a public trust and suggests
decentralised regulation through groundwater
committees at the panchayat level. It provides for
demarcation of Groundwater Protection Zones to
protect threatened aquifers and ensure groundwater
sustainability. It also contains provisions to ensure
efective implementation, including annual social audits
and a qualifed Nyaya Mitra
16
to assist groundwater
grievance redressal ofcers. Similarly, Maharashtra
was the frst state to recognise the need for legislative
backing in the protection of groundwater with the
Maharashtra Groundwater (Development and
Management) Act 2009. Tis Act is based on the notion
of water as a CPR and aims to facilitate sustainable and
adequate supply of groundwater of prescribed quality
by institutionalising community water budgeting, crop
planning and conjunctive management of surface and
groundwater. Various bans, such as on deep borewells,
as well as incentives and disincentives for demand
management are in place to ensure sustainability of
water resources.
Finally, eforts have been made to address pollution
which heavily impacts the utilisation of water. But
planning and institutional capacity for pollution control
has been inadequate (CAG 2012). Some programmes
such as the National River Conservation Plan (NRCP)
and the National Lake Conservation Plan (NLCP) have
BOX 5.4 Decentralised Rainwater Harvesting Eforts
Rainwater harvesting and groundwater recharge can play an important role in meeting basic water needs. India has had
a historical tradition of local water harvesting such as in ahar-pynes in Bihar, tankas in Rajasthan, dharas in the Himalayas,
talabs in Bundelkhand and eries in Tamil Nadu. The success of such decentralised initiatives highlights the importance of
encouraging rainwater harvesting in rural areas.
Happas are small mud-excavated structures with a command area of 0.60.75 acres, constructed on private farming plots
in parts of West Bengal afected by continuous natural resource degradation. Funded by MGNREGS and maintained by
farmers, they have been found to improve soil and moisture conservation, check soil erosion and enhance livelihoods with
increases in yield and cropping intensity, and generate employment.
Farmer initiatives in Kurubahalli, Karnataka, to conserve water using desilting tanks and check dams, helped prevent
rainwater from fowing to the drains. After the 1987 drought in Saurashtra, Gujarat, check-dams were constructed to
reduce water speed and allow groundwater recharge. This was expanded with NGO assistance until the state government
introduced the Sardar Patel Participatory Water Conservation Project under which the government provides 80 per cent of
the cost. By end-March 2012, over 70,000 check-dams were constructed.
Source: Based on Jana (2011) and Sekhri (2012).
15
Available at http://www.planningcommission.nic.in/aboutus/committee/wrkgrp12/wr/wg_model_bill.pdf (accessed in 2013).
16
As per the Model Bill, every district should have a Nyaya Mitra (or judicial friend) with a minimum qualifcation of an undergraduate
degree in law to assist the groundwater grievance redressal ofcer in the discharge of her/his duties.
192 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
been operational for over a decade, but implementation
has been unsatisfactory. For instance, sewage treatment
plants (STPs) were to be built under the NRCP to
treat the fow of sewage water from towns and cities
that were afecting stretches of 39 major rivers across 20
states, but barely a fraction have actually been built. Tis
was either due to lack of fnancial resources, difculty
in acquiring land for the STPs, contractual problems or
cost overruns. Te project also failed to take a holistic
approach and instead tackled individual towns. Tis
oversight was partially addressed with the formulation
of the Ganga Action Plan (GAP) and Yamuna Action
Plan (YAP) that take a basin-level approach. But
both these programmes have shown limited success
as well, for many of the same reasons, including a gap
between requirement of sewage treatment and actual
pollution load, delays in building STPs and lack of
maintenance by municipal corporations. Beyond urban
wastewater pollution, the pressing issue of discharge of
mining and industrial waste into riverssuch as in the
mining areas near the Damodar and Mahanadi rivers
has gone unaddressed.
5.5 Fishery
Fishery is a key component of rural development. Te
sectors contribution to employment generation, foreign
exchange earnings and food and nutritional security is
now well recognised. Fishery employs about 0.93 million
people on a full-time basis,
1.01 million on a part-time
basis and 1.39 million in
ancillary services (MoSPI
2011; MPEDA 2011). A
sustainable approach to
fshery envisages providing
future generations a steady
stream of benefts from
living aquatic resources. Consumption patterns of Indian
households have shifted from cereals to commodities
such as eggs, meat, milk and fsh over the period 1999
2000 to 2010, with rural households consuming more
fsh than urban households (NSSO 2012). All these
factors togetherincluding the increased demand
for fshmake ensuring the sustainability of fsheries
important not only for the ecology but also for the well-
being of Indias rural community and economy.
Fishery consists of both marine and inland fsheries,
further classifed as capture and culture fshery. Marine
capture fsheries comprised a large part of Indias total fsh
production. But its contribution has declined over time
from 70 per cent in the 1960s to 39 per cent by 201011
(see Figure 5.6). Culture fshery, including aquaculture
(i.e. rearing fsh in controlled aquatic environments) and
mariculture (ocean-based aquaculture), is playing an
increasingly important role in ensuring a steady fow of
fsh for human consumption and reducing the pressure
on marine fsh stock.
Marine capture fsheries
comprised a large
part of Indias total
fsh production. But
its contribution has
declined over time from
70 per cent in 1960s to
39 per cent by 201011.
9000
T
o
n
n
e
s
7000
5000
3000
1000
1000
1
9
5
0

5
1
1
9
6
0

6
1
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9
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7
1
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8
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8
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8
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8
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0

9
1
1
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9
2

9
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1
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9
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9
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1
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6

9
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8

9
9
2
0
0
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0
1
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0
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0
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8

0
9
2
0
1
0

1
1
FIGURE 5.6 Trends in Fishery Production
Thousands
Marine Inland Total
Source: MoA (2009, 2011).
Sustainability 193
Unprecedented
growth in number of
mechanised boats
afects the sustainability
of marine fsheries
because it has led to
over-fshing and falling
fsh catches per boat.
5.5.1 Marine Fishery
With a coastline of 8100 km, India has a continental
shelf of about 5,08,000 sq km. With the declaration
of exclusive economic zones (EEZ),
17
India became
responsible for conserving, developing and optimally
exploiting the marine resources within its EEZ. Te
harvestable marine-resource potential of the Indian
EEZ is about 4.41 million metric tonnes (mmt) of
which the pelagic
18
resources account for 2.13 mmt
and demersal
19
resources for 2.03 mmt (Planning
Commission 2012b).
Te marine fsheries census data shows that 8,63,000
fshing households depended on the marine sector
for their livelihoods in 2010. Marine fsheries are of
particular signifcance in rural India because their
activities are spread over 1376 fsh-landing centres and
3322 fshing villages (Fishery Survey of India 2005).
Studies show that an important reason for depleting
stocks is the promotion of production intensifcation.
A study in Indias west coast reports that 47 per cent
of species along the Kerala coast and 55 per cent
along the Karnataka coast are declining and attributes
this primarily to mechanisation, particularly trawling
(Mohamed et al. 2010).
In the early period of
fsheries development,
expanding annual marine
fsh catch, mechanising
indigenous craft and
developing ofshore trawling
capacity with international
assistance were emphasised.
With the Tird Five-Year
Plan (196166), growing international demand for
shrimp led Indian maritime states to intensify eforts
and introduce new technologies of production, including
trawler technologies. India also subsidised technologies
and fuel in the sector. Tis led to an export-oriented
fshery sector which, in turn, led to unsustainable
practices of catching more fsh, mainly due to unregulated
growth, lack of awareness of and poor compliance with
prevailing rules and regulations by marine fshermen and
weak enforcement measures by management authorities
( Johnson 2001; Sathyapalan et al. 2008).
Today, 26 per cent of total fshing crafts are traditional,
37 per cent motorised and the remaining 37 per cent
mechanised (see Figure 5.7). Te unprecedented growth
in number of mechanised boats afects the sustainability
17
An EEZ is a sea-zone stretching from a states coast out to 200 nautical miles over which the state has special rights over exploration and
use of marine resources including energy production from water and wind under the United Nations Convention on the Law of the Sea.
18
Living in the upper layers of the sea.
19
Living close to the foor of seas or lakes.
100
P
e
r

C
e
n
t
80
60
40
20
0
W
e
s
t

B
e
n
g
a
l
M
a
h
a
r
a
s
h
t
r
a
G
u
j
a
r
a
t
D
a
m
a
n

&

D
i
u
G
o
a
K
a
r
n
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t
a
k
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N
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r
a
l
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O
d
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s
h
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r
a

P
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s
h
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n
d
i
a
82
18
75
64
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29
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21
19
43
49
9
26
54
20
23
54
23 22
51
27
21
36
43
14
60
26
10
34
56
37 37
26
FIGURE 5.7 Distribution of Fishing Crafts Across Maritime States
Mechanised Motorised Non-motorised
Source: Fishery Survey of India (2005).
194 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Inland fsheries provide
full-time employment
to over a million
fshermen and generate
approximately 3.4
mmt of annual fsh
production (about 61
per cent of the total
fsh production). Inland
fsheries account for
about 75 per cent
of the total human
resources involved in
fshing, aquaculture and
associated activities.
of marine fsheries because it has led to over-fshing and
falling fsh catches per boat. Falling fsh catches have
long-term repercussions on the livelihoods of fshing
communities. At present, poorly capitalised trawler
owners have been worst hit, but in the long run small-
scale fshermen with little income diversifcation and
limited access to improved technology could also be
threatened. Other causes cited for resource depletion in
the fsheries sector include industrial pollution, catching
of under-size fsh (trash fsh), use of small mesh size in
fshing nets, climatic changes and monsoon fshing.
Te government has made various attempts to
explore new potential fshery resources, such as demersal
and deep-sea resources and development of high-value
aquaculture to cope with the increasing demand for fsh.
Fishery in territorial waters is a state subject; all
maritime states of India have enacted respective Marine
Fisheries Regulation Acts. Te regulation mechanism
of marine fshery includes a seasonal ban on trawling,
fshing ground earmarked for traditional fshermen and
marine protected areas. But with the exception of the
seasonal trawling ban, these controls are not efectively
enforced. Te sustainability of Indian marine fshery
depends to a great extent on efective enforcement of
control mechanisms and fshermen complying with
rules and regulations.
5.5.2 Inland Fishery
Inland fshing sources include rivers, canals, estuaries,
foodplain lakes, wetlands, lagoons, upland lakes and
reservoirs. Tese inland fsheries provide full-time
employment to over a million fshermen and generate
approximately 3.4 mmt of annual fsh production (about
61 per cent of total fsh production).
(Declining marine fshery output in the 1990s led to
the increased popularity of inland culture fshery, making
it an important source
of rural livelihood and
for human consumption.
Inland fsheries account for
about 75 per cent of the total
human resources involved
in fshing, aquaculture
and associated activities
(Planning Commission
2013). Shrimp cultivation
has become an important
component of inland
fshery, and production
almost doubled in the last
decade with the introduction of new technologies and
species. Tere is scope to further enhance inland fshery
production by two to four times in rainfed water bodies
such as irrigation reservoirs, natural wetlands and
ponds/tanks created as part of watershed development
or through government support (Planning Commission
2012b). For instance, inland fsh cultivation in
Bundelkhand, Madhya Pradesh, by 200 co-operatives of
farmer groups that have 48 seed nurseries has beneftted
over 12,000 households, with an almost three-fold
increase in fsh production following the formation of
the co-operatives (Planning Commission 2011k).
While aquaculture catalysed an increase in the share
of inland fsheries, there now seems to be a slowdown
in species diversifcation and yields due to a failure to
prioritise sustainable development of inland capture
fsheries. Te numerous construction activities and
infrastructure developments undertaken in recent
years pose a threat to Indias inland fshery resources
and wetlands. Structures such as dams and reservoirs
endanger aquatic resources due to disrupted inter-
connectivity of inland habitats and threaten the existence
of certain aquatic species, particularly those whose
lifecycle depends on upstream or downstream migration.
Filling up of foodplains, rice felds and wetlands also
threatens inland fsheries. Te gradual decline of Freshwater
Fish Farmers Development Agencies and Brackish Water
Farmers Development Agencies and weak extension
services is also a concern; the Twelfth Plan combines these
two agencies into Fisheries and Aquaculture Development
Agency to revive extension services.
Also threatening the marine ecosystem is the high
dependence of aquaculture farms on fsh feed produced
from marine capture fshery. Fish feed with locally
available ingredients must be promoted and commercial
fsh feed mills should be encouraged.
5.6 Climate Change
Te dependence of large sections of Indias rural
population on natural resources for their livelihood
makes the role of climate
particularly signifcant for
the rural economy. Changes
in key climate variables pose a
severe threat to development
due to adverse efects on
the rural ecosystem and
erosion of adaptive capacity.
Preparedness for combating
Dependence of large
sections of Indias
rural population on
natural resources for
their livelihood makes
the role of climate
particularly signifcant
for the rural economy.
Sustainability 195
the impacts of climate change then is an imperative for
ensuring sustainable rural development. Given the gravity
of the situation, the Working Group on Climate Change
constituted by the Planning Commission has estimated
large investment requirements over the Twelfth Plan
period for putting in place climate resilient infrastructure.
5.6.1 Impacts of Climate Change
Various impact assessment studies have estimated
the impact of climate change in India. Te melting of
the Himalayan glaciers due to a rise in temperature
would threaten the livelihood of Indians who depend
on agriculture and allied activities. Impact assessment
studies have estimated that in low-latitude regions such
as India, 1C rise in temperature may lead to 510 per
cent reduction in the yield of major crops (WTO and
UNEP 2009). Of Indias geographical area of 329 mha,
40 mha is food-prone (MoWR 1980), while almost
one-sixth of the area supporting 12 per cent of the
population is drought-prone ( Jain et al. 2007). Climate
change is predicted to increase the severity of droughts
and foods (Gosain et al. 2006). Also, foods and sea
storms are likely to afect fsh breeding, migration and
harvests, with severe impacts on small fshermen.
Most alarming is the fact that due to a combination
of greater exposure to climatic shocks and low adaptive
capacity, the rural poor are likely to be the most afected.
Districts with highest
climate sensitivity are
not necessarily the most
vulnerablemost districts
in southern Bihar, for
example, have only medium
sensitivity to climate change
but are vulnerable due to low adaptive capacity (OBrien
et al. 2004). Tis highlights the need to map vulnerability
and adopt policy measures for climate change
adaptation for the poor. While mitigation initiatives to
reduce greenhouse gas emissions are important from
a long-term perspective, pursuing them in rural areas
will be meaningful only if they ofer strong co-benefts
to improve the standard of living and livelihood of the
rural population.
Impact of Climate Change on Agriculture
Agriculture, backbone of the rural economy, is very
vulnerable to the efects of climate change because
almost 60 per cent of the countrys agricultural areas
are rainfed (Planning Commission 2011d). A small
variation in temperature and precipitation can reduce
yield. Various studies (TERI 2003; IPCC 2007) have
confrmed that climate change would impact agriculture
production. While productivity of most crops is
supposed to decrease marginally by 2020, a decrease of
1040 per cent by 20802100 (IPCC 2007) is possible.
Te risk is higher for rainfed agriculture due to its low
coping mechanisms. Te efects of heat on reproduction
too are expected to cause animal distress (Aggarwal et
al. 2009b).
5.6.2 Government Action
Te government released the National Action Plan
on Climate Change (NAPCC) in 2008 as Indias frst
ofcial climate change mitigation strategy. It sets out
eight missions:
Te National Mission for Sustainable Agriculture
aims to increase the resilience of agriculture to
climate change by developing new varieties of crops
and cropping patterns that are resistant to extreme
weather, long dry spells and fooding, as well as
improving the productivity of rainfed crops. It
recommends the development of credit and insurance
to promote better agricultural practices. But the
mission needs to include programmes focused
on soil fertility and pest management, watershed
development, marketing and storage facilities, agro-
forestry and other services (Ganguly and Panda 2010).
Te Green India Mission, recognising the importance
of forests as a carbon sink, targets the increase in
area under forest and tree cover from 23 per cent to
33 per cent. Te mission is in the preparatory stage
with an allocation
20
of Rs 4400 crore over 10 years.
But it focuses on increasing forest cover and fails
to explicitly consider biodiversity, livelihoods and
conservation (Byravan and Rajan 2012). Adaptive
co-management is considered a key strategy with
communities playing a signifcant role in maintaining
the ecosystem.
Te Jawaharlal Nehru National Solar Mission
identifes solar energy as critical to ensuring energy
security. It aims to install 22 gigawatt (GW) of
solar capacity by 2022 compared to 10.28 megawatt
(MW) in 2010. It anticipates that solar energy will
achieve grid parity by 2022. Progress on this mission
A combination of
greater exposure to
climatic shocks and low
adaptive capacity, the
rural poor are likely to
be the most afected.
20
Te resources are to be mobilised as additionality from the Planning Commission with any defcit fnanced by assistance from international
funding sources.
196 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
is encouraging, but it does not adequately emphasise
of-grid potential which could serve the poor and
help achieve development benefts. Solar energy
could enable signifcant co-benefts in rural areas
given the large number of rural households still not
electrifed, the high cost of electricity grid extension
to remote areas and the poor quality of electricity
supply in rural areas.
Te National Water Mission attempts to manage
water resources through conservation, increased storage
and minimisation of waste to achieve equitable water
distribution. It has developed a framework to increase
the efciency of water use by 20 per cent through
regulatory mechanisms using diferential entitlements
and pricing. It also aims to develop an incentive
structure to promote water-neutral technologies and
recharge underground water resources. But fragmented
authority between the Centre and the states may cause
challenges in implementation.
Because the Himalayan region is one of the most
vulnerable to climate change (Planning Commission
2011b), the NAPCC includes a Mission for
Sustaining the Himalayan Ecosystem focusing
on the development of capacities to sustain the
ecosystem and for long-term studies to understand
and predict changes. It also plans to increase dialogue
among stakeholders to formulate a comprehensive
strategy to protect the fragile ecosystem.
In addition, there are two missions focused on
mitigation in urban areas and one that is geared towards
promoting research and technological improvements to
assist in both adaptation and mitigation.
Te Sustainable Habitats Mission targets
improvements in energy use by buildings, recycling of
waste materials and improved management of solid
wastes such as through technology that generates
power from waste, and the promotion of public
transport in urban areas.
Te National Mission for Enhanced Energy
Efciency proposes initiatives aimed at demand side
management of energy. An important provision is the
Perform Achieve and Trade scheme where plants
have specifc energy consumption targets which, if
not met, will need to be compensated for by purchase
of energy permits from plants that have exceeded
their target or payment of penalty. Te mission
also envisages a shift towards more energy efcient
appliances, such as using CDM to fnance lighting
under the Bachat Lamp Yojana.
Te National Mission on Strategic Knowledge
for Climate Change aims to promote research and
technology development to identify the impacts of
and formulate responses to deal with climate change
through funding of high quality research.
Te NAPCC, however, does not clearly lay down the
synergy among missions and possibilities of convergence.
NAPCCs success depends on how the various actions
are detailed and implemented, how well they are
synergised, of course, how well they are fnanced.
Te government has also set up a National Clean
Energy Fund (NCEF) by levying a cess of Rs 50
per tonne of domestic or imported coal since 2010.
NCEF is intended to fund research and innovative
clean technology projects. Individual or consortia
of organisations are eligible for funding of up to
40 per cent of the project cost. Tis could play a key
role in fnding clean energy solutions at afordable
prices. However, the performance of the NCEF is
unsatisfactory (CBGA 2012). Funding, conditioned
on the organisation providing a minimum 40 per cent
fnancial commitment, is provided on projects not
being funded by a government arm. Te participation
of research institutes is thus difcult (ibid.). Te stated
objectives of NCEF also seem inconsistent with its
operational guidelines which allow projects even with
tenuous links to clean energy (Panda and Jena 2012).
Apart from these targeted initiatives, various poverty
alleviation measures to provide income security,
alternative livelihoods or ensure food security also
play a critical role in ameliorating vulnerabilities and
safeguarding against climatic shocks in rural areas
(Ganguly and Panda 2010).
5.6.3 Rural Adaptation to Climate Change
Being natural resource dependent, rural communities are
vulnerable to the impacts of climate change. Tey have
limited adaptive capacity and lack the infrastructure,
resources and knowledge to deal with climate-related
challenges. Steps should therefore be taken to increase
their resilience to shocks. Importantly, while the
impacts of mitigation are realised only in the long run,
the benefts of adaptation measures are immediate and
realised locally. Since most development projects and all
infrastructure projects have signifcant lock-in periods,
they must have strong co-benefts and add to adaptive
capacity and increased resilience to climate change.
Adaptation has no one-size-fts-all solution, but
requires approaches tailored to the locations in and
conditions under which communities live (Chaturvedi
et al. 2012). Community-based innovative solutions
Sustainability 197
Adaptation has no one-
size-fts-all solution, but
requires approaches
specifc to the locations
in and conditions under
which communities live.
that simultaneously address
climate impacts, livelihood
improvements and
environmental sustainability
must be developed. Various
projects undertaken on a
pilot basis have found that
communities can play a critical role in adaptation activities
particularly since maintenance of community resources is
under the domain of Panchayat Raj Institutions (PRIs).
For instance, PRIs have played an active role in upgrading
harrens, traditional irrigation systems prevalent in semi-
arid areas of Rajasthan ( John and Chelat 2012).
Adaptation strategies must also be based on
sustainable agriculture practices, possible only
through production systems that make efcient use
of natural resources without damaging them. Te
agricultural sector can reduce energy needs by opting
for more energy efcient technologies including
irrigation pumps with efcient motors and better load
management (Planning Commission 2011b). More
importantly, better agricultural practices that reduce
input requirements must be adopted. For instance, the
system of rice intensifcation (SRI), which uses 4050
per cent less water and produces higher output, ofers
a solution of efcient, resource-conserving cultivation
(discussed in Chapter 2). It involves using compost
instead of chemical fertiliser, reducing pressure on
scarce water and aquifer supplies and avoiding complete
fooding (Tiyagarajan 2004).
For Indias large, poor rural population, actions
directed at mitigating emission of local pollutants while
mitigating greenhouse gas emissions as a co-beneft
would be acceptable and efective. Particulate emissions
have major health consequences and their impacts are
mainly felt in the region of origin because they do not
disperse quickly, making mitigation an important policy
imperative (Somanathan
and Somanathan 2009).
Over 40 per cent of
particulate emissions come
from wood, agricultural
residue and dung from
cooking fres, with about
a third from forest fres
and open burning of
agricultural residue after
harvests (Venkataraman et al. 2006). Low-cost emission
reductions are therefore possible by productive use of
residues. A biomass system in Hosahalli, Karnataka, for
instance, has helped meet electricity needs since 1988,
providing lighting and piped drinking water for over 85
per cent of days between 1998 and 2004 (Ravindranath
et al. 2004). But barriers to adoption of biomass
power must be addressed. For lighting, transition from
kerosene-based lamps to electricity or renewable energy
presents an opportunity to reduce particulate emissions.
While grid power may imply greenhouse gas emissions
and transmission and distribution (T&D) losses,
efcient renewable-based decentralised options could
help efectively address the problem (see Chapter 4).
Land management is crucialforests and grasslands
ofset emissions and mitigate climate change cost-
efectively. Also, containing the loss of natural habitats
and preventing deforestation has signifcant biodiversity,
soil and water conservation benefts. In the marine sector,
measures like estimation of food inundation through
geographic information system (GIS) techniques, better
monitoring mechanisms, infrastructure development
near coasts, planting of mangroves and land use control
can be undertaken.
5.6.4 Funding Climate Change Projects
Difculty in capturing return on investment in adaptation
may lead to under-investment in such projects. Te
Green Climate Fund (GCF), which mobilises funds
from international sources, is still in its initial stages
and operational modalities are not known. Te report
of the Sub-Group on Climate Change for the Twelfth
Five-Year Plan
21
stressed
the importance of eforts to
increase the participation of
banks in fnancing projects,
bundling small projects to
reduce transaction costs
and increasing average
project size. But it also stressed that India must mainly
rely on domestic sources for climate fnance, primarily
budgetary allocations and the NCEF.
India also stands to draw economic benefts from
climate instruments like the clean development
mechanism (CDM) under the Kyoto Protocol. As
of May 2012, India had about 835 registered CDM
projects, i.e. about 20 per cent of all registered projects
For Indias large, poor
rural population,
actions directed at
mitigating emission of
local pollutants while
mitigating greenhouse
gas emissions as a
co-beneft would be
acceptable and efective.
Difculty in capturing
return on investment
in adaptation may lead
to under-investment in
such projects.
21
Available at http://planningcommission.gov.in/aboutus/committee/wrkgrp12/enf/wg_climate3001.pdf (accessed in 2013).
198 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
(IGES 2012). But CDM has not contributed to
the alleviation of rural poverty (Sirohi 2007). Since
rural projects tend to be small and CDM entails high
transaction costs, ways of consolidating small CDM
projects to lower costs and to obtain fnancial benefts
of such carbon-ofsetting initiatives must be explored.
5.7 The Way Forward
While rural livelihoods critically depend on natural
resources, the indiscriminate overuse of these resources
has led to their degradation which, in turn, threatens
livelihoods and impedes immediate and long-term rural
development. Economic growth so far has largely resulted
in ecological poverty and distressed livelihoods. Going
forward the following actions should be considered to
mitigate the threats to resource sustainability.
Conservation and Efcient Use of
Natural Resources
Much of the crisis is man-made and can be rectifed.
A combination of fnancial incentives, regulations and
institutional support would help ensure conservation
and efcient use of resources.
Rational use of inputs can provide ecological and
fnancial benefts. Non-pesticide management adopted
in parts of Andhra Pradesh, for instance, uses a
combination of physical and biological measures to
reduce the use of chemical fertilisers and has signifcantly
reduced cultivation costs and farmer indebtedness
(Vijay Kumar et al. 2009).
Inappropriate pricing and subsidy policies have
encouraged indiscriminate use of farming inputs. For
fertilisers, ongoing eforts to shift towards a nutrient-
based subsidy regime and decontrol urea prices to
converge towards a uniform, deregulated retail price
regime must be expedited to improve a balanced nutrient
uptake and minimise contamination of groundwater
(Planning Commission 2013). Use of appropriate
mixtures of organic fertilisers, chemical fertilisers, and
organic/chemical composites specifc to soil conditions
and crops must be promoted. Farmers are currently
compensated for undertaking organic farming, but the
continued subsidy on chemical fertilisers and no subsidy
for organic manures has been discouraging wider
adoption of organic agriculture.
Water too must be used more efciently and initiatives
must be introduced to rectify perverse incentives to
over-exploit water, such as subsidised electricity (see
Chapter 4 on Jyotigram initiative). Greater efciency in
water use can be ensured through the promotion of less
water-intensive cultivation and appropriate technology
like drip and sprinkler irrigation or SRI cultivation.
Although government subsidies do support capital-
intensive drip and sprinkler irrigation, the subsidy cap
could hurt farmers if the price of irrigation systems
increases. Also of concern is the fact that subsidies are
passed directly to the manufacturer with no concrete
commitment to provide technical support for operations.
Tis process needs to be reviewed and innovation for
more afordable microirrigation systems encouraged.
Similarly, for fshery, the diesel subsidy to trawlers needs
to be reviewed, given that the size of the trawl feet
especially mechanised feethas contributed to rapid
depletion of marine fsh.
Improving Availability by Promoting Regeneration
and Harvesting
Natural resources must not only be used efciently, but
also regenerated. In rainfed and resource-poor areas,
resource regeneration is mainly through the watershed
approach with community participation in planning
and implementation. Given the limitations of large
dams and reservoirs, traditional and other methods
of rainwater harvesting should be promoted along
with building smaller surface water storage structures.
Degraded tanks and ponds should be renovated and
the Repair, Renovation and Restoration (RRR) scheme
launched in 2005 be made more efective, as proposed
in the Twelfth Plan. MGNREGS can be used for all
these purposes, especially after the new Operational
Guidelines 2013 which expands the set of activities
eligible under MGNREGS (MoRD 2013). But there
must be a strong emphasis on quality. Improving
supply of surface water requires better management
and maintenance of the existing canal irrigation
system and a more participatory role for water user
associations (WUAs) in managing the water delivered
(see Chapter 4).
For forests, the Green India mission should assist in
natural regeneration, emphasising the protection and
nurture of local varieties of trees in degraded forests
rather than the planting of non-native species. Eforts
should be made to increase forest cover with appropriate
plant species at suitable locations, such as in the higher
reaches of hills, to tap and slow water runof, thereby
achieving reduced soil erosion, lower siltation of water
bodies and regeneration of surface and groundwater.
Forest-dependent communities could also undertake
cultivation of select NTFP species in forest fringe areas
Sustainability 199
to reduce the pressure on NTFPs in forests and assist in
sustainable NTFP development.
Similarly, increasing investment in cultured fshing
could assist in reducing the pressure on marine fshery.
Community Participation and PRIs
Past experience tells us that traditional, community-
managed systems work fairly well in equitably sharing,
conserving and maintaining resources. Tere is,
therefore, a compelling case to increase and improve
community involvement in activities that fundamentally
concern them. But efective community participation
depends on members deriving benefts from their eforts
and being autonomous in operations, without powerful
elites cornering the benefts.
Community participation is critical to ensuring
water-source sustainability, negotiating competing uses
for water within and between villages and other users,
managing irrigation systems (i.e. role played by WUAs)
and maintaining drinking-water delivery systems.
Communities can play a key role in monitoring the
proposed National Aquifer Management Programme
(NAMP) that hopes to map and monitor all the countrys
underground aquifers (see Chapter 4). Trough fshery
co-management systems, local communities can monitor
compliance with fshing rules and regulations.
Experience has also shown that local PRIs can
efectively manage, restore and regenerate village
commons (see Chapter 6). Te most efcient way is to
permit PRIs to perform day-to-day operations while
the state administers laws and regulations. MGNREGS
gives PRIs an opportunity to govern their CPRs
more efciently by undertaking projects that address
degraded resources and create a durable asset base such
as watershed and forestry.
Institutional Strengthening and Capacity Building
Given Indias vast agro-climatic diversity, policies
governing the use and management of natural resources
must account for local conditions rather than having
blanket national policies. Because this involves actors at
various levelscentral, state and localclarity of roles
and responsibilities would ensure better conservation
and management. Efcient forest management, for
example, requires the combined participation of local
communities, the FD and the tribal department. Te
parameters of the various statutes, such as the Indian
Forest Act 1927 and the Forest Rights Act, should
be clarifed.
Capacity building and awareness among the
administrative machinery and communities would go
a long way in ensuring sustainability. Soil testing by
farmers in laboratories and expert recommendations
regarding fertiliser use according to soil conditions,
for instance, are both necessary for the balanced use of
fertilisers. Despite initiatives in this regard, farmers are
still unaware of soil-testing facilities and its benefts, and
the administrative machinery lacks the capacity to reach
out to farmers. Similarly, State Pollution Control Boards
have limited staf to regulate and enforce industrial
pollution norms. Regular and reliable data collection
and inventory of natural resources also are key to the
formulation of efective and required policies and their
going forward.
Combating Climate Change
Rural India, in early stages of infrastructure develop-
ment, has a unique opportunity to pursue sustainable
development that manages emissions and adapts to the
efects of climate change. Considering the signifcant
lock-in period of infrastructure, development projects
should be low-carbon. Initiatives should present eco-
nomic co-benefts that can aid in poverty alleviation.
Infrastructure development in rural areas, for instance,
should encourage the use of decentralised renewable
energy as with the Green House Scheme in Tamil Nadu
(see Chapter 4). Similarly, various low-carbon and less
water-intensive technologies in agriculture have mul-
tiple co-benefts. Climate policy should be formulated
to promote equity within poor, vulnerable communities
(Ananthapadmanabhan et al. 2007). Implementation
of such a policy at the grassroots level depends on the
collective eforts of civil society, businesses and govern-
ments at all levels.
Finally, eforts to address the impacts of climate
change must form an integral part of rural development
policy and consider impacts on poverty and livelihoods.
Te focus must be on building the rural populations
capacity to adapt and on increasing their resilience to
sudden impacts of climate change.
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Image credit: Ministry of Rural Development
Summary
T
he Constitution (73rd
Amendment) Act of 1992
(73rd CAA) formally es-
tablished panchayati raj
institutions (PRIs) as a third level of
federal democracy. Local self-government
was intended to facilitate greater demo-
cratic participation, better articulation
of local development priorities, more
ef cient resource use, and reduction
of wastage. Elected representatives liv-
ing within their constituencies were to
inspire more robust accountability. Te
73rd CAA establishes the gram sabha
(GS) or village assembly as the primary
deliberative body under which the gram
panchayat (GP), or village council of
elected of cials, operates.
Two decades on, PRIs cannot be deemed
to have become the dynamic, empowered,
local self-government institutions that
were envisioned. Te reasons are many.
State governments, line ministries, and
legacy rural development agencies have
been slow to devolve functions, resources
and staf to PRIs, leaving them unsure
about their responsibilities and funding, and without
suf cient technical support. Government of cials,
local elites and/or Naxalites have often interfered and
deprived villages of the discretion to plan or implement
projects. PRIs have often been left out of the planning
phase of fagship central government schemes, and given
only the tasks of benefciary selection, implementation
or monitoring. And even when they have played a
primary role in planning, PRIs have been unable to do so
efectively, in part due to the burdensome administrative
responsibilities that many government schemes impose
upon them, and in part due to their lack of capability.
Corruption also has been a serious problem
through political clientelism (trading benefts for votes)
or elite capture (a privileged sub-section usurping
benefts) or outright siphoning-of of funds. Village
elites control many panchayats, merely perpetuating
existing hierarchies. Te GSs social audits, or public
checks on programme implementation and outcomes,
were intended to safeguard against misuse of funds, but
they have been virtually non-existent.
But there have been heartening instances of PRIs
working well. Often as a result of support from non-
governmental or civil society organisations, people
have become aware of their rights and responsibilities,
and have demanded development-oriented projects
and accountability from the panchayat of cials. At
6
CHAPTER
PRIs for Local Self-Governance
and Rural Development
210 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
the same time, GPs have gained from this outside
technical assistance by making detailed holistic plans
that beneft the majority. Other successes have been due
to the greater participation of women and members of
Scheduled Castes (SCs) and Scheduled Tribes (STs),
often as a result of mandatory reservations for the
sarpanch (elected head of the GP) position. Although
these positions usually have been flled in name only or
as a proxy for village elites, meaningful participation of
these marginalised groups is rising.
Experience points to the need for clear activity
mapping to devolve functions to PRIs and a greater
push for capacity building. States must be encouraged
to release their grip on power, and the bottom-up pull
for good governance must be strengthened. States that
are better-governed have a history of social reform,
lower levels of poverty, higher literacy rates and more
equitable land distribution, or have made eforts
to remedy social discrimination, have yielded more
dynamic and empowered local institutions. Tis could
be because the poor and disadvantaged in those states
are less marginalised, and thus better able to assert their
rights under the 73rd CAA.
6.1 The Need for Bottom-up
Governance
Te search for appropriate institutional arrangements
for governance and development at the grassroots
level has long been a core concern of Indian rural
development. Over the years, huge sums of money
have been allocated to rural development, but results
have not been commensurate: money has often been
siphoned of or wasted on large incomplete projects
or projects that do not refect local priorities. Te
rationale for decentralisation and local self-governance
on political and economic
grounds stems from these
issues. In theory, local self-
government allows greater
democratic participation
and articulation of local
development priorities.
Decentralisation also
enables more efcient
resource use and reduced
waste. Finally, elected representatives who are closer to
the people can more easily be held accountable.
GPs, as a form of decentralised governance, have been
integral to Indian village governance since pre-colonial
times, although with varying legal status and powers,
over time and across regions.
1
In newly Independent
India, the Community Development Programme (CDP)
introduced in 1952 sought to promote decentralised
rural development through community development
blocks (CDBs). But the governance of CDBs was
bureaucratic in nature, and lacked the elements of popular
participation and accountability. Tey were plagued by
leakage and corruption, red-tapism and the absence of
local inputs in planning and implementation. Although
CDBs remained an important part of development
administration, the search for more people-centric,
community-oriented and locally accountable institutions
began. Te Balwantrai Mehta Committee (1957)
was its frst major realisation and PRIs proliferated
nationwide in the period that followed. But they did
not last, possibly due to the vested interests of those
who were threatened by, or opposed to, such grassroots
democracy. Te detractors of the system attacked it on
grounds of its domination by upper castes, corruption
and lack of capacity. Te Ashok Mehta Committee
(1978) and the G. V. K. Rao Committee (1985) both
sought various solutions to revive and strengthen the
declining institutions. One critical suggestion, frst
made by the Ashok Mehta Committee and stressed by
the L. M. Singhvi Committee (1989), under the Rajiv
Gandhi government, was to grant constitutional status
to panchayats. However, this attempt failed by a narrow
margin in Parliament in 1989.
Te 73rd CAA passed in 1992, formally established
the panchayati raj system as a third level of federal
democracy. (Tis was followed by the Constitution
(74th Amendment) Act, 1993 setting up municipalities
as urban local bodies (ULBs). Although some states
Andhra Pradesh, Karnataka, Gujarat, Maharashtra and
West Bengalalready had reasonably well-functioning
panchayats with elections at regular intervals, the Act
introduced a degree of nationwide uniformity in PRIs.
Te 73rd CAA was historic in many ways. It mandated
reservations for women, SCs and STsan attempt
at grassroots-level afrmative action and inclusion
on a scale not witnessed elsewhere in the world. Tis
1
During the colonial period, panchayats were transformed from primarily social institutions to legal institutions. Despite this
institutionalisation and the provision for elected representatives, panchayat powers remained limited and were often just a mechanism for
collecting taxes during the colonial period.
The rationale for
decentralisation
is that it allows
greater democratic
participation,
articulation of local
priorities, more efcient
resource use and greater
accountability.
PRIs for Local Self-Governance and Rural Development 211
With growth of peri-
urban areas and large
villages, PRIs will
play a crucial role in
development, including
providing communities
land and natural
resources on equitable
terms.
brought 1.6 million previously marginalised people
into political positions in local government. Te 73rd
CAA also provided safeguards against erosion of the
PRI system.
Tis chapter seeks to review the Acts implementa-
tionin letter and on the groundand examine its
successes and the challenges facing the PRIs two decades
on. Has the vision of the architects of this far-reaching
reform been realised? How far along the path are we?
Decentralisation is clearly here to stay, but PRIs still
do not function as envisaged. Te GS, positioned as
central to all decision-making, has not been empowered
to the extent envisioned under the Act. Not only is there
variation among states,
but in a country as diverse
as India, one cannot even
generalise within a state,
let alone nationwide. But
much can be learned from
the successes and failures to date in order to strengthen
these institutions in the future. Are there certain pre-
existing or concurrent conditionssuch as a history
of social reform or capable NGOsthat improve PRI
performance? Can a reassignment of roles across PRI
tiers, or a changed relationship with local administration,
yield better outcomes? Has mandatory reservation
engendered true participation from marginalised
communities? Does decentralisation necessarily lead
to more fair or equitable development outcomes?
Tis chapter tries to shed light on some of these
interrelationships and raise questions for further research.
Answers to these and other questions illuminate
how democratic participation and accountability can
be rooted and strengthened. Going forward, new rural
socio-economic development programmes will increase
the demands on PRIs. PRIs also have a crucial role
in the implementation of a number of rights-based
programmes including the Mahatma Gandhi National
Rural Employment Guarantee Scheme (MGNREGS)
and the Right to Education (RTE) . But the role of PRIs
goes beyond delivery of government programmes. As
the economy grows and industrialises, PRIs will play a
crucial role in the overall development process, including
providing communities land and natural resources on
fair and equitable terms. With growing urbanisation,
rural areas are increasingly becoming linked to urban
areas. In fact, in the last ten years, a larger share of urban
growth has come from peri-urban areas and growth
of smaller towns than from organic growth within
large cities (Census 2011). Tis will require PRIs to
work more closely with
their urban or urbanising
counterparts to negotiate
issues ranging from
sharing natural resources
to building infrastructure.
With these varied and
extensive responsibilities
ahead of them, equipping
PRIs to meet not only
current but also future demands is critical.
Tis chapter discusses the following:
Section 6.2 explains the key features and spirit of the
73rd CAA.
Section 6.3 assesses the Acts implementation and
the challenges in the way of better PRI performance.
It then evaluates two fagship schemes, the
MGNREGS and the Backward Regions Grant Fund
(BRGF) because the underlying goal of both schemes
is of empowering and building capacity of PRIs and
improving governance.
Section 6.4 discusses Panchayats (Extension to
Scheduled Areas) (PESA) Act, 1996 and the
Scheduled Tribes and Other Traditional Forest
Dwellers (Recognition of Forest Rights) Act, 2006
two Acts that extend features of the 73rd CAA to
marginalised populations.
Section 6.5 takes stock of where PRIs stand now and
raises questions for refection and future research.
Section 6.6 makes recommendations for the way
forward.
6.2 The Constitution (73rd
Amendment) Act, 1992
Te 73rd CAA requires states to legislate the
establishment of PRIs. It provides broad guidelines for
the structure and operation of these local institutions.
Key features of the Act are:
Each state is to enact legislation that establishes
a uniform three-tier PRI system comprising zilla
(district) panchayat (ZP), taluk/mandal (intermediate)
panchayat (IP) and gram (village) panchayat (GP).
States with population below 20 lakhs may dispense
with the second tier (see Figure 6.1).
All GP representatives are to be directly elected
from territorial constituencies, with the GP head to
be elected either directly by the people or by elected
representatives.
One-third of all seats are to be reserved for women,
Decentralisation is
clearly here to stay, but
PRIs still do not function
as envisaged.
212 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
and SCs and STs are to be given proportional
representation. Other backward classes (OBCs) may
also be given adequate representation.
All elected representatives are to serve a fxed, fve-
year term. If a panchayat is dissolved, elections
are to be held within six months from the date of
dissolution. State Election Commissions will conduct
PRI elections in each state.
Te GS, consisting of all adult members of the village,
is the main deliberative body for decisions about
development and other GP priorities, and monitoring
executive functioningthe GP head, ward members
2

and non-elected ofcials like a panchayat secretary
and a rozgar sevak (employment guarantee assistant).
States are to transfer responsibilitiesmentioned
in an indicative list of twenty-nine items
3
in the
Eleventh Schedule of the Constitutionto the PRIs,
and to devolve adequate power and functions to them
with respect to the preparation and implementation
of plans for economic development and social justice.
Each state is to constitute a State Finance Commission
(SFC) with the power to make recommendations for
devolving funds to the PRIs. Te Act also mentions
a list of taxes that PRIs may levy, including home,
entertainment and water tax.
A District Planning Committee (DPC) is to be
constituted, comprising elected representatives of rural
and urban panchayats, local Members of Legislative
Assembly (MLAs) and Members of Parliament (MPs)
and designated ofcials. Te DPC has the power to
prepare the districts annual development plan with
inputs from rural and urban panchayats.
Te Act has mandatory provisions regarding the basic
structure and constitution of PRIs, and discretionary
provisions that grant the states substantial fexibility
in meeting their requirements. Mandatory provisions
include: establishing a three-tier PRI structure; holding
GS meetings; reserving seats for SCs, STs and women
(including allotting the position of sarpanch to women,
SCs and STs on a rotational basis during each election
cycle); conducting panchayat elections every fve years,
and establishing an SFC.
2
Each panchayat area is divided into territorial constituencies (called wards). Each ward holds elections for the post of ward member. Te
ward members in turn occupy seats in the GP.
3
Tese are: 1. agriculture, including agricultural extension; 2. land improvement, implementation of land reforms, land consolidation and
soil conservation; 3. minor irrigation, water management and watershed development; 4. animal husbandry, dairying and poultry; 5. fsheries;
6. social forestry and farm forestry; 7. minor forest produce; 8. small-scale industries, including food processing industries; 9. khadi, village and
cottage industries; 10. rural housing; 11. drinking water; 12. fuel and fodder; 13. roads, culverts, bridges, ferries, waterways and other means
of communication; 14. rural electrifcation, including distribution of electricity; 15. non-conventional energy sources; 16. poverty alleviation
programme; 17. education, including primary and secondary schools; 18. technical training and vocational education; 19. adult and non-formal
education; 20. libraries; 21. cultural activities; 22. markets and fairs; 23. health and sanitation, including hospitals, primary health centres and
dispensaries; 24. family welfare; 25. women and child development; 26. social welfare, including welfare of the handicapped and mentally
retarded; 27. welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes; 28. public distribution system,
and 29. maintenance of community assets.
FIGURE 6.1 Parallel Structure of Local Governance
Source: Ministry of Panchayati Raj (MoPR), http://lgdirectory.gov.in/rptConsolidateforRuralLB.do, accessed on 6 September 2013.
ADMINISTRATIVE WING
DISTRICT
District Collector (DC)
Engr, Accountant
BLOCK
Block Development ofcer (BDO)
Area Dev & Extn Ofcers, Engr.,
Accountant
DC to executy supervise
& coordinate district-level
development
BDO to coordinate
block-level
development
VDO to coordinate
development for
2/3 GPs
LEGISLATIVE WING
DISTRICT
Zila Panchayat/Zila Parishad (ZP)
(589)
BLOCK/TEHSIL/TALUKA
Intermediate Panchayat/Panchayat Samiti
(6325)
VILLAGE
Gram Panchayat (2,39,539)
VILLAGE
Village Development ofcer (VDO)
PRIs for Local Self-Governance and Rural Development 213
6.3 Assessing Two Decades of
PRIs under the 73rd CAA
In the two decades following
the 73rd CAA, the progress
of devolution of functions
and accompanying resources
and functionaries to PRIs
has been weak. Section 6.3.1
reviews the progress on
participation of women and marginalised communities
in panchayats, and devolution of functions, funds and
functionaries, commonly referred to as the three Fs.
6.3.1 Implementing the Letter and Spirit
of the Act
All twenty-eight states have by now enacted legislation
to constitute functioning PRIs although Jharkhand
did not constitute panchayats as late as 2010. Most
states held fve-yearly elections for PRI representatives,
although election cycles were not always coordinated
across tiers, as the Act provides. Not all states have
implemented all the mandatory provisions of the
Act, but Haryana, Tamil Nadu, Sikkim, Rajasthan,
Karnataka, Odisha, Madhya Pradesh and Punjab have
fared better than the rest (IIPA 2013).
Social Dimensions
Almost all states have reserved seats for SCs, STs
and women. Bihar was the frst to enact 50 per
cent reservation for women during the panchayat
elections of 2006, instead of the mandated one-third
(see Figure 6.2). Subsequently, other states made
similar amendments to their respective panchayat
Acts, although some have not yet implemented them;
only eight states have not yet announced 50 per cent
reservation for women.
For SCs and STs, representation in PRIs appears
broadly proportional to their population within the
state. Several states even have higher than proportional
representation of SCs and STs (see Figures 6.3 and 6.4).
Womens Participation
While the overall representation seems encouraging, one
must interpret these fgures with caution. Numerous feld
studies show that the problem of proxy representation
is acute amongst women representatives. Women are
often being elected to satisfy the required quotas while
men actually wield power. In Uttar Pradesh, the informal
system of a pradhanpati (literally, husband of the pradhan
or head) is very common; that is, the wife is nominally
the pradhan, but it is the pradhanpati who wields true
power. In some cases the wife is almost invisible. Tis
practice extends beyond Uttar Pradesh to other states,
including Gujarat, Maharashtra and Andhra Pradesh
(Baviskar and Mathew 2009). Maharashtra and Andhra
Pradesh have a more pragmatic division: the woman
conducts meetings and handles paperwork, while the
husband deals with outside contractors and workers
(ibid). Te no-confdence motion, designed to instil
accountability within the panchayat, is often misused to
remove the female sarpanch and enable a man to usurp
the position (IRMA 2010). Entrenched patriarchal and
caste attitudes and indiference towards female political
Two decades later the
progress of devolution
of functions and
accompanying resources
and functionaries to PRIs
has been weak.
FIGURE 6.2 State-wise Actual Share of Women Representatives in PRIs
60
0
20
40
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33 33 32
Note: Figures for J&K, Odisha and Sikkim are not available. Data for Andhra Pradesh, Assam, Manipur and West Bengal pertain to the previous panchayat election cycle
in the respective states. In Andhra Pradesh, Assam, Manipur, Sikkim, Tripura and West Bengal, reservation for women in panchayats has been increased to 50 per cent.
Source: IIPA (2013).
214 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
FIGURE 6.3 State-wise Share of SC Representatives in PRIs
40
P
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t30
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10
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Note: Figures for Goa and J&K are not available. Data for Andhra Pradesh, Assam, Manipur and West Bengal pertain to the previous panchayat election cycle in the
respective states.
Source: Census of India (2011); IIPA (2013).
FIGURE 6.4 State-wise Share of ST Representatives in PRIs
34
32
27 27
24 24
22
20
19 18
17
16 16
15
12
11 11
7 7
5 5
1
Share of SCs in PRI Share of SCs in rural population
100
80
60
40
20
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Share of STs in PRI Share of STs in rural population
Note: Figures for Haryana, J&K, Punjab and Uttar Pradesh are not available. Data for Andhra Pradesh, Assam, Manipur and West Bengal pertain to the previous panchayat
election cycle in the respective states.
Source: Census of India (2011); IIPA (2013).
candidates have often hindered true participation
some upper caste men have been reluctant to work
under lower caste women representatives.
Te inclusion of women has had important empow-
erment and development outcomes. Women have come
forward enthusiastically in some states, even defeating
male candidates for general seats. Increased female
participation in PRIs has encouraged more wom-
en to participate in GSs (ibid.). Tere have been
instances of women repre-
sentatives asserting their
rights to chair panchayat
meetings, of changed atti-
tudes towards represent-
atives in their households
and communities, and even
of men (or other women
in the household) taking
Women are often
elected to satisfy the
required quotas while
men actually wield
the power. But where
women are actually
empowered, there
have been positive
development outcomes.
PRIs for Local Self-Governance and Rural Development 215
Women continue to
face many barriers
when participating in
panchayats, such as lack
of family support, low
skills and literacy, public
perception about their
role in society, or lack of
access to resources for
campaigning.
over household duties so
that women representatives
can attend meetings (ibid.).
According to a Ministry of
Panchayati Raj (MoPR)
survey, women have also
been able to compete in non-reserved seats in PRIs,
showing promising results for the system (ibid).
Women have shown diferentoften more
positiveinclinations than their male counterparts
towards development.
Women tend to focus on social welfare projects that
have, in turn, enabled broader, more holistic village
development (Lindberg et al. 2011).
Women have accorded central importance to
education (IRMA 2010). A female president of a GP
in Karnataka, for example, facilitated the creation
of a school for girls through a government scheme
and started literacy classes for women (Deshmukh-
Ranadive 2003).
Women-led panchayats in Rajasthan have increased
village revenues which, in turn, have prompted more
development projects.
Women have taken greater interest in monitoring,
for e.g., inspecting nutrition centres and the presence
of teachers and medical staf in schools and health
centres.
Women have taken the initiative to provide resources
for family and marital counselling and setting up
community assets such as halls and crches (MoPR
2008).
Men, on the other hand, have tended to gravitate
towards infrastructure development projects that
promise kickbacks (Singh 2012). Villagers in Manipur
perceived female panchayat members to be less inclined
to corruption (Brara 2009).
But women continue to
face many barriers when
participating in panchayats,
such as lack of family
support, low skills and
literacy, public perception
about their role in society,
or lack of access to
resources for campaigning
(IRMA 2010; Singh 2012;
Lindberg et al. 2011). Very
few women have progressed to a political career from
panchayat participation.
Participation of SCs and STs
Attitudes towards SCs and
STs are gradually changing.
Certain states, particularly
those with a history of
social reform, such as
Maharashtra, Gujarat and
some southern states, have
examples of empowered
and vocal sarpanchs.
In Uttar Pradesh, SC
panchayat members are
gaining political clout and
working towards protecting
community rights and interests (Singh 2009). In West
Bengal, SCs have gained economic clout through land
reforms and support from left-wing parties as a result
of the PRI system. Te oppressed are undergoing a
social revolution of sorts as SC/STs gain power in
the PRI system. But discrimination against SC and
ST panchayats continues. Some upper class or caste
villagers elect a deputy sarpanch who actually holds
power. Others support a weak SC/ST sarpanch who
is susceptible to manipulation. Many instances of
outright discrimination include disrespect of lower
caste sarpanchs and even money set aside for SC/ST
development in the panchayat budget diverted to upper
castes. Despite the signifcant gains in ensuring active
and meaningful representation of women, SCs and STs,
much remains to be done.
Devolution of the Tree Fs
Te Twelfth Plan Working Group on Panchayati Raj
Institutions and Rural Governance (hereafter WG)
and other reviews (e.g., IIPA 2012) have found progress
grossly inadequate (see also Table 6.1 below).
Functions. Certain states have fared better than others;
but overall, state governments have been reluctant
to devolve to PRIs the range of responsibilities or
functions envisaged in the Constitution (see Figure
6.5). Haryana, Karnataka, Kerala and Sikkim have
issued orders to devolve
all twenty-nine subjects,
while others have devolved
only a few (PIB 2012). As
the Second Administrative
Reforms Commission
(SARC 2007) documents,
The inclusion of women
has had important
empowerment and
development outcomes.
In some states, SC/ST
sarpanchs are vocal and
have been able to gain
political and economic
clout to further
community rights and
interests. Yet, instances
of discrimination persist
and SC/ST sarpanchs are
disrespected or forced
to obey the wishes of
elites.
Activity mapping
is critical to ensure
that functions are
devolved to the level
at which they are most
appropriately handled.
T
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218 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
most state panchayati raj Acts continue to retain
considerable authority to review and approve (or
disapprove) PRI activities and budgets, suspend
resolutions and elected ofcials, and withdraw powers
and functions. Tis means that almost all states
continue to exercise authority over PRIs, vesting power
with the district collector, divisional commissioner
or the state government itself (ibid). Te spirit of the
73rd CAA has thus largely been ignoredrather
than having autonomous space as the Act envisions,
PRIs continue to function within what the Second
Administrative Reforms Commission refers to as
permissive functional domain.
Te number of devolved functions may also be
misleading becausethe associated responsibilities are
often ill-defned and may remain with the state
governments. Most states have begun the process of
activity mapping to clearly allocate responsibilities at
each level. In theory, a well-designed system of allocation
of activities can improve outcomes by increasing
accountability. Pritchett and Pande (2006) illustrate the
example of rural primary education. Using public fnance
and accountability principles, the authors propose an
allocation of activities for rural primary education across
diferent tiers of government (see Figure 6.5). Since PRIs
are closest to the students and schools, they should be
most actively involved in service delivery and performance
evaluation, whereas other functions such as standard
setting might be assigned to higher levels of authority.
In four statesKerala, Karnataka, West Bengal
and Rajasthan, all of which have shown commitment
to devolutionthe authors fnd that, both by law and
in practice, the assignment of responsibilities remains
heavily tilted towards the state. Te state delegates
functions to the lower levels of administrative
responsibility (such as district and block educational
ofces), but very little to PRIs as autonomous units
of self-government. Te few items assigned to PRIs
are the least critical, for instance, maintenance of
school buildings, and even such items are concurrently
assigned to all tiers, leaving the allocation unclear.
Critical functions such as monitoring and tracking the
spread of education remain unassigned. In all states,
the state government, and not the PRIs, can employ
teachers (who are state government employees deputed
to various villages for short periods), even though this
function is better executed by a level of government
closer to the actual schools. Even in states that have
shown commitment to devolution maintain control of
key activities preventing local input and participation
in operational and monitoring tasks.
Funds. Te devolution of functions is meaningless
without the funding needs to execute them. PRIs receive
the vast majority of funds from the central government,
routed through state government line departments
or local administration. But PRIs often do not know
how much money they will receive or when. Tis lack
of clarity greatly impairs their ability to plan for and
fund works. Some state governments are attempting to
streamline this process. Haryana, for instance, recently
proposed that funds for central and state development
schemes be transferred directly to GPs bank accounts.
State governments contribute only minimally to PRI
funds, with few exceptions. Several states have not set
up SFCs, and where they have, their recommendations
are not always implemented. SFCs also sufer from a
lack of capacity and trained personnel.
Standard Setting (Curriculum design & setting learning
goals), M&E (Assessment of learning achievements)
Planning (physical expansion), asset creation (social capital),
operations (teacher hiring, training, salary structure), M&E
(monitoring school processes)
Planning (quality improvement), asset creation (physical
capital), operations (benefciary selection, recurrent
non-wage expenses, maintenance, teacher assignments/
salaries/performance evaluation), M&E (monitoring student
progress)
CENTRE &
STATE
DISTRICT
GP/SMC/VEC
Standard setting
Planning
Asset creation
Operations
Monitoring & evaluation
1
2
3
4
5
FIGURE 6.5 Proposed Activity Mapping for Elementary Education
Note: GPGram Panchayat; SMCSchool Management Committee; VECVillage Education Committee.
Source: Pritchett and Pande (2006).
PRIs for Local Self-Governance and Rural Development 219
PRIs own revenue resources are also often inadequate
to allow them to be efective governing bodies. Tis is
partly due to a lack of political will to mobilise resources.
Although the legislation of many states permits PRIs to
levy local taxes on a number of items (see Table 6.1),
most have not done so.
But some PRIs have been determined to improve
their own revenues and go beyond passively
implementing central and state development schemes.
Karnataka, for example, empowers GPs to maintain
the piped water supply and mini water supply systems,
and operate and maintain drinking water facilities in
their respective jurisdictions. Te GPs determine and
levy consumption-based charges on water, a water
connection fee and a house tax, from which they can
maintain the water supply, pay the watchmens and
watermens salaries and take care of community assets
(Billava and Kulkarni 2012; Pankaj 2012). Odisha also
collects a water tax, which, along with other sources of
revenue, is used for development works. All GP-raised
revenue is collected in a Gram Fund and deposited in
a nationalised bank, post ofce or treasury (Behuria
2011). GPs have also attempted tapping other revenue
sources, but not always successfully. In Haryana,
GPs raised revenue by collecting rent on cultivatable
panchayat land leased out each year, and the
commercial use of common property such as ponds,
roads and forests (Government of Haryana n.d.;
IRMA 2010). But upon discovering that bureaucrats
had often illegally sold and transferred GP land to
private developers, the state banned the practice under
the Punjab Village Common Lands Act, 2012 (Indian
Express 2012; Patel and Das 2012).
Functionaries. Te fact that state governments have been
reluctant to transfer their own staf (or functionaries) to
PRIs has restricted the latters operational efciency.
Lower-level bureaucrats strongly resist working as PRI
ofcials and prefer working for the state government.
Also because they cannot recruit their own administrative,
fnancial (accountants) and technical (engineers) staf,
most PRIs remain dependent on the state government
for performance of tasks assigned to them.
A few states have put more staf at the disposal of
PRIs, in three ways.
First, as in Karnataka and Himachal Pradesh, they
have created a cadre of technical personnel that PRIs
can draw upon.
Second, some states have tried to empower
panchayats by giving them power over government
functionaries at their level. But this is limitedfor
instance, in Himachal Pradesh, panchayats only
have some supervisory powers such as reporting
attendance of feld-level government functionaries.
In Madhya Pradesh, PRIs play a larger role. IPs and
ZPs can replace village-level administrators on the
GPs recommendations. GPs can monitor the new
ofcers attendance and render advice, while ZPs can
transfer ofcials, pay wages, sanction leave and take
disciplinary action against ofce bearers (IRMA
2010). But feld studies show that this transfer of
power often burdens local representatives who cannot
fulfl their responsibilities due to a lack of knowledge
and training (Dasgupta and Marter 2003).
Tird, as in Kerala, states have assigned their
functionaries from the district level and below
to work as the secretaries of the corresponding
panchayats (IRMA 2010).
Combining the Tree Fs. Te MoPR and NCAER have
developed a Devolution Index to measure and compare
the extent of devolution of the 3Fs across states. While
it encapsulates summary progress, the Devolution Index
does not measure PRI accountability or transparency
(Finance Commission 2009; Oommen 2009). It
also fails to capture true administrative autonomy or
empowerment, a vital feature of truly participative
democracy (ibid). Most of the questions listed to gauge
progress in devolving functionaries, in fact, relate to
training and capacity building, and hardly proxied
for administrative autonomy (ibid). Even though the
performance-based monetary rewards that states
currently receive are based on it, the Devolution Index,
thus, should be interpreted with caution.
4
In 2013, IIPA published a revised index which
incorporates six aspectsapart from the original
4
According to this index, the best performing states with regard to devolution of functions and functionaries are Karnataka, Maharashtra,
Madhya Pradesh, Kerala and Rajasthan. Te same states also score higher on the Devolution Index with regard to devolution of funds,
in addition to West Bengal, Sikkim and Chhattisgarh. According to the 2013 IIPA index, all aspects taken together, the best performing
state was Maharashtra, followed by Karnataka, Kerala, Rajasthan and Tamil Nadu, indicating that roughly the same set of states remain
the better performers. Medium performers which include states like Uttarakhand, Chhattisgarh and Haryana fare much better than the
North Eastern states.
220 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Governments have
placed a heavy
administrative burden
on the roughly 2.4
lakh PRIs while failing
to build capacity and
provide adequate staf
to help them carry out
their responsibilities,
including planning.
three Fs, these include a fourth F, framework, as well
as capacity building and accountability (IIPA 2013).
Framework attempts to capture performance on
setting up adherence to mandatory provisions such
as setting up a DPC or having regular panchayat
elections. Yet, as with all indices, many subtle nuances
afecting PRI functioning, such as political economy,
are hard to quantify and capture.
6.3.2 Challenges in PRI Functioning
Tis section examines the most critical impediments to
the efective functioning of PRIs.
Capacity building
State and central governments have failed to provide
adequate and relevant training and capacity building to
about 2.4 lakh PRIs. As a result, PRIs often are poorly
equipped to handle even
their limited responsibilities,
and still depend on
government administration
to formulate their plans.
Even where funds have
been allocated for capacity
building, the lack of teachers
or training centres and poor
quality of training have
been constraints. Training
programmes have also not been tailored to local needs
and have not taken into account feedback or input from
PRIs themselves. Tis has compounded an already
difcult situation. A large share of PRI representatives
are not educated or may be semi-literate.
But sincere eforts to develop capacity have been
made and have yielded positive results. Various State
Institutes of Rural Development (SIRD) have made
innovations on the mode of capacity building and
means to reach the scale. West Bengal, for instance, has
made remarkable progress in training panchayat ofcials
with the help of the State Institute of Panchayats and
Rural Development (SIPRD). SIPRD uses PRI and
lower-level government ofcials as faculty for courses
focusing on practical knowledge and applied research
techniques. West Bengals progress in rural sanitation,
in fact, is attributed to SIPRD (CGG 2004). SIRD
Punjab emphasises training for GS mobilisation, and
uses mock GS meetings to train members in activities
such as preparing village plans and conducting social
audits. States have also used technology for capacity
building and improving awareness. Karnataka has used
a satellite-based distance
learning programme, while
Chhattisgarh and Tamil
Nadu have used the radio.
PRIs lack not only
technical capacity but also
administrative staf to handle
their cumbersome volume
of paperwork. A World
Bank study in Madhya Pradesh and Karnataka describes
the issue of administrative overload on panchayats (CSE
2008). Te study found that on average, a sarpanch is
responsible for keeping track of 470 accounts and dealing
with seventeen line departments involving ffty ofcials
(ibid). Tis often means that even well-meaning GPs
struggle to pay adequate attention to any one scheme,
and often focus on meeting administrative aspects rather
than innovative or strategic aspects of implementation.
Te WG report found that a large number of GPs do
not even have a full-time secretary.
Overlapping Jurisdiction and Responsibilities:
Bureaucratic Control or Interference
Te governments administrative arman institution
parallel to the PRIhas long been in place to
implement rural development and Centrally Sponsored
Schemes (CSSs), and includes line departments and
state ofcials at the district, block and village levels
(see Figure 6.1). Most states also have a District Rural
Development Agency (DRDA), a legacy institution set
up to plan, monitor, implement and receive funds for
rural development programmes. Tis parallel structure
has compounded the lack of clarity on functions
among all tiers of PRI representatives and the already
overlapping jurisdiction between PRIs, district-level
administrative ofcials and line department staf.
Many CSSs bypass, or are structured to impede, the
working of PRIs either by giving more control to
district administrations or vesting control with line
departments and state ofcials.
State- and district-level ofcials often interfere in the
functioning of GPs. As state government employees,
they are reluctant to vest true power in PRI ofcials.
Since funds are routed through them and they have the
power to approve or reject PRI plans and proposals, they
have often used this power to dilute the PRIs autonomy.
Numerous instances of ofcials hijacking development
plans to beneft interest groups or even themselves
have been reported. In Andhra Pradesh for instance,
the state government machinery often by passed PRIs.
Various state institutes
of rural development
have innovated to
successfully deliver
practical and relevant
training, using PRI and
lower government
ofcials as faculty.
PRIs for Local Self-Governance and Rural Development 221
In one case, a GP had
carefully prepared plans
for water storage structures
and restoration of lakes,
along with projections for
how this would help their
groundwater levels and
local fsheries. Even though the GS had approved these
plans, block ofcials authorised works for bunding and
teak plantation instead (CSE 2008). Even GSs in West
Bengal sufer from low attendance because participants
do not believe that their panchayats can efect change in
the face of opposition from the stronger administrative
ofcials (Misra 2008).
But there have been instances of the administrations
curbed authority, oras in Karnatakaa power
shift away from the administration towards the PRIs.
Engineering such a shift involved a strong political
calculation. Karnataka undertook a major initiative in
1987 to overcome the bureaucracys opposition to the
shift in power to PRIs, when the DRDAs were merged
with the ZPs. To do this, ofcers ranked higher than the
deputy commissioner were appointed chief secretaries
of ZPs, who then had to relinquish their responsibilities
in the DRDAs and be accountable to the ZPs, since
their confdential reports were written by the head
of the Zilla Panchayat Mission (Mission Group on
Decentralisation 2010). Following Karnatakas example,
a number of states like Madhya Pradesh, Chhattisgarh,
Rajasthan, West Bengal and Kerala have abolished
DRDAs as separate legal entities, and merged them
with the ZPs following Karnatakas example. In January
2012, the report of the Committee on Restructuring of
DRDA recommended that the elected head of the ZP
be made the DRDA chairperson.
In addition to the formal bureaucracy, some states also
have an informal bureaucracy that can play a positive role.
In Karnataka, for instance, Customary Village Councils
(CVCs), play an infuential role in local governance,
parallel to the formal structure of PRIs. Te CVCs
govern a village, taking responsibility for maintaining
social order and . . . fostering village solidarity
(Ananthpur 2007). Tey even step in to provide services
that GPs cannot, such as religious activities and confict
resolution. According to Ananthpur (2007), the CVCs
overlapping jurisdiction often complements the GP,
demonstrating the benefts of institutional dualism.
In certain instances, however, parallel entities such
as missions, societies and committees, usurped the
panchayats formal responsibilities.
Too Many Layers of PRI Representatives?
Blurring of functional devolution and overlap of
the executive and legislative arms at the local level
is further compounded by the argument of some
observers that there may also be one-too-many layers
of representatives within the PRI structure itself.
While the district panchayat plays an important role
in facilitating development from the local level to the
administration, and the GP is integral in bringing about
grassroots participation where possible, in some cases,
the IPs role in local governance is limited. Some also
argue that the GP and IP are closest to the people, and
the ZP is redundant. In 2006, the governor of Tamil
Nadu said that the state government would press for a
constitutional amendment seeking a two-tier panchayat
system and abolishing ZPs. Tis view arose from the
belief that the district panchayat, which only coordinates
rural panchayats, is redundant, and a body like the DPC
(see below) that co-ordinates across rural and urban
panchayats is more constructive (RDPRD n.d.).
Although the Ashok Mehta Committee had
recommended replacing the three-tier PRI system with
two tiers, this was not done in the73rd CAA. Some states
such as Karnataka did pass the Zilla Parishad, Mandal
Panchayats and Taluk Samitis Act in 1983, which created
a two-tier system of local governance, but at the district
(not block) and village levels. Trough this, districts got
considerable autonomy for the preparation of plans, with
greater contribution from the GPs and GSs. But after the
state government changed hands in the 1990s, the state
aligned with the 73rd CAA, and introduced the three-
tier PRI system (Mission Group on Decentralisation
2010). While the context varies across states whether a
two-tier system might be more efcient and streamlined,
and whether states might be given fexibility to choose the
number of tiers remain open questions.
Tied Funds
Tied funds under CSSs can sometimes further impede
autonomous functioning of PRIs. Conditions and
restrictions on how money can be spent reduce a schemes
fexibility to suit local needs. Panchayats may sanction
works that the community does not consider a priority
only to satisfy the schemes conditions. But whether
PRIs can handle untied funds remains an open question.
How can the government check for leakages and ensure
that quality and monitoring and evaluation are done at
appropriate intervals? MGNREGS has been a sizeable
attempt to address these issues and grant PRIs fexibility
through untied funds to develop better governance and
State and district-
level ofcials are
often reluctant to vest
power in PRI ofcials
and interfere in the
functioning of GPs.
222 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
local decision-making (see Section 6.3.3). Based on its
efectiveness, more untied funds may be provided in the
future to all or better performing PRIs.
Corruption, Transparency and Accountability
Corruption among PRIs, in various forms, including
elite capture, or capture of government or other
benefts by those with political power and social or
fnancial clout has been widely prevalent. Fieldwork in
villages in south India in 2002, for example, showed
that households of local politicians were likely to have
Below Poverty Line (BPL)
cards that entitled them
to government assistance
while the same BPL card-
holders were unlikely
to give disadvantaged
households BPL cards (Besley et al. 2007). PRI ofcials
have siphoned of funds on a large scale in collusion
with ofcials and contractors; panchayats have misused
grants for development projects; and large commissions
have been paid in procurement and public works.
Political clientelism, or a sarpanch or other
political candidate making strategic transfers to poor
or disadvantaged groups in exchange for votes, is also
widespread (Bardhan and Mookherjee 2011). Often
masked as positive pro-poor targeting of government
schemes, in reality the benefts may only accrue to a
population subset. Both forms of corruption tend to
be myopicserving narrow personal interests rather
than the long-term community interests, e.g., transfer
of rations versus long-term community investments
in education or health. Since this occurs at all levels
of government, contrary to the envisioned greater
accountability due to decentralisation, PRIs appear to
have merely replicated at the local level the problems
seen at higher levels of government.
Te checks and balances hoped for also clearly do not
work. While the GS was to have ultimate power, GS
meetings do not always occur, so the sarpanch cannot be
questioned (Singh 2009). If meetings are held, sarpanchs
or other leaders may not heed GS decisions or may
acknowledge only the opinions of a subset of the GS.
But some states are trying to promote democratic
accountability. West Bengal, for instance, has regular
audits of panchayat accounts; the public has access
to information on projects implemented and GP
expenditures; and a no-confdence motion is in place to
allow the people to remove an incapable ofcial.
Karnataka introduced an administrative mechanism
called jamabandhi to improve transparency in GP
functioning in 2001. On a designated day every year, it
allows citizens to view records and evaluate the progress
of ongoing GP projects. In 2003, further amendments
were made to facilitate peoples participation at
all panchayat levels (CGG 2004). Ward and GS
proceedings were made publicly available along with
asset and expense declarations of panchayat members.
Account audits were performed across all three tiers.
Such audits would, of course, be more efective if
done regularly.
Rajasthan may be considered the birthplace of the
social audit. Pioneered by the Mazdoor Kisan Shakti
Sangathan (MKSS) in the mid-1990s, social audits
have two core elements: (i) the Right to Information
(RTI): demanding access to government records of local
development works; and (ii) Jansunwai: a public hearing
at which details of ofcial records are read out and local
residents invited to give testimonies and government
ofcials and local politicians to publicly defend their
actions. Te social audit process has been incorporated
in MGNREGS (see Section 6.3.3), and could be
incorporated in all schemes in the future.
Poor Local Planning and Functioning of the DPC
A key purpose of decentralisation was to encourage
planning at the local level, through the GS and the
elected representatives at diferent levels of PRIs. But
local planning has not taken root. Article 243ZD of
the Constitution required that DPCs be set up in every
district for decentralised democratic planning. Te
DPC is responsible for consolidating and integrating
panchayat and municipal plans (the panchayat/
municipality is to be treated as the smallest planning
unit.) and developing a district plan by considering the
overall district development vision and needs. DPCs are
also to play a mediating role between municipalities and
panchayats in deciding on the allocation and sharing of
natural resources, and the integration of infrastructure
and environmental conservation initiatives.
Te state district planning committee Acts lay
down the composition, manner of appointment of the
chairperson, and functioning of DPCs. A DPC typically
includes elected members from the PRIs and ULBs
and state-government nominated members,
5
including
the CEO (ZP), district collector, MPs, MLAs and
technical/other experts. Te District Planning Unit
(DPU) provides technical support to the DPCs.
Corruption among PRIs,
in various forms and
at various levels, is a
serious problem.
5
Article 243ZD of the Constitution requires that a minimum of 80 per cent of DPC members be elected panchayat and municipality members.
PRIs for Local Self-Governance and Rural Development 223
District plans are often
made in an ad hoc
manner as a summation
of GS and municipal
plans, rather than as a
synergetic integration.
Most states have set up
DPCs, but their function-
ing remains weak. Plans
are often made in an ad hoc
manner as a mere summa-
tion of GS and municipal
plans, rather than as a pro-
gramme-wise and urban-rural synergetic integration
(Planning Commission 2006). With few exceptions
such as Odisha, plans have been solely developed in
BRGF districts, mainly to get approval of BRGF
budgets. PRIs at all three levels have generated local
plans (IRMA 2010). Some states, e.g., Chhattisgarh,
Gujarat, Madhya Pradesh, Odisha, Maharashtra and
Himachal Pradesh have district-in-charge ministers
as chairpersons of DPCs, while Haryana has deputy
commissioners as chairperson. Tey might infuence
the plan and hamper the bottom-up participative na-
ture of the planning process (Planning Commission
2008). Other states such as Karnataka and Punjab
have rotational membership of ZP and ULB members.
While this ensures that all elected ZP and ULB mem-
bers are members of the DPC for some period during
their tenure, it leads to a lack of synchronisation across
plans (IRMA 2010).
Te Kerala Peoples Plan was an attempt at bottom-
up planning, the experience of which shows both
successes and challenges discussed below (see Box 6.1).
BOX 6.1 Keralas Peoples Plan
Keralas Left Democratic Front initially launched the Peoples Plan Campaign in 1996 to implement the 73rd CAA, intending
to devolve power to the newly created and elected PRIs. A bottom-up planning process involving GSs, GPs, IPs and experts
was put in place. The government allocated 3540 per cent (about Rs 1025 crore) of state plan funds to rural and urban
panchayats rather than the 2.35 per cent (about Rs 20 crore) allocated during the 8th Five Year Plan (FYP). While the funds
technically were untied, they came with conditions; in rural areas, 40 per cent was earmarked for productive sectors, such
as agriculture, 10 per cent for women-related programmes, and 30 per cent for infrastructure. In 2001, when the United
Democratic Front came into power in Kerala, the plan was replaced with the Area Development Scheme which reverted
authority back to the conventional tiers of administration and away from the PRIs.
The Peoples Plan successfully addressed social welfare and basic need issues by signifcantly improving infrastructural
facilities such as schools, anganwadis and hospitals. But the plan could not tackle economic development, in part due
to the administrations reluctance to relinquish control of the state governments large rent-seeking departments, such
as irrigation, public works, water supply and electricity distribution (Kannan 2000), even though the state government
had enacted the devolution of all twenty-nine functions mentioned in the Eleventh Schedule of the Constitution. This
prevented PRIs from creating essential infrastructure projects suitable for their local needs and led to the continued
stagnation of the agriculture sector.
In fact, the Kerala Panchayati Raj Act, 1994 handed over a considerable amount of powerthe power to cancel or suspend
resolutions, take action against panchayat leaders, and dissolve the panchayatsto the state government, diluting
the autonomy of PRIs. These and other powers of the state government more or less maintained the status quo in their
authority, disallowing real devolution as in other states (SARC 2007).
To exacerbate the situation, nothing was done to encourage interaction and deliberation between the political
and administrative modes of governance. This led to redundant projects and unnecessary spending, because legal
responsibilities were outlined by subject rather than [specifc] activities (Issac 2000). These overlaps also occurred within
the PRIs. Although the three tiers of panchayats were intended to submit to the DPC a consolidated plan, over time
three separate plans were sent (due to ill-defned responsibilities under the Panchayati Raj Act), causing duplication in
implemented projects (Chathukulum and John 2002).
The Peoples Plan focused on increasing public participation instead of taking preemptive action to enhance the capacity of the
PRIs. About 1,20,000 members of the task forces employed in the preparation of development plans participated in training
exercises. But the Economic Review of the Government of Kerala deemed the quality of the training inadequate, as evidenced
by the poor technical and fnancial analyses incorporated in the plans (Kannan 2000) and resulting in many plans being rejected.
GS meetings, a key element of the Peoples Plan, allowed stakeholders to suggest development projects, select project
benefciaries, evaluate the quality of the plan and performance of projects, and examine GP accounts. The largest
accountability measure was the use of the social audit through GSs. While the low participation in GSs compromised its
efectiveness, the experience from the Plan has set the stage for a stronger social audit in panchayats today. Along with this,
Kerala employs a wide range of accountability mechanisms such as RTI, citizens charter, ombudsman, appellate tribunal,
and performance and local fund audits (Oomen 2004).
224 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
6.3.3 Assessing PRI Performance
in Flagship Programmes
Te rationale of devolution makes PRIs central
to all aspects of delivering CSSs and various state
programmes. But PRIs have been given greater roles in
implementation and monitoring than in planning. And
even implementation often has not worked. Te role of
PRIs in the case of operation and maintenance of water
supply and sanitation schemes, for instance, is unclear,
or is not supported by transfer of sufcient fnancial or
manpower resources (Planning Commission 2011b).
In many such instances, PRIs have been reluctant to
take over completed schemes especially if they were
not involved in the planning. In recent years, some
CSSsin particular BRGF and MGNREGShave
granted PRIs a greater role in planning. Tese schemes
are unique in that they aim to develop PRI capacity to
plan, prioritise, and deliver locally relevant development
projects. But even in these schemes, the PRIs role in
planning often remains only on paper (MoPR 2013)
(see Table 6.2). Te Expert Committee Report chaired
by Mani Shankar Aiyar thus presents a model of activity
mapping for several key CSSs that grants PRIs a more
TABLE 6.2 PRI Roles in Flagship Programmes
CSS Scheme description Planning Benefciary Implement- Monitoring/
selection ation evaluation
Backward Regions Resources to supplement and help achieve conver-
Grant Fund (BRGF) gence in existing programmes
Mahatma Gandhi Guarantees 100 days of work annually to all rural
National Rural households to deliver GP determined develop-
Employment ment projects
Guarantee Scheme
(MGNREGS)
Public Distribution Distribute subsidised food and non-food items to
System (PDS) BPL families
Indira Awaas Rural housing assistance for BPL families; grants for
Yojana (IAY) land and construction costs
Sarva Shiksha Achieve universal elementary education; focus on
Abhiyan (SSA) girls and special needs children
Mid-Day Meal Provide MDM to all students up to class V,
Scheme(MDM) for nutrition and attendance
National Rural Improve health care delivery, hygiene and sanita-
Health Mission tion; train local residents; motherhood protection
(NRHM) programme
Nirmal Bharat Financial assistance to construct household/
Abhiyan/Total community latrines
Sanitation Camp-
aign (NBA/TSC)
Rajiv Gandhi Provide access to electricity to rural households
Grameen (free for BPL households)
Vidyutikaran
Yojana (RGGVY)
National Rural Provide a minimum amount of safe drinking water
Drinking Water in all rural households
Program (NRDWP)
National Social Pensions, maternity benefts and assistance upon
Assistance death of primary breadwinner
Programme (NSAP)
Source: CSS websites.
PRIs for Local Self-Governance and Rural Development 225
MGNREGS is a marked
efort towards
strengthening local
governance by
empowering PRIs
and the GSs to decide
and execute village
economic and social
development priorities.
active planning role. Te discussion below of two
fagship schemes assesses the extent to which giving
PRIs a greater planning role can be expected to catalyse
broader changes.
Mahatma Gandhi National Rural Employment
Guarantee Scheme (MGNREGS)
Beyond its primary aim of guaranteeing employment,
MGNREGS is a marked efort towards strengthening
local governance by empowering both PRIs and GSs
to decide and execute economic and social village
development priorities. At every stage of the scheme
from planning to implementation and monitoringthe
PRIs and the GSs are given a central role (see Chapter 7
on MGNREGS for details).
MGNREGS has
several unique features in
this respect. First, it is the
only rural development
scheme other than BRGF
to provide untied funds
to execute the GPs vision.
Second, it focuses heavily
on transparency and
accountability, which the
GSsince it is closest to what is happening on the
groundis to ensure through an ongoing social audit
system. In systematising local participation, it hopes
to enable PRIs and GSs to develop into strong and
responsive systems of local governance.
In the seven years since the launching of the scheme,
evidence from the ground shows mixed efectiveness of
PRIs. In many instances, PRIs have proved to lack the
technical capacity to prepare holistic village development
plans. Even planned projects are generally piecemeal and
incoherent. A well or checkdam project, for example, is
planned without provisions for groundwater recharge.
Although some states such as Rajasthan and Madhya
Pradesh have better planned projects because NGOs have
provided technical support to the PRIs, there are numerous
instances of PRIs wilfully manipulating the scheme
to beneft a select group. Some villagers have colluded
amongst themselves and with ofcials, while others
have used political or administrative infuence to guide
MGNREGS works in a particular direction. In many
Naxal-afected districts, for example, all decisions regarding
MGNREGS works are made only with the approval
of local Naxal leaders (see Chapter 7 on MGNREGS).
With increasing decentralisation, MGNREGS is
only one of many schemes for which PRIs must assume
responsibility. So, administrative overload has sometimes
hindered implementation. Block Development Ofcers
(BDOs) have sent, and GPs have accepted, old, recycled
programmes instead of creating their own plans.
Although MGNREGA requires designated ofcials at
both the IP and GP levels, this has not always happened,
leading to delays in formulating plans, measuring works,
or approving payments.
In assigning the GS
signifcant responsibility,
MGNREGS creates the
opportunity for villagers
to demand proper
implementation, even if PRI
ofcials are unwilling. But
performance on this front
too has been disappointing.
Fieldwork in seven states shows that GS members are
often unaware of their rights and responsibilities under
the scheme. GS participation in planning has been weak,
and instances of PRIs acting to foster participation
appear limited. Very often, GSs are not even aware
that the Act does not permit works to be sanctioned
without their approval. Tis means poor articulation
of village development priorities, which makes elite
capture easier. We found that states with higher income
and literacy levels typically had more knowledgeable
GSs than poorer ones (see Chapter 7 on MGNREGS
for details). In some cases, however, GSs were aware
and did demand work under the scheme, but PRIs did
not respond either due to inability or wilful neglect. In
states such as Gujarat, the planning process bypasses
direct villager participation (Ambasta et al. 2008).
GSs also play an important role in social audits.
Social audits empower the GS to demand accountability
and ensure that funds are appropriately spent. But
with few exceptions, such as Andhra Pradesh, most
GSs have failed to conduct social audits. Even if
social audits have been conducted, evidence shows
that the accused are rarely held accountable, often due
to jurisdictional overlap in government departments
and the non-enforceability of social audit fndings in
court. But numerous NGOs have succeeding in raising
GS awareness, leading to more articulation of work
demand, issuance of job cards (required to undertake
MGNREGS work) and participatory planning.
GSs will continue to remain central to ensuring
accountability. Wall paintings are an interesting and
innovative practice for improving transparency. In
OBC-dominated Vijaypura panchayat in Rajsamand
Villagers who are
aware of their rights
and responsibilities
can demand
implementation of
MGNREGS even if PRI
ofcials are unwilling to
take the initiative.
226 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Wall paintings are
an interesting and
innovative practice
for improving
transparency.
district of Rajasthan, for
instance, the Dalit sarpanch
has painted all records
of work done under the
MGNREGS and other
rural development schemes
on village walls (Roy and Dey 2009).Te full balance
sheet of the sarpanchs fve-year term, along with
records of scheme benefciaries, hours worked under
MGNREGS, wages collected and details of materials
procured, are painted on yellow village walls together
with the sarpanchs phone number. Inspired by this,
the Chief Minister of the state made wall-accounting
mandatory for all villages in 2010 (Shrinivasan 2010).
MGNREGS ofers the opportunity to create dynamic
systems of local governance, and despite implementation
failings, remains one of the more successful rural
development programmes. But to date, success has
often come with the help of external non-PRI actors,
or where PRIs were strong to begin with. MGNREGS
has succeeded in Andhra Pradesh, for instance, largely
due to a state government push that bypassed the PRI
system. In Rajasthan and Madhya Pradesh, strongly
entrenched NGOs played a crucial role in building GS
awareness to put pressure on PRIs and in building and
supplementing technical capacity for PRIs to formulate
plans. In Kerala, Kudumbashree, a state-promoted
womens self-help group (SHG) programme that
was introduced ten years before MGNREGS, helped
create a cadre of rural women trained in the basics of
accounting, planning and community engagement who
could assist with scheme implementation (see Chapter
7 on MGNREGS).
Tese are still early days for this paradigm-shifting
programme. While it may take external actors
particularly in the programmes early yearsto leverage
its provisions, in the longer term, a more aware and
empowered rural population acting through the GS
should be able to enforce accountability on the members
of the PRIs. And PRIs that have received technical
assistance and other support should be better able to
discharge their responsibilities in the future.
Backward Regions Grant Fund (BRGF)
Like that of MGNREGS, BRGFs underlying aim is
strengthening GPs to prepare their own development
plans. With a specifc focus on 250 (now 272) identifed
backward districts, BRGF attempts to redress regional
inequality both in terms of development and PRI
capacity. BRGF provides untied fnancial support to GPs
so that they can address the fnancial and infrastructure
gaps in village plans that arise from a lack of convergence
among other rural development schemes. Tese untied
central funds (Rs 10 crore per district) can be used for
any development project as long as the work is identifed
through peoples participation. BRGF thus not only
provides the opportunity for, but actually requires,
local-level participatory planning. Te emphasis on
integrating and institutionalising local-level planning is
built into the design of BRGFthe release of BRGF
funds for projects is conditioned on constituting
the DPC.
Recognising that backward districts are least likely
to be able to undertake such planning, BRGF pays
special attention to developing PRI planning capacity
by earmarking approximately Rs 1 crore per district
per year for capacity building and providing technical
support institutions (TSIs) to assist the PRIs in the
programmes initial years.
Te BRGF has not met expectations. An
independent, nationwide evaluation of the programme
suggests that per panchayat grants are very small (Rs
2 to 6 lakhs per year), which restricts investment and
project choices to one or two projects per year (World
Bank 2010).Its impact in reducing regional inequality,
therefore, has been negligible. Te fxed amount per
district also tends to favour districts with smaller
population size in terms of per capita allocation, which
the most backward districts may not be. Other issues
that undermine its capacity-building objectives are low
utilisation of development and capacity-building grants
in most states, and bureaucracy-centred, rather than
PRI-centred, implementation (ibid.). Providing TSIs
to support PRIs in the preparation of plans has created
a dependency and hampered the learning process.
Despite best intentions, BRGF does not appear to
have broken the cycle of backwardness. Even within
the selected backward districts, the states with weaker
PRIs have not utilised
BRGF funds, particularly
for capacity building, or
used them much less than
states with stronger PRIs.
Tis is often because states
with weak PRIs lack the
institutional capacity to
apply for and absorb the
funding. States that fared
better as measured by the
Devolution Index, which is
The BRGF
has not broken the
cycle of backwardness.
Because weaker PRIs
have not used BRGF
funds for capacity
building as much as
stronger PRIs, the
restructured BRGF
focuses on capacity
building of PRIs to
increase their absorptive
capacity.
PRIs for Local Self-Governance and Rural Development 227
Under PESA, the GS is
the legal custodian of
land and other natural
resources in PESA areas.
heavily focused on capacity building, e.g., Maharashtra,
Karnataka, Kerala, Rajasthan and Tamil Nadu used a
larger share of the funds released to them for capacity
building.
Te BRGF sufers from many of the same problems
as other schemes, such as delays in fund transfers,
misappropriation of funds, and poor GP involvement
in preparing plans. But its limited success in bringing
about convergence of fragmented government schemes
(e.g., in Chhattisgarh and Bihar) highlights the potential
of leveraging local knowledge for better outcomes.
Te World Bank (2010) review reveals that the
reluctance of line departments to disclose information
about their planned activities and to help facilitate co-
ordination between GPs has hindered convergence
of government programmes. Te reports fnding
that the programme design actually curtails PRI
autonomy by requiring a long list of approvals from
the state government is particularly troublesome. Te
cumbersome process for fund release has led to delays of
almost one year. To rectify this, in 2011, the procedure
was changed so that DPC plans no longer need state
government approval, but are sent directly to the centre
for approval. While PRIs may lack capacity to plan
and execute programmes, the report suggests that an
alternative design with more reliable fund fows and
greater capacity building and technical support from
block and district ofcers (rather than approvals) would
unlock the programmes potential to leverage PRIs
planning potential.
Acknowledging its shortcomings, the Twelfth FYP
proposes restructuring the BRGF and enhancing its
allocation. In the frst two years, the Plan focuses on
capacity building of PRIs, both in terms of human
resources and infrastructure and speedy implementation
of fagship programmes, as well as of PESA and FRA. Tis
would improve district absorptive capacities for outlays
under various schemes including BRGF. Additional funds
in the next three years would be given to those districts
which show progress (Approach to Twelfth Plan). Te
new BRGF would focus more on the sub-district level,
though would also include the district and supra-district
levels as some activities require a higher level perspective.
Te criteria for identifcation of districts and sub-districts
under the new BRGF also give more importance to
backwardness, and districts or sub-districts with higher
deprivation levels would receive higher allocations.
Based on the revised criteria, the Planning Commission
proposes to cover 200 districts and 1500 most
backward sub-districts (Planning Commission 2013).
6.4 Extending the 73rd CAA to
Marginalised Populations
In the years following the
passage of the 73rd CAA,
its basic tenetsgiving lo-
cal communities greater
powers of self-determina-
tion and governancehave
been extended to certain
marginalised populations,
particularly tribals and for-
est dwellersover 8 per
cent of the countrys popu-
lation and an economically
and culturally vulnerable
group that has historically
been marginalised in mat-
ters of local self-governance
and land rights. Te two
Acts discussed in this sec-
tion are, thus, politically
signifcant for empowering
these groups. Te two Acts
discussed in this section
become more relevant as demand for land and natural
resources increase.
6.4.1 Te Panchayats (Extension to
Scheduled Areas) (PESA) Act, 1996
PESA is applicable in the
Fifth Schedule Areas, those
that the Constitution des-
ignates as having signifcant
tribal populations.Te GS
rather than the elected GP is
the legal custodian of land and other natural resources in
PESA areas. It is also given a range of powers including:
the power to prevent alienation of land in Fifth
Schedule areas and take appropriate action to restore
an STs unlawfully alienated land;
the power to decide on ownership of minor forest
produce, regulate or ban the sale of intoxicants and
control money-lending to STs;
the power to control local plans (including tribal sub-
plans) and resources allocated for such plans;
the power to issue utilisation certifcates for
government works in their villages;
the power to provide consultation on land acquisition
matters, and
Following passage
of the 73rd CAA, its
basic tenetsgiving
local communities
greater powers of
self-determination and
governance have
been extended to
certain marginalised
populations, particularly
tribals and forest
dwellers.
Tribals, who account
for over 8 per cent of
the countrys
population, have
historically been
marginalised in matters
of local self-governance
and land rights.
228 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
FRA is viewed as more
inclusive than PESA
because it covers non-
PESA areas.
the power of prior recommendation in granting
prospecting license or mining leases for minor
minerals, and the grant of concessions for the
exploitation of minor minerals by auction.
While it aimed for a shift in power from the state and
elites to the rural community and the GS, PESA has not
succeeded in doing so for a number of reasons:
State Legislation. States have adopted PESA provisions
in their state panchayat Acts to varying degrees. While
all states in Fifth Schedule Areas have enacted legislation
adopting the PESA, some states (e.g., Madhya Pradesh)
have unequivocally adopted all the provisions of the
Act; but others have curtailed the powers of the GS
in favour of the state government (e.g., Jharkhand) or
subsumed decisions made by GSs and GPs under those
made by the state (e.g., Odisha). Giving the power of
the GS to other bodies has diluted the provisions of
the Act (SARC 2007). Except Madhya Pradesh and
Chhattisgarh, most states have given powers to the GP
instead of the GS, as the Act envisions. Many have also
failed to put redressal mechanisms in place. GSs often
are convened at a scale larger than individual villages
which fragments the consultative process.
Land. Even in Madhya Pradesh and Chhattisgarh,
where GSs have been granted most powers under the
PESA, they are given the power of consultation, but not
consent, for land-acquisition decisions.
Minerals and Mining. Most states, including Madhya
Pradesh and Chhattisgarh, have done little to empower
PESA-covered PRIs. Many states have not even en-
trusted local communities with rights over minor forest
produce on which they depend for their livelihoods.
Other PESA-related issues stem from indiference
and lack of knowledge of PESA provisions amongst
local and state ofcials. Both these factors lead to even
well-meaning sarpanchs and PRI ofcials being ignored
when they raise concerns on behalf of their constituents.
Widespread illegal mining in Odisha and Jharkhand is
only part of the overwhelming evidence of the ignoring
of the demands and concerns of PRIs in PESA-covered
areas. PESA has been unable to stop land alienation
across tracts of tribal land in almost all states, including
Chhattisgarh and Odisha.
Disappointingly, the gap between promise and
implementation of the PESA is huge. Tribals have routinely
been displaced for development projects; although they
constitute around 8 per cent of the population, at least
55 per cent of the 60 million persons displaced until
2004 were tribals (Planning
Commission 2012). Tat
iniquitous socio-political
circumstances, non-
implementation of PESA,
lack of access to resources,
and lack of land reforms
have contributed to tribal
grievances, and resulted
in the rise of Naxalism in the PESA districts (Expert
Committee on Leveraging Panchayats for Efcient
Delivery of Public Goods and Services 2013) is now
recognised. Of the eighty-two Naxal-afected districts,
thirty-two are PESA districts.
In 2011, the National Advisory Council (NAC)
constituted a Working Group on the PESA which
identifed shortcomings in its implementation and
recommended (NAC 2012):
amending state rules inconsistent with PESA by
specifc deadlines and preparing a list of hamlets so
that GSs can be formed at the hamlet level;
declaring illegal all land transfers except ones to STs
or societies composed exclusively of STs;
empowering the GS to act suo motu or on a complaint
to restore alienated tribal land; and
bringing all tribal areas under the Fifth Schedule
based on Census 2011 to allow them protection
under the Act, recognising that 70 per cent of STs
currently live outside the Fifth Schedule Areas.
Te extent to which these recommendations will be
implemented, and PESA operationalised, remains to
be seen.
6.4.2 Scheduled Tribes and Other Traditional
Forest Dwellers (Recognition of Forest
Rights) Act, 2006 (FRA)
Recognising the long-standing demands of tribal areas,
the Scheduled Tribes and Other Traditional Forest
Dwellers (Recognition of Forest Rights) Act, commonly
known as the Forest Rights Act (FRA), was passed in
2006, with similar goals as that of the PESA. Te FRA
is viewed as more inclusive than PESAit extends to
non-PESA areas, and thus has the potential to address
the issues of tribal and other disadvantaged sections in
these regions. By defning community forest resources
very broadly, it brings all
forest categories within its
purview, giving STs and
other traditional forest
dwellers the rights to live
Iniquitous socio-political
circumstances, non-
implementation of
PESA, and lack of access
to resources, including
land, have contributed
to tribal grievances
and Maoist militancy
in PESA districts.
PRIs for Local Self-Governance and Rural Development 229
in forests and collect and
use minor forest products
(see Chapter 5). Successful
implementation of the FRA
is being vigorously fought
for at various levels.
Te FRA is community-
oriented not only with regard to claims over forest
resources, but also in the procedure for determining
such rights. It emphasises the GSs crucial role in
initiating the process of determination of rights. A
Forest Rights Committee (FRC) at the GS level,
constituted and authorised by the GS, assists the GS
in receiving, collating, verifying and approving claims to
rights. A Sub-Divisional Level Committee (SDLC) is
to examine GS resolutions and maps, and pass them on
to the next level and provide the GS and FRC support
in the rights determination process. But the FRA
currently grants the state eminent domain to acquire
land for development projects.
While the FRA gives a clear and overwhelming
mandate to the GS to make crucial decisions relating
to forest areas, the slowness of implementation of that
mandate in several states (see Chapter5), and the lack
of efort to roll this out on the ground, are disturbing.
Te key challenges and issues with implementation of
the FRA are as follows:
Lack of Interest in Community Rights. Although
the FRAs main objective is to promote community
participation and management, the N. C. Saxena
Committee Report found that, in practice, securing
individual rights has taken precedence over community
or group rights (MoEF and MTA 2010). In Andhra
Pradesh, for instance, community claim forms were
either not distributed or not used due to lack of awareness
(Reddy et al. 2011). Similarly, in Kerala, it appears
tribals lacked a clear idea about the process of claiming
community rights (Sathyapalan 2010). Assigning
community rights is critical to ensuring sustainable
livelihoods for forest dwellers. Baseline information on
existing community rights (recorded or unrecorded) and
customary practices relating to management, use and
protection also need to be strengthened in most places.
Without this, one can hardly imagine that community
rights will receive adequate recognition under FRA.
But there have been successes. In 2011, Mendha
Lekha in Maharashtra was given a transit pass to
harvest and sell bamboo, making it the frst village in
the country to exercise community rights. Tis raised
Rs 1 crore for the GS. Tis success was possible due
to a combination of factors: heightened awareness,
training programmes, global positioning system
(GPS), maps and forest and revenue records given to
FRCs, strong village leadership, and assistance from
civil society groups. Te people of Mendha Lekha, who
have practised community forest conservation since the
1970s when they protested against the construction of
two dams and formed a strong movement of tribal self-
rule, have demonstrated how communities can assert
their rights as the owners of forests.
Shortfalls in Outreach. Authorities have failed to make
signifcant eforts to reach out to tribal communities
and teach them their rights under the FRA (MoEF and
MTA 2010).
Lack of Trained Staf. Tis impedes grassroots-level
implementation of FRA. Surveying land, demarcating
boundaries and settling of land rights is a laborious
process that needs adequate human resources. In
most states and UTs, the task has been assigned to
the revenue department and the forest department
(FD) as an additional responsibility, because the nodal
tribal departmenthad weak infrastructure and lacked
experience in dealing with such settlements (ibid.). All
work has been outsourced to professionals on a contract
basis in certain instances.
Formation of GS. While the Act requires that the GS
be convened at the hamlet level to provide a democratic
and accessible forum to claim rights, numerous reports
have found that implementation has occurred at the
administrative village level ( Jha 2010; CSD 2010;
Reddy et al. 2011; Bandi 2012). Even here, in most
states, GSs have been recognised at the panchayat
level instead of the revenue village level, or as defned
under PESA. Panchayats usually consist of more than
one revenue village and several habitations/hamlets.
Since tribals often live in scarcely populated regions,
the constituent hamlets may be far and convening the
GS to reach a meeting quorum, and forming FRCs to
function efectively, has been extremely difcult (MoEF
and MTA 2010).
Interference by Government Ofcials. Government
ofcials, particularly from the FD, often interfere in the
functioning of FRCs by joining FRCs as permanent
invitees, nominating FRC members, or appointing the
panchayat secretary as FRC secretary ( Jha 2010; CSD
2010; Reddy et al 2011).
FRA is community-
oriented not only with
regard to claims over
forest resources but also
in the procedure for
determining such rights.
230 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Friction Between the Ministry of Tribal Afairs (MTA)
and the Ministry of Environment and Forests (MoEF).
Tis is partly due to contradictions between the FRA
and the Indian Forest Act, 1927. While the latter vests
control over productive assets with the FD, for instance,
the FRA provides forest dwellers free access to minor
forest produce. Te FD and joint forest management
committees ( JFMCs) that make decisions in violation
of the FRA (CSD 2010) often bypass the GS. Te
FD also has been found to make community claims
on behalf of JFMCs. In Andhra Pradesh, for example,
villagers community claims are rejected or approved for
smaller areas than claimed (Reddy et al. 2011). Finally,
the MoEF has continued policies in violation of the
FRA, including claiming land for aforestation
programmes, as well as diversion of forest land for large
projects (CSD 2010).
Communities and civil society organisations (CSOs)
have protested various aspects of FRA implementation,
including:
the conversion of JFMCs into FRCs with decisions
made in violation of the FRA and preventing
community-based nurturing of village commons
(e.g., in parts of Karnataka and Tamil Nadu) (CSD
2010);
the constitution of the GS at the administrative
village level (e.g., West Bengal);
the continued relocation of forest dwellers in violation
of the FRA, as in tiger reserves in various states;
the illegal process of FRC formation by state
authorities (in West Bengal, for instance, resulting
in the closing of government timber depots across
northern Bengal for over a month in 2008) ( Jha
2010); and
the proposed bauxite mining in the Niyamgiri
Hills in violation of the FRA in Odisha, taken to
the Supreme Court, resulted in the rejection of an
environmental clearance given to a mining frm.
While the FRA marks an important step in
recognising the rights of forest dwellers and the
importance of decentralisation, key features of the Act
have been undermined, resulting in the denial of rights
of STs and other traditional forest dwellers (CSD
2010). Concerted eforts must be made to implement
the FRA to fulfl its promise
as a pro-poor reform to
beneft the large number of
forest dwellers. Te rights
of forest dwellers must
also be balanced with the
rights of the entire population that indirectly depend
on forests to mitigate climate change and for food and
water security (see Chapter 5). Protecting the forests
is as integral to Indias survival as the protection of the
rights of forest dwellers.
6.5 Where Do We Stand Two
Decades Later?
While performance varies
among states, decentralisa-
tion has not delivered on
the transformative poten-
tial envisioned by the 73rd
CAA. Politics has played
a central role in this. In
almost every state, state
governments have been reluctant to truly devolve
adequate functions and supporting resources to empow-
er and build vibrant local institutions. As seen in Ker-
ala, this sentiment within a state can change from one
government to the next, which puts at risk the sustain-
ability of gains under the PRI system. Local politics also
plays a role when local administration and PRI ofcials
collide. How these impediments to PRI functioning can
be addressed must occupy centre stage in the ongoing
debate. What incentives, mechanisms and structures
can spur state governments to release their grip on pow-
er? How can the politicisation of PRIs through alliance
with political parties be addressed so that participation
is not tied to a broader party agenda for re-election but
to real grassroots needs and inputs?
Another critical issue is: how can conditions that
determine the development and distributional outcomes
of decentralisation be improved? Political clientelism
and elite capture, seen not only in PRIs, but also in other
tiers of local administration and above, have shown that
decentralisation alone is not a panacea. Other supporting
measures need to be put in place to create an enabling
environment. In West Bengal, for example, in areas with
reduced poverty and higher literacy levels and more
equitable land distribution,
PRIs showed better
development outcomes
because the poor were less
vulnerable (Bardhan and
Mookherjee 2011).
A signifcant area for
research, thus, might be the
identifcation of supporting
Protecting the forests
is as integral to
Indias survival as the
protection of the rights
of forest dwellers.
While performance
varies among states,
decentralisation has
not delivered on the
transformative potential
envisioned by the 73rd
CAA.
A signifcant area for
research might be
the identifcation of
supporting reforms and
interventions that can
strengthen the pull for
good governance from
below.
PRIs for Local Self-Governance and Rural Development 231
reforms and interventions that can strengthen the pull
for good governance from below. Does a pattern emerge
from looking at the states with better performance with
regard to PRIs? Are the better-governed states, or
those with a history of social reform, generally better
performers in yielding more dynamic and empowered
local institutions? Evidence suggests so. Field studies
across fourteen states, for instance, demonstrate that
states such as Maharashtra, Gujarat, West Bengal
and others in the south, have had more instances
of meaningful participation by SC/STs, building
on a strong foundation of interventions to remedy
discrimination (Baviskar and Mathew 2009). A
Princeton University comparative study demonstrates
that between Uttar Pradesh and Tamil Nadu, the latter
with its longer history of empowered, decentralised local
bodies has shown better development outcomes under
MGNREGS (Bonner et al. 2012). Similarly, as Chapter
7 on MGNREGS documents, states with higher levels
of literacy and awareness of rights appear to have better-
functioning PRIs. While literacynarrowly defned as
the ability to read and writeis not a sufcient condition
for competence or awareness, it clearly makes a case for
strengthening and pushing for broader social reform
and better education beyond being standalone goals.
More comprehensive and rigorous analysis is needed
to establish the critical factors that can truly unlock the
potential of PRIs. But even with our understanding
to date, much remains to be done to strengthen local
self-governance.
To address these issues, the Twelfth Five-Year
Plan (FYP) has introduced measures to incentivise,
institutionalise and enable both the strengthening of
PRIs and meaningful devolution through the Rajiv
Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA).
Tis fagship programme subsumes all the smaller
schemes that currently come under the MoPR, and is
supported by a ten-fold increase in funding since the
Eleventh FYP, from Rs 636 crore to Rs 6437 crore.
RGPSA will target various aspects, as discussed in more
detail below, but an important aspect is that funding
(which will be shared 75:25 between centre and state
for most states) will be conditional on states meeting
certain critical aspects of devolution,such as setting
up of SFCs, DPCs, and ensuring regular panchayat
elections with mandated reservations. While the success
of this programme is yet to be seen, it marks a step
towards spurring state governments to devolve power
independent of political leanings. But the extent to
which it can address the more important issues of elite
capture, clientelism and creating an enabling framework
(through parallel eforts on literacy, governance, land
reform and transparency) remains to be seen.
6.6 The Way Forward
Numerous changes can and should be made to improve
the current PRI system:
Actual Devolution. Although the RGPSA partially
addresses this critical issue, states have often used an
actual or perceived lack of capacity as an excuse not to
devolve functions to PRIs. A number of observers have
suggested a new approach: push ahead with clear and
well-thought-out activity mapping to devolve funds,
functions and functionaries, with the expectation that
this will create a demand for capacity and knowledge
support from the PRIs themselves (Aiyar 2012).
Te rationale is that if they are clear about their
responsibilities, how much funding they will receive,
and when and where the institutional line of control lies,
panchayats will be more responsive and demand training
and assistance. Raghunandan (2012), for example, argues
that the lack of a clear functional space for PRIs and the
governments failure to respond to the huge demand
for training and support is a cause of much PRI failure.
Capacity Building and Training. Finding innovative ways
to reach the audience will be critical. Tis may include
the use of social media, online and ofine modules, and
developing content that is accessible and can be absorbed
by both literate and non-literate users. Capacity building
and training must be relevant to the roles that PRIs are
expected to fulfl, and provide the skills to think about
new solutions rather than imposing existing ones.
Incorporating these aspects will be important to the
success of the restructured BRGF and RGPSA.
Te Tree Fs. As the WG on PRIs has argued, the
signifcant growth of the CSS/Additional Central
Assistances (ACAs)reaching approximately Rs
1.7 lakh crore in 200910is a good opportunity to
ensure better devolution of the three Fs to PRIs. As
CSSs increasingly grant responsibility to PRIs, the
clear delineation of every activity assigned to a specifc
level of panchayats must be supported with appropriate
authority to handle fnances. Sufcient untied or
fexible funds must be provided to address specifc local
needs and meet the schemes additional administrative
expenses. Modes and timelines by which funds are
transferred, used and reported must be specifed.
232 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Seamless and time-bound fows of funds would require
IT for electronic tagging and tracking of funds (WG).
Providing funds in a transparent and predictable manner
is criticalonly when PRIs know budget constraints
and timelines for receiving funds can they plan to meet
their responsibilities accordingly. With this purpose,
linking the disbursal of RGPSA funds to states that
perform in 201415, requires that SFCs make timely
central and state transfers to PRIs and provide them
untied funds. But untied funds may be granted to PRIs
who meet certain performance criteria for social audits
and participatory decision-making as well. RGPSA also
asks states to demonstrate progress on strengthening
the panchayat resource base by allowing them to levy
certain taxes and fees.
Accounting and Auditing. With more funds fowing
to panchayatswhether tied or untieda proper
accounting and auditing system becomes more important.
Social audits have proven to be extremely efective in
Andhra Pradesh and must be encouraged nationwide.
Te RGPSA aims to institutionalise and issue guidelines
for social audit and other accountability measures such
as voluntary disclosure of information. As included in
the RGPSA, an online database on PRI fnances, at least
for the district and intermediary level, should be created
using the audited accounts of all PRIs nationwide.
Trough these measures, RGPSA aims to create a
system for performance assessment of PRIs. Te WG
also suggests numerous steps to increase accountability
and transparency in panchayats. Some of these have
already been adopted in the form of e-panchayats or state
government schemes such as in Assam.
Structural and Institutional Changes. As the
committee on restructuring of the DRDA recommends,
abolishing parallel bodies such as the DRDA and
other CSS line departments may help create a more
streamlined structure for the articulation and delivery
of local plans. DPCs must also be strengthened to bring
synergy across panchayats plans and integrate plans for
growth with urban and urbanising areas. Tis is critical
for the implementation of larger initiatives such as
infrastructure, transport, sharing of water resources and
managing climate change.
To facilitate convergence between rural and urban
areas, Raghunandan (2012) recommends a two-tier
structure for PRIs, arguing that the current three-tier
system was based on the line-department structure and
does not optimise PRI functions. He recommends a fat
structure with PRIs (re-designated as municipalities)
having exclusive jurisdiction over designated areas.
Each municipality would have certain core functions
that do not overlap with those of other jurisdictions.
He recommends fve types of municipalities ranging
from the national capital to large metropolises, all the
way down to taluk or tehsil headquarter towns, to the
smallest GP.
But such changes would require an amendment of
the Constitution which mandates a uniform three-tier
structure. Tat said, changing the roles of the IPs and
ZPs to be more facilitative and consultative bodies
so as to provide technical assistance and help co-
ordinate activities across GPs where necessary (e.g., in
a watersupply project), may be possible. Te IPs and
ZPs can then work to address a major concernthe
lack of adequate and relevant capacity building for PRIs.
Whether the structure can be changed or not, the need
to streamline and co-ordinate local activities is clear.
PESA and FRA. Tese two critical pieces of
legislation have not received the attention they
deserve. Implementing them is critical to an inclusive
development path going forward. Any political
calculation of decentralisation must take them into
account.
Social Audits. Learning from Andhra Pradeshs
experience, all PRI schemes must use the social
audit process to ensure greater transparency and
accountability, community participation and vigil.
Ultimately, ensuring participatory PRI decision-
making requires community awareness and demand.
Te RGPSA recognises this, and asks states to work
towards creating greater GS awareness and promoting
mahila sabhas (womens assemblies).
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2
PART
Image credit: Ministry of Rural Development
Summary
T
he Mahatma Gandhi National
Rural Employment Guarantee
Act (MGNREGA) being
implemented as a rights-
based, demand-driven and self-selecting
Scheme marks a paradigm shift in Indias
eforts to create employment. Its primary
aim is to enhance livelihood security by
guaranteeing rural households up to 100
days of paid employment per fnancial
year. Te Scheme, which has provided an
average of 4050 days of employment per
year to 25 per cent of all rural households,
is the largest public works programme in
Indias history and possibly in the world.
Te Acts secondary goals also have
potentially far-reaching economic, social
and political ramifcations:
It aims to create durable assets like water-
harvesting structures that can make a
lasting impact on rural livelihoods.
By granting the gram sabha (GS) a
central role in deciding and planning
projects based on local development
priorities, it aims to strengthen
democratic functioning.
By giving local self-governance institutions (gram
panchayat) responsibility for implementation, it also
acts as a vehicle for capacity building.
Its social audits, by which the GS can monitor and
evaluate implementation and expenditure, are critical
for accountability, which combined with a number
of other safeguards, such as a ban on the use of
contractors, mitigate corruption.
Self-targeting has worked to some extentbut not
as much as hoped for three main reasons.
NSS data and our feld survey show that, largely due
to high unmet demand (people want to work but are
not issued job cards or not given work), particularly
in poorer states like Bihar, the Scheme seems to
have plateaued and even show signs of deceleration.
Insuf cient employment-generating projects, due to
the panchayats poor planning or lack of motivation,
and peoples lack of awareness of their right under the
Scheme have also led to unmet demand.
Delays in providing work and in paying wages
for work done have also discouraged people from
working under the Scheme. Many have even reverted
to migration, which had declined when MGNREGS
was seen as an alternative.
Finally, even in the limited instances of social audits
actually done, audit decisions, including ones calling
for disciplinary action, have not been adequately
enforced.
7
CHAPTER
Performance of the
Mahatma Gandhi National Rural
Employment Guarantee Scheme
240 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Corruption, though less prevalent than in other
schemes, also remains an issue as does the poor quality
and poor maintenance of assets created under the
Scheme. Te new Operational Guidelines 2013 seek to
address many of these problems.
But the Scheme has contributed to reducing
poverty, both directly and indirectly. Te fact that poor
households spend almost their entire income from the
Scheme on food shows its direct contribution to food
security. Indirectly, it has created upward pressure on
the reservation wage below which a worker would be
unwilling to work. Tis is especially true for women
who get equal pay as men under the Scheme. Women,
SCs and STs, have not only beneftted monetarily but
also in status and confdence. Te Scheme has worked
best when the GS has been actively involved, often
supported or driven by NGOs. Despite being criticised
for its high cost, the Scheme appears to have fared
signifcantly better than other subsidy programmes in
delivering to the people who need it most.
7.1 MGNREGA: A Vision for
Employment Guarantee
and Beyond
Providing remunerative employment to rural
workers has been one of Indias major challenges
since Independence. Te economic growth process
that was expected to generate sufcient employment
opportunities has not done so. Most of Indias unskilled
workers experience seasonality in employment. Casual
labourers, in particular, commonly remain unemployed
during the lean agricultural season. Te government has
responded with several public employment programmes
for the rural unemployed, culminating in the Mahatma
Gandhi National Rural Employment Guarantee Act
(MGNREGA or the Act) in 2005.
Te Act represents a paradigm shift in Indias history
of employment generation. Previous public programmes
1

were supply-driven, formulated and implemented by a
government agency, dominated by contractors, wrought
with leakages, had little transparency and accountability,
without any legal employment guarantee, and with
only a marginal role for the Panchayati Raj Institutions
(PRIs). In contrast, the Act is a rights-based, demand-
driven programme that overcomes problems of targeting
through self-selection. Te
legally binding right to work
implies the lack of fxed
budget constraints. Te
programme was launched
in 200 districts in 2006,
extended to another 130
districts in 200708, and
eventually covered all rural
districts from April 2008.
Each state government was
required to formulate a Scheme to operationalise the
Act, collectively known as the Mahatma Gandhi National
Rural Employment Guarantee Scheme (MGNREGS or
the Scheme), with certain specifed minimum conditions.
It is the countrys largest public works programme ever
with 25 per cent of all rural households participating and
an annual central government expenditure of about 0.5
per cent of GDP.
Tis chapter provides macro and micro assessments
of the Scheme. It looks at the programmes overall
reach, both across states and across economic and
social classes. It then examines the Schemes key
implementation challenges and successes, including its
non-employment-related objectives. Te way forward
underscores the need for such a programme and provides
both immediate and long-term recommendations for
the programme to realise its full potential. Te analysis
relies on secondary data drawn mainly from the websites
of the Ministry of Rural Development (MoRD) and
National Sample Survey Organisation (NSSO) and
primary data collected specifcally for this study from 23
villages in 8 states.
7.2 The Letter and Spirit
of the Act
Te Act is aimed at enhancing livelihood security by
guaranteeing up to 100 days of wage employment in a
fnancial year to rural households whose adult members
do unskilled manual work (MoLJ 2005). It also seeks
to create durable assets to augment land and water
resources, improve rural connectivity and strengthen the
livelihood resource base of the rural poor.
Te Act marks a turning point in many respects. For
the frst time, workers have rights to entitlements such as
MGNREGS is a rights-
based, demand-driven
programme that
overcomes problems
of targeting through
self-selection. It is the
countrys largest public
works programme
everwith 25 per cent
of all rural households
participating.
1
Examples of programmes designed for the rural sector include the National Rural Employment Programme (NREP) in 198089; Rural
Landless Employment Guarantee Programme (RLEGP) in 198389; Jawahar Rozgar Yojana ( JRY) in 198999; Employment Assurance
Scheme (EAS) in 199399; Jawahar Gram Samridhi Yojana since 2001, and National Food for Work (NFFW) from 2004.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 241
to work on demand (within
15 days) at a minimum
wage, or an unemployment
allowance, basic worksite
facilities, and wage payment
within 15 days (see Box 7.1).
Te Act and its Operational
Guidelines (OG) also
make a directed efort to
strengthen transparency and accountability and reduce
the scope for leakages by, for instance, banning the use of
contractors and labour-displacing machinery. Its unique
transparency safeguarding features include muster rolls
kept at the worksite, regular maintenance of job cards,
payment of wages in public, wall painting of works
undertaken and jobs provided, separation of payment
agencies from implementation agencies, vigilance
committees, and social audits.
MGNREGA gives workers
certain entitlements
for the frst time: such
as to work on demand
(within 15 days) at a
minimum wage, or
to an unemployment
allowance, basic worksite
facilities, and wage
payment within 15 days.
BOX 7.1 Salient Features of MGNREGA, 2005
Registration: Adult members of a rural household apply for registration either in writing, or orally to the local Gram
Panchayat (GP). Each registration unita householdis entitled to 100 days of employment per year.
Job card: After the place of residence and age of the member/s is verifed, the registered household is issued a job card.
Application for work: A written application for work is made to the GP or Block Ofce, stating the time and duration
for which work is sought. The GP issues a dated receipt for the written application for employment, against which the
guarantee of providing employment within 15 days operates.
Unemployment allowance: The state government pays the benefciary if employment is not provided within 15 days.
Provision of work: The key considerations for allocating work are: (a) work is provided within a 5 km radius of the village.
If the worksite is beyond 5 km, a 10 per cent premium is payable to meet additional transportation and living expenses.
Women are given priority, with the result that at least one-third of the benefciaries are women. At least 50 per cent of
works, in terms of cost, are to be executed by the GPs.
Wages: Wages are paid in accordance with the state-wise Government of India (GoI)-notifed MGNREGS wages. Wages
also may be paid according to piece rate, as per the Schedule of Rates (SoRs). Wages are to be paid on a weekly basis
and not later than a fortnight in any case. Payment of wages is mandatorily done through bank/post ofce benefciary
accounts.
Planning: Plans and decisions regarding the nature and choice of works to be undertaken in a fnancial year according to a
specifed order and site selection are all to be made in open assemblies of the GS and ratifed by the GP.
Cost sharing: The GoI bears 100 per cent of the wage cost of unskilled manual labour and 75 per cent of the material cost,
including the wages of skilled and semi-skilled workers.
Worksite management: To ensure that the workers beneft directly, the Act prohibits the use of contractors or machinery
in execution of the works. To ensure that the spirit of the Act is not diluted and wage employment remains its main focus,
MGNREGS mandates that, in the total cost of works undertaken in a GP, the wage expenditure to material expenditure ratio
be 60:40. Facilities such as crche, drinking water and shade have to be provided at all worksites.
Transparency and accountability: The GS regularly conducts social audits, to scrutinise all the records and works under
the Scheme. The Social Audit forum allows the GS to question ofcials regarding the entire employment process. Lists of
applicants ofered work and reasons for not disbursing unemployment allowance are made public on the GPs and POs
notice boards. Muster rolls are made available to the public for a fee. A penalty of Rs 1000 is to be levied on those who
violate the Act.
Source: MoRD (2008 & 2012a)
Te Act potentially has far-reaching economic, social
and political ramifcations. By guaranteeing employment
at a minimum wage, albeit for only 100 days in a year,
it aims to strengthen the bargaining power of rural
labourers by enabling them to resist exploitative work
conditions and also demand minimum wages from the
private sector (Drze 2011). In other words, wages
under the Act could help raise the reservation wage
i.e., the fall-back wage or casual wage rateand beneft
even labourers who do not participate. Women too
242 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
could gain confdence by
accessing income-earning
opportunities at equal pay,
especially important in
areas where rural women are
traditionally homebound.
Besides social protec-
tion, livelihood security and
democratic empowerment
(MoRD 2013a) of socially
disadvantaged groups, the
Act aims to strengthen
decentralised and partici-
patory planning, deepen
grassroots democracy by
supporting PRIs, and efect
greater transparency and
accountability in governance. Te Act is a powerful in-
strument for inclusive growth in rural India.
7.3 Bottom-up Implementation
Framework
Te Scheme has been
envisioned as a grassroots
programme that grants the
GS and its elected repre-
sentatives to the GP central
responsibility for planning,
implementation and moni-
toring. Community devel-
opment priorities are iden-
tifed at GS meetings and
form the basis on which the
GP prepares the villages development plan. In accor-
dance with the MGNREGA Operational Guidelines
of 2008 (OG 2008), the GPs implementation respon-
sibilities include registering households, providing job
cards, ensuring availability of work according to de-
mand, preparing and maintaining muster rolls, ensuring
proper worksite facilities and making timely payments
(MoRD 2008). As projects are implemented, the GS,
the primary forum for conducting social audits, is meant
to play a central role in monitoring.
Te annual village development plan has two key
components: projects to be undertaken and cost and
labour budgets. Critical to this process is the Junior
Engineer ( JE) at the block level, who provides villages
technical support in planning development works, and
preparing technical plans and cost estimates. For the 82
poorest left-wing, extremist districts, with an accelerated
development plan (the Integrated Action Plan or IAP),
JEs are placed at the cluster level to cover the 2000 most
backward blocks.
Village plans are approved and consolidated at the
block level by the Programme Ofcer (PO) before being
sent to the district authorities. Te District Programme
Coordinator (DPC) is responsible for overall programme
coordination and for fnalising the District Plan using
plans collated by the various POs, with inputs from the
District Technical Committee, NGOs, centre and state
government undertakings and self-help groups (SHGs).
Te DPC manages the fnances and releases funds to
the GPs for payment of wages.
Once district plans are approved, the GPs are informed
and can start the works. Te OG 2008 recommends
administrative support in the form of a Gram Rozgar
Sahayak (GRS) or Employment Guarantee Assistant
(EGA) (see Figure 7.1) to assist the GP in registering
workers, issuing job cards, processing worker
applications, ensuring that the muster roll of worker
attendance is in order and is made publicly available
along with other documents to enable transparency and
accountability at the ground level.
To mobilise worker groups, facilitate demand for
work, supervise and capture attendance in a muster roll,
the OG 2008 recommends the selection of a mate or
supervisor from among Scheme workers. A mate is a
literate worker trained in the rights, entitlements and
operations under the Scheme and a leader the workers
can trust.
When works are completed, payments to workers are
processed on the basis of either a daily wage or a piece rate
system. Te piece rate system requires the JE to measure
the volume of work and estimate wage payments based
on a Schedule of Rates (SoR). Te PO, responsible for
ensuring employment within 15 days of work applications,
also pays either wages based on the JEs estimates or
unemployment allowances if work is not provided.
Te fnal stage is the social audit, a participatory
evaluation of the scheme. Te GS is to conduct the
social audit and the PO to ensure that it is conducted
and follow-up actions are taken.
Its inbuilt quality and fraud check system is one of
the Schemes unique features. Te JE and the PO are
responsible for timely, fraud-free implementation. Te JE
inspects work completion and quality and the PO checks
for misappropriation in issuing job cards, registering
work, and allotting work and payment. Villagers can
register formal complaints with the GP and, if the
The Act potentially
has far-reaching
economic, social and
political ramifcations.
By guaranteeing
employment at a
minimum wage,
albeit for only 100
days in a year, it aims
to strengthen the
bargaining power
of rural labourers by
enabling them to
resist exploitative work
conditions and demand
minimum wages also
from the private sector.
MGNREGS has been
envisioned as a
grassroots programme
that grants the
GS and its elected
representatives to the
GP central responsibility
for planning,
implementation and
monitoring.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 243
complaints go unaddressed
for over 7 days, with the PO.
Te PO acts on complaints,
and escalates them to the
DPC if there is evidence
of misappropriation or
fnancial irregularity. Te
DPC then fles and acts on
the frst information report
and, if needed, orders a
third-party inspection and audit. To strengthen this
system, the OG 2013 recommends a three-tier (state,
district and village) vigilance and monitoring system
and installing an Ombudsman to receive and act on
complaints, and report them to the Chief Secretary and
Secretary of the Department for appropriate legal action.
Appropriate administrative and technical stafng
are obviously critical to the proper planning and
execution of projects but there are shortfalls at the
block and panchayat levels. First, the JE is in charge
of both MGNREGS and non-MGNREGS works,
and therefore often cannot devote enough time to the
Scheme, leading to delays and poor project outcomes
(see Sections Delays and Assessment of the Schemes
Broader Objectives and their Impact). Second, many
states have failed to appoint a full-time PO. Instead,
the Block Development Ofcer (BDO) takes over
Scheme-related responsibilities as an additional
charge. Te OG 2008 suggests that an Additional
Programme Ofcer (APO) be appointed for support
in such instances, but it is unclear whether that has
been done.
Emphasising the enhancement of dedicated technical
staf at the local level, the OG 2013 recommends that
two-thirds of the administrative expenditure be at the
GP and block levels. Te OG 2013 also makes the
following specifc stafng recommendations:
A technical assistant per cluster of villages for the
measurement of works;
Tree computer-cum-accounts clerks per cluster of
villages for maintaining accounts, registering work
demand applications and creating job cards and
technical estimates;
Cluster facilitation teams (CFTs) of four members
specialising in community mobilisation, soil and
moisture conservation, agriculture, and IT for
designing annual plans and providing technical
assistance for works;
Two engineers per 6000 households for measure-
ment, valuation and calculation of wage payment;
In IAP districts, a Panchayat Development Ofcer
(PDO) and JE for each GP.
Beyond this tiered structure, every state has a
State Employment Guarantee Council and Central
Employment Guarantee Council (CEGC) at the centre
to monitor and evaluate the programme.
7.4 Nationwide Coverage
and Effectiveness
Following its launch in 2006, the programme expanded
rapidly, covering the countrysentire rural segment. It has
provided employment to about 50 million households
the equivalent of 25 per cent of all rural households
an average of 4050 person days of employment per
household (see Table 7.1). Geographical coverage,
though, is just one aspect. Te other is the extent to
which the various sections of rural society, especially the
Its inbuilt quality and
fraud check system is
a unique feature of
the Scheme. Villagers
can register formal
complaints with the GP
and, if the complaints
go unaddressed for
over 7 days, with
the PO.
TABLE 7.1 Overview of MGNREGS
200607 200708 200809 200910 201011 201112
Spread of programme (as number of districts) 200 330 615 615 626 626
Cumulative number of job cards issued (crore) 3.8 6.5 10 11.3 12 12.3
Households employed (crore) 2.1 3.4 4.5 5.3 5.5 5
Total person days (crore) 91 144 216 284 257 211
Person days: SC and ST (% of total person days) 62 57 55 51 51 40
Person days: Women (% of total person days) 41 43 48 48 48 48
Person days per household 43 42 48 54 47 42
Total expenditure (Rs crore) 8823 15,858 27,251 37,910 39,377 37,549
MGNREGS expenditure as % of GDP 0.2 0.3 0.5 0.6 0.5 0.4
Note: Person days for SC/ST and women cannot be added as they are not mutually exclusive.
Source: MoRD (2012a, 2012b, 2013); MIS data from MGNREGA website. http://mgrega.nic.in, accessed on 4 June 2013.
244 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Note: Boxes with dotted outlines represent recommendations as per the MGNREGA Operational Guidelines 2008 and 2013.
Source: Authors analysis based on CAG (Comptroller and Auditor General of India) (2008); MoRD, (2008, 2013a).
FIGURE 7.1 Organisational Structure of Implementation
Ministry of Rural Development (MoRD)
Nodal ministry for MGNREGS implementation
Provides resource support to states
Review monitoring and evaluation of processes
and outcomes
Establish MIS
State Government
Formulates state scheme and rules
Ensures timely release of state share
Ensures wide dissemination of information
District/ZillaPanchayat (DP)
Finalises district plan
Monitoring and supervision in
the district
Executes works (other than GP
works)
Intermediate/Taluka/Block Panchayat
Planning at block level
Monitoring and supervision
Executes works (other than GP works)
Other Implementing Agencies
Line departments, NGOs, central and state
government undertakings and SHGs
Gram Panchayat
Planning of works, registering households, issuing
job cards, allocating employment, execution of
works and monitoring
Gram Sabha
Recommends works to be taken
up
Monitoring and supervision
Conducts social audits
Central Employment Guarantee Council (CEGC)
Advises GoI on MGNREGSConvergence, guidelines, technical
studies
Monitoring and evaluation
National Management Team
Programme management, human resource development and capacity
building, monitoring and evaluation, IT, vigilance and social audit
State Employment Guarantee Council (SEGC)
Advises state governmentpreferred works, technical
studies, capacity building
Monitoring and evaluation
Decides on preferred works under MGNREGS
State Management Team
Programme management and experts in relevant areas
District Programme Coordinator (DPC)
Overall coordination
Headed by senior administrative ofcer, e.g. Collector
Releases funds, disseminates information and provides
training
District Technical Committee
District ofcers of relevant technical depart-
ments: NGOs and academia
Additional DPC
Day-to-day operations of MGNREGS
Provides technical support with specialists in agriculture,
engineering, MIS, social mobilisation and capacity
building
Programme Ofcer
Ensures employment to workers
Cluster Facilitation Team
Community mobilisation, soil and moisture
conservation, agriculture, MIS and IT
Technical Assistant for a group of GPs
Identifcation and measurement of
works, preparation of work estimates
Employment Guarantee
Assistant (EGA)
Oversees entire worker employment process
Maintain documents for public
viewing
Mate Leader of the worker group
Trained in MGNREGS rights and entitlements
Assisting worker groups in demanding work
Supervising work on feld and maintaining attendance the
muster roll
Block Resource Centre
Disburses wage payments and unemployment allowance
Cluster
(56 GPs)
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 245
disadvantaged, are covered. In fact, the main benefciaries
have been SC and ST households who, in each of the
programmes frst fve years, received over 50 per cent of
the employment generated. Women, many of them also
SC and ST, received 48 per cent of total person days of
employment (see Table 7.1), a signifcant beneft.
Although the programme expanded rapidly until
200910, it seems to have plateaued since then, even
showing signs of deceleration. Tis chapter discusses
possible reasons.
7.4.1 Registration and Issuance
of Job Cards
First, a household seeking work is to be issued a job
card, and then eligible members are provided work.
NSSO data (200910)
2
show 36 per cent of total
rural households registered (issued job cards) while
MIS (Management Information System) data for the
fnancial year 200910 show 69 per cent, clearly a large
discrepancy.
3

Nationally, registration is higher among the
disadvantaged than other social groups, indicating that
MGNREGS is somewhat self-targeting. For example, 57 per
cent of ST households and 46 per cent of SC households
received job cards but only 31 per cent of OBCs and 25
per cent of Other Castes did (see Figure 7.2 A and B). A
2008 survey conducted in 6 statesBihar, Chhattisgarh,
Jharkhand, Madhya Pradesh, Rajasthan and Uttar
Pradeshalso found that a majority of MGNREGS
workers were economically and socially disadvantaged
(Drze and Khera 2011). All-India NSS data also show
that a larger share of labour households52 per cent of
agricultural labour (AL) and 42 per cent of other labour
(OL)have job cards than self-employed households
(see Figure 7.2A). And generally a larger share of poor
households gets registered. Indeed, the share of registered
households declines with rising household monthly per
capita expenditure (MPCE)among the poorest 10 per
cent of rural households, 49 per cent have job cards and
it drops to 17 per cent for the richest decile (see
Figure 7.2B).
One would expect states with higher poverty to
have higher registration rates, but the data show no
signifcant relationship between the two (see Figure
7.3). Te data also show a wide divergence among the
states participating; some states have registered a larger
2
Te 200910 NSSO Survey had the following questions on MGNREGS (NSSO 2011).
i. Whether the household has NREG job card (Code: yes-1, no-2).
ii. Whether got work in NREG works during last 365 days (Code: got work in NREG works1, sought but did not get work in NREG
works2, did not seek work in NREG works3).
iii. If gotwork in NREG works, no. of days worked.
iv. If gotwork in NREG works, mode of payment (Code: paid: directly into post ofce account1, directly into bank account2, in a Gram
Sabha meeting3, by the feld assistant/mate4, by an SHG member5, through a smartcard6, other9; not yet paid7 ).
3
Te CAG Report has noticed substantial diferences in the data uploaded in the MIS and the actual records maintained with the DPC. Te
CAG also observed cases of erroneous entries and states not entering data on a regular basis (CAG 2013).
FIGURE 7.2A and B Registered Rural Households by Category and MPCE Deciles
Note: AL = agricultural labour, OL = other labour, SEA = self-employed in agriculture, SENA = self-employed in non-agriculture
Source: NSSO (200910); Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
P
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t

h
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h
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s
60
50
40
30
20
10
5
7
4
6
3
1
2
5
5
2
4
2
3
4
2
5
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60
50
40
30
20
10
49
45
17
25
30
34
34
39
41
42
1 2 3 4 5 6 7 8 9 10
Deciles
246 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
share of the poor and
disadvantaged than others.
Almost all north-eastern
states have high registration
rates even though their
poverty levels are generally
low.
4
Among major states,
Rajasthan with a rural
household poverty ratio
of 22 per cent tops the list
with almost 75 per cent of
its households registered. At the other extreme, in Bihar,
nearly half the rural households are poor, but only 20
per cent of all rural households have job cards. Similarly,
in Uttar Pradesh, Maharashtra, Haryana, Assam and
Karnataka, the registration rates are considerably
lower than poverty levels. Overall registration rates
appear weakly correlated to poverty levelsonly 0.129.
Substituting landless agricultural labour for poverty
ratio shows a stronger relationship with the percentage
of SC and ST householdsa correlation of 0.654.
Tis can be seen most clearly in the high registration in
north-eastern states which have a high concentration of
SC and ST population (see Figure 7.3).
Registration is voluntary and costs nothing. So, why
have 51 per cent of the poorest decile, including many poor,
SC, ST, and labour households chosen not to register?
Te answer is explained in the sections that follow.
7.4.2 Demand, Actual Participation
and Unmet Demand
Demand for Work and Rationing of Job Cards
Registration entitles one to participate in the Scheme
but not necessarily to receive work. Nationwide, about
25 per cent of all rural households actually worked even
though 36 per cent had registered, i.e., an average of
about 70 per cent of registered households worked.
Participation by Income Level
But there was a sizeable
additional demand for work
from households that did not
register (NSS 200910).
Around 45 per cent of total
rural households sought work
under the Scheme30 per cent that registered, and 15
per cent that did not register but sought work (see
Figure 7.4). Forty per cent of the rural poor registered
and demanded work; another 17 per cent demanded
work even though they were not registered. Demand
for work by unregistered households is substantial
not only among poor but also among rural labour and
SC/ST households (see Figure 7.4). Tis explains a
part of the puzzlealmost 58 per cent of poor rural
households sought work but many were not registered.
Why not?
Overall registration
rates appear weakly
correlated to poverty
levelsonly 0.129.
Substituting landless
agricultural labour for
poverty ratio shows a
stronger relationship
with percentage of SC
and ST householdsa
correlation of 0.654.
4
Te state-specifc poverty lines used to estimate the percentage of poor households from NSS Employment and Unemployment Survey
data are derived so that they yield the same poverty head count ratios as those released by the Planning Commission (2012) based on household
consumer expenditure surveys of NSS.
FIGURE 7.3 Percentages of Poor, SC/ST and MGNREGS-registered Households by State
Around 45 per cent of
total rural households
sought work under the
Scheme.
P
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t

h
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e
h
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s
80
60
40
20
0
100
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Registered Poverty SC & ST
7
9
4
6
4
5
4
3
4
0
4
0
3
7
3
6
3
6
3
0
2
3
2
1
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1
8
1
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1
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5
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9
2
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1
7
7
7
4
6
7
5
9
5
9
Source: NSSO 200910; Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 247
Because ofcials did
not issue job cards to meet
demands for work, i.e.,
rationing of job cards was
very high. Most of the poor
states have a larger share
of household demand outside the registered systemas
many as 16 to 31 per cent of rural households in Bihar,
Jharkhand, Odisha, Chhattisgarh and Uttar Pradesh
(see Figure 7.5). Maharashtra and Punjab were the
only other states with a higher share of households
outside the registered system that wanted work. Of
serious concern is the fact that almost all the demand
from unregistered households went unmet (97 per
cent). Much of the rationing occurs in the poorer states,
precisely where MGNREGS could have had the most
benefcial impact. Addressing this unmet demand is one
of the programmes serious challenges. A second stage of
rationinghouseholds with job cards not getting work
does exist but appears less prevalent.
Almost 25 per cent of the countrys rural households
worked under the Scheme, according to NSS data.
Te MIS data for the same reference period of NSSO,
200910, concurs (MoRD 2012a). STs and SCs and
agricultural labour and poor households participated
more than other social groups (see Figure 7.6). And,
although a larger percentage of low-income households
participated than higher income households, two-
FIGURE 7.4 Demand for Work and Actual Work Participation Across Socio-economic
Groups of Registered and Unregistered Rural Households
Note: AL=agricultural labour, OL=other labour, SEA=self-employed in agriculture, SENA=self-employed in non-agriculture Participation rate is the
number of rural households worked as a share of total number of rural households.
Source: NSSO 200910; Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
thirds share of low income
households did not
participate. Higher income
households, of course, are
less likely to work under the
Scheme and participation
rates decline as MPCE
rises. For example, one-
third of the households in
the bottom 10 per cent participated while only 9 per
cent in the top decile did. But two-thirds of the poorest
consumption group did not participate.
Participation Rates by State
Participation rates vary substantially across states
(see Figure 7.5). Te north-eastern states, as well
as Rajasthan, Chhattisgarh, West Bengal, Madhya
Pradesh, Andhra Pradesh, Tamil Nadu and Himachal
Pradesh clearly had signifcant participation. Almost
all the same states also had the highest average number
of working days per household. High poverty states
such as Bihar, Uttar Pradesh, Assam, Jharkhand, and
Odisha had both low participation rates (ranging from
9.5 per cent to 22 per cent of households who worked
as compared to total rural households) and low average
numbers of days worked. In Maoist-afected states like
Bihar and Jharkhand, low participation may be partly
due to Naxal inteference.
Most of the poor states
have a larger share of
household demand
outside the registered
system.
P
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t

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w
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k
70
60
50
10
20
40
30
0
1
2
5
0
1
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4
1
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5
2
5
1
4
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1
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7
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1
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1
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62
56
40
34
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53
40
36
22
40
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45
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21
15
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24
21
33
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T
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Social groups Household type Poverty status
Registered HH demand Unregistered HH demand Participation rate
Although a larger
percentage of the low
income households
participated than
higher income
households, a high
two-thirds share of low
income households did
not participate
39
248 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Unmet Demand for Work from Registered Workers
Unmet demand extends to registered workers as well:
19 per cent of those who sought work did not get
work. Unmet demand among higher income groups
was relatively higher, indicating an implicit targeting
through rationing of jobs. Tis type of unmet demand
varies considerably across stateswhile it is as high
as 52 per cent in Maharashtra, it is nearly zero in the
north-eastern states like Mizoram, Tripura, Sikkim and
Meghalaya. States with a high incidence of rural poverty,
except Uttar Pradesh and Chhattisgarh, also have high
unmet demand. More than one-third of registered
households who sought work in Bihar, Jharkhand and
Odisha did not get work.
MGNREGS is not a targeted scheme. It is open to
any person willing to do unskilled manual work when
in need. For this reason it is considered self-targeting
as there are more takers from disadvantaged groups
of rural India. It would, therefore, be instructive to
examine its performance in meeting the work demand
of poor households, as poverty is concentrated among
SC, ST and labour households. Overall, 27 per cent of
FIGURE 7.6 Participation Rate Across Socio-economic Groups
FIGURE 7.5 Demand For Work Among Registered and Unregistered Households
and Households Provided Work by State
Source: NSSO 200910; Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
100
90
80
70
60
50
40
30
20
10
0
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1
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1
7
5
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1
1
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6
6
9
6
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5
7
8
8
9
1
4
Unregistered HH demand Registered HH demand Participation rate
P
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p
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A
50
40
30
20
10
4
2
3
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2
1
1
6
4
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1
5
5
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Social groups Household type Poverty status
Note: AL=agricultural labour, OL=other labour, SEA=self-employed in agriculture, SENA=self-employed in non-agriculture
Source: NSSO, 200910; Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 249
TABLE 7.2 Unmet Work Demand Amongst Poor
Rural Households
State Poor rural Poor rural Poor rural Poor rural
HHs as % HHs that HHs with HHs with
of total sought unmet work unmet work
rural HHs work as demand as demand as
% of total % of total % of work
rural HHs rural HHs sought
Andhra Pradesh 18.1 11.7 2.4 20.5
Assam 36.1 18.0 9.2 51.1
Bihar 45.9 23.9 18.0 75.3
Chhattisgarh 51.3 39.3 10.1 25.7
Gujarat 21.0 9.7 3.2 33.0
Haryana 15.8 5.5 3.8 69.1
Himachal 4.2 2.7 0.6 22.2
Pradesh
Jammu & 2.7 1.8 1.8 100.0
Kashmir
Jharkhand 34.1 20.7 13.1 63.3
Karnataka 20.6 5.5 2.5 45.5
Kerala 8.3 2.1 1.1 52.4
Madhya 36.8 28.1 8.2 29.2
Pradesh
Maharashtra 24.0 9.4 6.9 73.4
Meghalaya 11.6 9.3 0.6 6.5
Mizoram 28.1 28.1 0.0 0.0
Nagaland 16.6 13.9 5.2 37.4
Odisha 35.1 24.0 11.4 47.5
Punjab 11.5 5.8 4.4 75.9
Rajasthan 22.1 20.0 3.7 18.5
Sikkim 10.1 6.9 0.4 5.8
Tamil Nadu 16.9 9.2 0.8 8.7
Tripura 15.2 15.0 0.9 6.0
Uttar Pradesh 33.5 15.6 7.6 48.7
Uttarakhand 8.6 5.5 2.6 47.3
West Bengal 23.9 19.2 5.5 28.6
All India 27.1 15.6 6.6 42.3
Note: HHsHouseholds.
Source: NSSO, 200910; Authors calculations from unit record data.
rural households in India
are poor and more than
half of them have sought
work under MGNREGS
(see Table 7.2). Not all
the poor households who
sought work were given
This indicates the
programmes inadequate
coverage among the
needy across most
states, especially those
with high incidence of
poverty.
work: as many as 42 per cent were not. Tis unmet
demand is substantial across many states. For example,
in Bihar half of the rural poor, constituting 24 per cent
of rural households in the state demanded work, but
three-fourths of them were denied work. Tis means
that in Bihar, 18 per cent of the rural households were
denied work, though they are poor and sought work.
Te percentages are signifcant in several other states
as well10 per cent in Chhattisgarh, 13 per cent in
Jharkhand, 11 per cent in Odisha and 8 per cent in
Madhya Pradesh and Uttar Pradesh (see Table 7.2).
Tis indicates the programmes inadequate coverage
among the needy across most states, especially those
with high incidence of poverty.
7.4.3 Comparing Efectiveness
among Phase 1 and Phase 2
and 3 Districts
MGNREGS was initially launched in Indias 200
most backward districts (Phase 1 districts) and then
gradually expanded to others (Phase 2 and 3) by
2008 (see Figure 7.7). NSS data shows that half of
all poor rural households but only 39 per cent of all
rural households live in Phase 1 districts, as do nearly
50 per cent and 42 per cent of rural, tribal and labour
households respectively, which clearly remain backward.
Overall, Phase 1 districts have a considerably higher
coverage rate (per cent registered) than Phase 2 and 3
districts (see Figure 7.7) across all social, occupational
and economic groups and all categories of households.
But despite better registration and participation rates,
unmet demand in Phase 1 districts is similar to that in
Phase 2 and 3 districts.
In summary, the NSS data show that a high
percentage of SC, ST, mostly women, labour and poor
Source: NSSO, 200910; Authors calculations from unit record data of
200910, National Sample Survey Schedule 10.
P
e
r

c
e
n
t

h
o
u
s
e
h
o
l
d
s50
40
30
20
10
0
44
30
31
21 20
18
Registered Participated Unmet demand
Phase 1 Phase 2 and 3
FIGURE 7.7 Efectiveness in Phase 1
and Phase 2 and 3
250 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
of rural India registered
in the programme
nationwide. But much of
the demand among both
registered and unregistered
workers in poorer states
that most need the Scheme
went unmet due to various
constraints. Tese are
discussed in the next
section.
7.5 On-the-Ground Insights
on Implementation
What accounts for the signifcant unmet demand and
low work participation rates? Why has MGNREGS,
initially met with great enthusiasm, begun to plateau?
What factors might explain lower uptake in poorer
states where employment needs should, in principle,
be more acute? Tis section seeks to answer these
questions, drawing on primary data from our own
feldwork and on several studies assessing the impact
of MGNREGS. For a review of all major studies, see
MGNREGA Sameeksha (MoRD 2012a).
Choice of Villages for Field Study
Our feldworkaimed at understanding the
efectiveness of MGNREGS in various micro contexts
rather than at the state levelconsisted of a household
survey and focus group discussions in 23 villages in 8
states with a sample size of 811 households. Without
reliable information with which a sample frame for
selecting households could be designed, we adopted
what we call the random walk method. We used a
semi-structured interview schedule to collect data
from April to October 2012, using the 201112
fnancial year as the reference period.
We grouped the states into three categories
according to poverty levels. Selected villages from
Kerala, Andhra Pradesh and Rajasthan with poverty
rates lower than the national average were in Category
I. Te fve other states with poverty rates above the
national average were divided into two groups
Category II with villages from the high-poverty region
of Bundelkhand in Madhya Pradesh, Uttar Pradesh
and Chhattisgarh; Category III with villages from
Palamau and Gaya districts in Jharkhand and Bihar,
where poverty is acute and deprivation very high, with
about 90 per cent of the households lacking electricity
A high percentage of
SC, ST, mostly women,
labour and poor of
rural India registered
in the programme
nationwide. But much
of the demand among
both registered and
unregistered workers in
poorer states that most
need the Scheme went
unmet.
and latrines (Census 2011) and under a signifcant
Maoist infuence. Te Ministry of Home Afairs has
classifed 58 per cent of the districts in Bihar and
88 per cent in Jharkhand as Naxal afected areas
the implementation of MGNREGS in these areas
bears examination because 106 of the 640 districts
nationwide are designated Naxal-afected and, as
mentioned in Section 7.3, have special provisions
under the IAP for dedicated staf to each GP. All
inferences are drawn for these three categories of
villages. Table 7.3 provides the sampling distribution
of households in each category and Table A7.2 the
names and locations of villages.
Te overview of household demographics and
socio-economic characteristics in Table A 7.3 shows
that Category I has a 65 per cent literacy rate and both
Category II and III have lower rates. Te percentage of
families with Antyodaya cards (for the poorest of poor)
and no ration cards is as high as 25 in Category II, 39 in
Category III, and only 3 per cent in Category I. Many
Category II and III households cannot access food from
the public distribution system (PDS) because they have
no ration cards. In short, we found low literacy, high
poverty and lack of access to the PDS in Category II and
III villages.
TABLE 7.3 Distribution of Sample Households
Across Selected Villages
Categories States Districts Number Sample
of house-
villages holds
Palakkad, 7 272
Kerala Alappuzha,
Pathanamthitta
Category I Andhra Anantpur,
Pradesh Chittoor
Rajasthan Bhilwara
Madhya Tikamgarh 12 421
Pradesh
Category II Uttar Lalitpur,
Pradesh Jalaun
Chhattisgarh Bilaspur,
Mungeli
Bihar Gaya 4 118
Jharkhand Palamau
Sample Size 23 811
Source: Based on authors survey.
Category III
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 251
7.5.1 Possible Reasons for Unmet
Demand or Job Rationing
Because meeting
employment demand under
MGNREGS is not subject
to budget constraints,
the large unmet demand
cannot be attributed to lack
of funds. On average, 74 per cent of available funds were
spent nationwide over the duration of the programme.
Even at its peak in 200708, spending was around 82
per cent of total available funds. Te fact that all states
except Tamil Nadu had funds left over at the end of each
fnancial year indicates that funding should not have
been a constraint in providing employment to those
who demanded it. What then could be the reasons for
such large unmet demand?
Our feld survey corroborated certain MIS and NSS
results and provided some explanations. We found
substantial variation in registration and days worked
across all three categories of villages. Category I villages
performed well above the national average,
5
Category II
at about the national average (according to MIS data)
and Category III, much lower. Tis suggests that poorer
villages had proportionately fewer households with job
cards, fewer households that worked and an average of
fewer days worked per household (see Table 7.4).
Focus group discussions in our surveyed villages
provided anecdotal evidence of job rationing at two
stages, as mentioned abovefor issuance of job cards
and providing workleading to unmet demand. In
Amarbhiga village of Gaya district in Bihar, for instance,
The large unmet
demand cannot be
attributed to lack of
funds.
women from maha-dalit
communities recounted
that they did not receive job
cards and their demands for
work were never entertained
at the panchayat level
due to caste hierarchy. In
Category II and III villages,
in particular, the sarpanch
or mukhiya often has discretion in deciding who gets
work, when and what type of work. Rather than being
proactive in inviting work applications, GPs often
ignored demands for work by failing to document the
demand (or to date or acknowledge the application)
and by favouring certain groups of job seekers. In
Chhattisgarh villages, people who wanted to work did
not do so due to an understanding between farmers and
the sarpanch to stop MGNREGS activities during the
peak agricultural season, particularly during sowing of
kharif and rabi crops. Similarly, in the villages in Bihar,
where applications for work are made orally and not in
writing, work is restricted during the agricultural season.
Te issue of job rationing arises because of an
insufcient pipeline of work, either because of a lack of
administrative and technical capacity or motivation. But
a key reason for the signifcant variation in performance
amongst the categories of villages is also awareness of
rights and empowerment to demand work. Category I
householdswhich fared better than the otherswere,
for example, much more aware of provisions such as a
hundred days work entitlement, minimum wages, and
payment of wages within 15 days, than Category II and
III households (see Table 7.5).
Greater awareness is also refected in a higher
percentage of people demanding work in writing (and
following up) in Category I villages (69 per cent) as
compared to a mere 7 and 14 per cent in Category II
and III villages (see Table 7.6). In fact, as many as 7080
per cent of households in Category II and III villages
did not demand work, (48 and 56 per cent respectively)
mainly because they were unaware that they needed to
apply. Instead, they waited for the sarpanch to give them
work. A recent study based on NSS data corroborates
these fndings, arguing that the main reason for unmet
demand is lower empowerment of poor people to
demand work (Dutta et al. 2012).
TABLE 7.4 Households with Job Cards and
Average Number of Days Worked Between
April 2011 to March 2012
Category House- House- Average Total
holds with holds days worked house-
job cards worked per HH holds
Category I 265 (97) 250 (92) 68 272
Category II 312 (74) 236 (56) 45 421
Category III 53 (45) 20 (17) 27 118
Total 630 (78) 506 (62) 56 811
Note: Figures in parentheses are percentages of households in each
category.
Source: Based on authors survey.
5
As indicated earlier, registration of rural households nationwide was 36 per cent according to NSS data and 69 per cent according to MIS
data. Te average person days worked per employed household was 54 days in 200910 and has come down since to 42 days in 201112
(MoRD 2012a).
Focus group discussions
provided anecdotal
evidence of job
rationing at two
stagesfor issuance of
job cards and providing
workleading to unmet
demand.
252 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE 7.5 Household Response on Awareness of Various Provisions of MGNREGS
Category I Category II Category III
Work entitlement up to 100 days 226 (83) 112 (27) 15 (13)
Minimum MGNREGS wage 123 (45) 135 (32) 20 (17)
Timely payment of wages after work 101 (37) 62 (15) 3 (3)
Approval of work through GS 198 (73) 94 (22) 34 (29)
System of mate 223 (82) 145 (34) 26 (22)
Updating information on prescribed wall 138 (51) 102 (24) 21 (18)
Social audit 171 (63) 24 (6) 19 (16)
Total households 272 (100) 421 (100) 118 (100)
Note: Figures in parentheses are percentages of households in each category.
Source: Based on authors survey.
While the sarpanch controlled work allocation in
many cases, in others, the PRIs themselves lacked
awarenessour feld study showed that many
representatives in Bihar were under the impression that
MGNREGS could only be used to build kaccha roads.
A relatively small share of households in Category
II and III villages knew of the provisions relating to
peoples involvement in the institutional process of
implementation, such as the GSs approval of work
and workers (see Table 7.5). Te GS was often neither
consulted on the type of work nor even aware that
works under the Act cannot be sanctioned without their
approval. Te GPs or other local elites exploited this
lack of awareness and often made unilateral decisions
that may not have been in the best public interest (e.g.,
Bihar). Even where the GSs are aware of their rights, it
has been seen that locally infuential residents infuenced
GS decisions (e.g., Chhattisgarh), supporting our
observation that in many poor villages decision-making
is mostly centred on the sarpanch.
Similarly, Category II and III households were
largely unaware of the Schemes transparency and
accountability requirementssuch as the system of
updating information on prescribed walls and social
audit requirements (see Table 7.5). For example, in
Bihars Naxal-afected regions, social audits and other
forms of monitoring are not conducted, partially due to
fear of local Maoist elements, but also due to reluctance
on the part of PRI ofcials.
7.5.2 Labour Standards and Worksite
Facilities
Along with greater awareness and involvement of
Category I villagers comes better organisation and
working conditions. While none of the villages in our
feld study had all the facilities mandated by the Act,
Category I villages had the most, such as drinking
water, shade, frst-aid kits and childcare facilities
to allow mothers to participate (see Table 7.7). A
comparison of worksite facilities across 6 north Indian
TABLE 7.6 Household Responses to Employment-related Issues Under MGNREGS
Category I Category II Category III
Demand for work
Demand work in writing and informal requests 188 (69) 29 (7) 16 (14)
Demand work only through informal requests 61 (22) 45 (11) 4 (3)
Do not make any demand for work 18 (7) 339 (81) 81 (69)
Not reported 5 (2) 8 (2) 17 (14)
Job cards
Keep job card with them 262 (96) 193 (46) 23 (19)
Keep job card with others ofcials/agents 8 (3) 225 (53) 95 (81)
Verify entries in job card 144 (53) 107 (25) 26 (22)
Source: Based on authors survey.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 253
states showed that drinking water, frst-aid kits and
childcare were found more often in Rajasthan than in
Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh and
Uttar Pradesh. While only 17 per cent of the worksites
in Rajasthan had childcare facilities, none in the other
states had them (Drze and Khera 2008).
But our worksite visits underscored the fact that
workers considered labour standard issues less important
than delays in getting work and wage payments.
7.5.3 Wage Payments
A serious source of discouragement to work
under MGNREGS is the undervaluation of work.
MGNREGS allows wages to be paid on the basis of
either (i) time-rate, viz., number of person days as per
MGNREGS wage rate or (ii) piece-rate, viz., volume
of work valued according to a schedule of rates (SoR).
As it is difcult to monitor productivity of workers on
a time-rate basis, wages are often paid on a piece-rate
basis. Te payment under piece-rate basis is not allowed
to be higher than the stipulated MGNREGS wage
rate. Terefore, this generally results in payment lower
than the MGNREGS wage rate. In our feld study, it
was evident that workers feel they are underpaid in
comparison to the MGNREGS wage rate. Tis draws
attention to the valuation of work based on SoR.
Tere are several problems with SoRs. Tey should
be based on a work-time-motion study which establishes
the productivity norm for a worker, and updated from
time to time to match the MGNREGS wage rate. Often,
however, SoRs are prepared based on a contractor-led,
machine-based systemand these rates are naturally
lower with the use of machines factored in. Tis leads
to the undervaluation of work and correspondingly
workers receive lower wage payments.
Moreover, SoRs are not sensitive to women workers,
age, seasons, and agro-climatic conditions. For instance,
during our feldwork it was observed that matching the
amount of work to earn one days MGNREGS wage
becomes difcult by the workers especially during the
hot summer. To overcome this, GPs in Rajasthan have
relaxed the norms by 50 per cent and GPs in Andhra
Pradesh by 20 to 40 per cent.
State governments should address this issue because
an efectively lower or non-transparent wage may be
another reason for the waning demand for the Scheme.
Wage Payments through Banks and Post Ofces
Chiefy to reduce corruption by separating implementation
from payment, the MoRD amended the Act in 2008,
and made the payment of wages through banks and post
ofces mandatory. Wages paid by the same agency that
maintains worker attendance records increases the risk of
embezzlement because the ofcials can fudge muster rolls
and steal wages.
By cutting the MGNREGS ofcials and contractors
out of the payment process, there is less of an incentive
to fudge records, and leakages should decrease.
Transparency would also be enhanced given the better
record keeping tendencies of such institutions. Using
the banking system could also encourage workers to
develop saving habits and provide them better access to
credit. We found that most rural households welcome
the prospect of having bank accounts, and a survey in
Uttar Pradesh and Jharkhand showed that 77 per cent
of respondents preferred wages to be paid through
banks or post ofces than in cash (Adhikari and Bhatia
2011).
6
Te bank payment process, however, has brought
complications. First, even though more households
preferred receiving wages through banks than in cash
or other means, not all had bank accounts, especially
in Category II and III villages (see Table 7.8). Many
face difculties and discrimination in opening bank
accounts. Banks ofcials often deny women their
own bank accounts and pay wages through their
husbands accounts, curtailing their empowerment
and independence. While some states like Tamil
Nadu mandated separate bank accounts for men and
TABLE 7.7 Household Response to
Labour Standards at Worksites
Issues Category Category Category
I II III
Availability of frst aid 185 (68) 53 (13) 23 (19)
Provision for drinking water 232 (85) 232 (55) 27 (23)
Facility to look after children 117 (43) 35 (8) 22 (19)
Shade and foor sheets 113 (42) 49 (12) 22 (19)
Note: Figures in parentheses are percentages of households in each
category.
Source: Based on authors survey.
6
About 8.6 crore bank and post ofce accounts have been opened and around 80 per cent of payments are made through this route. Te
Electronic Fund Management System (eFMS) has been initiated in fve states for directly crediting wages into benefciary accounts using Core
Banking System (MoRD 2013).
254 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
women, most states continue to have bank accounts
per household. Second, the low coverage of banks and
post ofces in rural areas increases transaction costs
for workers. In many cases, workers lose a days work to
travel some distance to collect their wages from banks.
A survey showed that 41 per cent of workers had to
travel more than 5 km to the nearest bank or post
ofce (ibid). Tird, since many rural banks, typically
regional and cooperative banks, are not a part of the
core banking system and do not function on real-time,
payments take longer to clear and lead to further delays
in payment.
Unfortunately, the bank payment process has created
new opportunities for corruption. Workers under
the Scheme, most of whom are frst-time bank users,
depend heavily on intermediaries (those with privileged
access to administrative and panchayat ofcials) to open
and operate bank/post ofce accounts. Tese accounts
have also complicated the social audit process, making
accountability more difcult. While the Operational
Guidelines clearly state that records such as account
statements and payment orders should be made publicly
available, bank ofcials deem them private, making
verifcation difcult. Even muster rolls, which had the
workers signature for receipt of wages and were available
for public viewing, have been made redundant because of
the direct transfer of funds into accounts. In Jharkhand,
for instance, post ofce and bank ofcials have colluded
with illegal contractors to extract money from bank
and post ofce accounts by
taking worker signatures on
blank withdrawal slips on
false pretexts, and operating
workers accounts without
their knowledge.
7.5.4 Delays
Signifcant delays, both
in getting work after
registration and in receiving
payment for work done (see
Figure 7.8), can deter those
who work under the Scheme.
Our feld studies show that
such delays tend to be more
acute in Category II and III villages. While most Category
I villages were provided work within the stipulated 15 days,
other villages had signifcant delays (see Figure 7.8). Delays
in payment in Category II and III villages also were over
two-and-a-half months, but far shorter in Category I. As a
result, people are reverting to other sources of work, even if
otherwise less attractive. For instance, villagers of Category
II village in Tikamgarh district in Madhya Pradesh
reported that they prefer to migrate for work since they
cannot be assured timely payments under the Scheme.
Tere are a number of reasons for delays.
TABLE 7.8 Household Response on Issues Related to Employment Under MGNREGS
Issues Category I Category II Category III
Bank accounts and wage payment
All members of HH having bank account 107 (39) 92 (22) 26 (22)
Some members of HH having bank account 155 (57) 216 (51) 33 (28)
No one having bank account not reported 5 (2) 93 (22) 47 (40)
Prefer to get payment through banks 180 (66) 200 (48) 26 (22)
Prefer to get payment in cash 76 (28) 114 (27) 16 (14)
Prefer to get payment through other sources 7 (3) 68 (16) 8 (7)
No preferences regarding payment of wages 9 (3) 39 (9) 68 (58)
Note: Figures in parentheses are percentages of households in each category.
Source: Based on authors survey.
Unfortunately, the
bank payment process
has created new
opportunities for
corruption.
Signifcant delays, both
in getting work after
registration and in
receiving payment for
work done, deter those
who work under the
Scheme.
Source: Based on authors survey.
FIGURE 7.8 Delays by Village Categories
D
a
y
s
100
80
60
40
20
0
Category I Category II Category III
15
38
72
80
30
77
Village categories
Waiting period after registration for work
Waiting period after work for payment of wages
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 255
Delay in Planning and Approval of Village Work
Plan and Labour Budgets
Te frst delay is in the planning and approval of village
work plan and labour budgets. In addition to the delay,
the CAG Report (CAG 2013) noted that about 31 per
cent of the 1,201 test checked GPs did not prepare the
annual village work plan or the plans were incomplete.
After the annual GS meeting on 2 October, the annual
village work plans and labour budgets are prepared
within the month and submitted to the PO. Village
work plans are consolidated at the block level and
further at the district level as the district annual plan,
which is then submitted to the central government
for scrutiny and approval. Funds then are released
directly to the District Panchayat (DP) which, in turn,
transfers part of the funds as advance to the GP. To
ensure smooth operations, the entire process needs to
be completed by the beginning of the fnancial year, i.e.,
frst week of April. But delays throughout the process
lead to delays in starting work even though GPs may
have reserve funds carried over from the previous year
or can receive advances from DPs to start work. To
avoid such delays, the OG 2013 recommends starting
the process on 15 August so that the village work plan
and labour budget approvals are in place by the frst
week of April.
Delay in Preparing Work Order
Te next delay is in preparing work orders for works
approved by the DP. For the PO to issue a work order,
the GP must submit a work demand application
and detailed technical drawings and estimates (to
include person days and total wages based on SoR
and material costs) prepared by the JE. Te JE, who
does both MGNREGS and non-MGNREGS works
in around 57 villages, has a substantial workload,
leading to delays in the preparation of technical
drawings and estimates, thus delaying the issuance of
work orders. Tis is compounded by the bunching of
MGNREGS works from January to May. Delays in
issuance of work orders leads to delays in preparing
the muster roll, the sarpanch and PO approving it,
and starting the work.
Delay in Measurement
After work is completed, again the JEs workload causes
delays in the work being measured and wages being
fnalised based on the SoR. Te measurement of work
and wages, as recorded in the measurement book, is
approved by the sarpanch and PO. It is the JEs high
workload that is the critical bottleneck and not the
administrative capacity of the GRS and PO, who are
dedicated for MGNREGS. Delays in measurement or
approval lead to delays in payment.
Delays in payment are more worrisome for Category
II and III villagers because work under the Scheme is
an important source of income for them especially in
lean periods, while for Category I villagers, it typically is
supplementary income (see Table 7.9).
7.5.5 Livelihood Security
From our primary data we tried to estimate income
and expenditure of the households to understand
how MGNREGS afected the living standards of
these households. Category I villages have the highest
average per capita income among all the three categories
of villages. While these villages also had the highest
income from MGNREGS because of higher person
days worked, the share of MGNREGS income is only
10 per cent of average per capita income in Category
I while it is 21 per cent in Category II and 14 per
cent of the total income in Category III villages (see
Table 7.9).
Te higher percentage of MGNREGS income in
Category II and III villages indicates the programmes
signifcance in high poverty areas, especially for
TABLE 7.9 Average Annual Per Capita Income of Household and Contribution of MGNREGS
to Total Income FY 201112
Income details Category I Category II Category III
Income from other sources 18,604 (263) 5254 (400) 5075 (65)
MGNREGS income (A) 1941 (248) 1247 (226) 818 (27)
Average total income (B) 19,905 (270) 5813 (410) 5895 (74)
MGNREGS income (% of avg total income) 10 21 14
Note: Figures in parentheses are number of reported households.
Source: Based on authors survey.
256 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
securing food. While in
both Category II and III,
households spend their
MGNREGS income on
food, this is most stark for
Category III households
which spend almost all their
MGNREGS income on
food, except few that also
spend on clothes, electricity and education. Less than
60 per cent of Category I households, on the other
hand, spent their MGNREGS income on food. A large
proportion spent it on non-food items and consumer
durables (see Table 7.10).
Some households, mainly in Category I villages
bought consumer durables such as mobile phones,
fans, televisions, LPG stoves, and bicycles, while very
few in Category II and none in Category III did so (see
Table 7.11). For these poorer households, MGNREGS
income is a safety net, especially in lean periods, for the
purchase of food items. Terefore, the wages they receive
and associated spending have nutritional implications
for them.
It is very clear that the frst priority of spending of the
poor households goes towards food items, with a limited
amount for other necessities. Tus, it can be argued that
MGNREGS is playing a vital role in improving the
food and livelihood security of the rural poor through
its impact on employment, income and consumption.
7.5.6 Leakages and Corruption
As with other government programmes, MGNREGS
is susceptible to corrupt practices at all levels including
the GP. Particularly in Category II and III villages,
corruption and involvement of agents or middlemen
is a serious issue. In villages in Uttar Pradesh, Madhya
Pradesh and Bihar, several people reported that they
had to bribe ofcials and the sarpanch to get a job
card. Having ofcials or middlemen maintain job
cards and account passbooks is also a common practice
in Category II and III villages (see Table 7.8), where
payments are made on the basis of entries in the job
card with or without the workers knowledge. Workers
may even have migrated
to an urban area, as was
the case in our feld study
in Chhattisgarh villages.
Other corrupt practices
include households paying
a commission to an agent
or ofcial at the rate of 10
to 20 per cent to get work,
and SC/ST, BPL (Below
Poverty Line), SMF (Small
and Marginal Farmer), IAY
(Indira Awaas Yojana) and
land reform benefciary
For poorer households,
MGNREGS income is a
safety net, especially
in lean periods, for
the purchase of food
items. Their wages and
associated spending
have nutritional
implications.
TABLE 7.10 Spending Patterns Using MGNREGS
Income on Non-food Items During FY 201112
Category I Category II Category III
Food Expenditure 161 (59) 421 (100) 118 (100)
Major Nonfood
Items Expenditure:
Clothes 155 (57) 116 (28) 3 (3)
Footwear 147 (54) 55 (13) 1 (1)
Cosmetics 128 (47) 24 (6) 0 (0)
Electricity bill 115 (42) 18 (4) 2 (2)
Utensils 104 (38) 39 (9) 0 (0)
Toilet products 72 (26) 16 (4) 0 (0)
Books 73 (27) 28 (7) 4 (3)
School fees 52 (19) 25 (6) 3 (3)
Transport for school 31 (11) 1 (0.2) 1 (1)
School donation 13 (5) 12 (3) 0 (0)
Festival 80 (29) 61 (14) 0 (0)
Total Sample 272 (100) 421 (100) 118 (100)
Note: Figures in parentheses are percentages of households in each
category, this will not add to 100 since it is a multiple response.
Source: Based on authors survey.
TABLE 7.11 Spending Patterns Using MGNREGS
Income on Consumer Durables During FY 201112
Items Category I Category II Category III
Radio 2 (1) 15 (4) 0
Television 24 (9) 7 (2) 0
Cassette/CD player 9 (3) 3 (1) 0
Telephone/Mobile 39 (14) 59 (14) 0
LPG stove 17 (6) 0
Bicycle 8 (3) 55 (13)
Pump set 2 (1) 4 (1)
Fan 39 (14) 11 (3)
Iron 13 (5) 4 (1)
Sewing machine 8 (3) 2 (0.5)
Total households 272 (100) 421 (100) 118 (100)
Note: Figures in parentheses are percentages of households in each
category, this will not add to 100 since it is a multiple response.
Source: Based on authors survey.
People reported that
they had to bribe
ofcials and sarpanches
to get a job card or
pay a commission to
an agent or ofcial
to get work and SC/
ST, BPL, SMF, IAY and
land reform benefciary
households paid the
sarpanch a commission
to have MGNREGS work
undertaken on their
felds.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 257
Moreover, planning
has not always been
participatory, often
lacking input or support
from the GS.
households paying a commission to the sarpanch to
have MGNREGS work undertaken on their felds.
Funds also have been siphoned of by other means.
In some instances, machines are used to undertake part
or all of MGNREGS work. Since the cost of executing
MGNREGS work through machines is about 40 per
cent cheaper than through workers, the savings are then
pocketed by the (illegal) contractor and the sarpanch.
Such collusion is not easily identifed during inspection
as the works are complete on ground. An extreme
as observed in some villages in Chhattisgarh and
Karnataka, everyone, including the ofcials, colluded
all workers stayed home, while work undertaken
remained only on paper.
Another form of rent-seeking is prevalent in some
extremist dominated areas. As with all government
programmes, panchayats have to share approximately
20 per cent of their MGNREGS funds with the left
extremists in order to implement the programme in
Bihar. In Jharkhand, it was reported that Maoists
collect commissions from higher levels of government,
not the panchayats. More generally, Bihar villagers in
our case study also reported that the mukhiya, ofcials,
maoist leaders and other infuential individuals collude
to choose development works that give them scope for
corruption.
MGNREGS has several in-built safeguards to
ensure transparency but they are mostly neglected, and
those who are expected to protect against failings in the
Scheme, such as the PO, JE and PRI ofcials, are often
party to them. What, in fact, distinguishes MGNREGS
from other government schemes is its potential for
collusion among several stakeholders including workers
and banks. Even the paltry penalty of Rs 1000 for each
violation of the Act is seldom enforced.
7.6 Assessment of the Schemes
Broader Objectives and
Their Impact
Beyond its immediate aim
of employment guarantee
and livelihood security,
MGNREGS was designed
to have a far reaching impact
with regard to the creation
of community assets to
spur rural development,
to empower women
and other marginalised
groups, indirectly improve
working conditions in the
casual labour market and
strengthen PRI functioning.
Tis section reviews the
status of such impacts to date
in the context of the current
status of implementation.
7.6.1 Planning
Preparing a holistic development plan for the village,
based on the GSs inputs and priorities is central to the
success of MGNREGS, but this has not always occurred.
But the lack of proper planning has been a major issue.
Although MGNREGS could be used to facilitate
convergence between diferent schemes, alleviate poverty,
enhance livelihood options and create a stream of works
to meet a villages development needs, few villages have
created holistic plans. Instead, works generally are
piecemeal with little co-ordination among schemes or
planning of future projects building on current ones.
Moreover, planning has
also not always been par-
ticipatory, often lacking
input or support from the
GS (also see Section 7.7).
In Tindra, a tribal village of
Lalitpur district in Uttar Pradesh, for instance, the sar-
panch decided to plant jatropha, not of much use to the
locals, and the panchayat committee auctioned the grass
from the village forest, with the result that villagers were
excluded from any benefts. As indicated earlier, this is
partly due to the GSs lack of awareness of its central
role in making decisions regarding works and partly due
to poor transparency and accountability. We repeatedly
observed that powerful local elites colluded to hijack
the programme for their own beneft. Our study of vil-
lages in Bihar, for example, showed that the sarpanches
made no efort to involve the GS in planninginstead
all decisions were made by local elites and needed the
approval of local Maoist leaders. In other cases, BDOs
or other local government ofcials exerted their infu-
ence to override the GS decisions.
PRIs also simply lacked the technical capacity to
plan efective and durable projects. Tey failed to take
into account crucial factors such as type of work, site
selection and technical design and to combine smaller,
complementary works to enhance their development
potential. Desilting of tanks and water bodies, for
example, is inefective without greening and building
... contd.
to empower women
and other marginalised
groups, indirectly improve
working conditions in
the casual labour market,
and strengthen PRI
functioning.
Beyond its immediate
aim of employment
guarantee and
livelihood security,
MGNREGS was designed
to have a far-reaching
impact on the creation
of community assets to
spur rural development,
contd...
258 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
water canals in the catchment area. Te OG 2013
provides a comprehensive list of permissible works that
support complementarity and fexibility from which
projects can be chosen in accordance with village and
regional requirements.
7.6.2 Creation of Durable Assets
Te creation of durable assets to strengthen the
livelihood resource base, one of the Schemes key
objectives, requires identifying a shelf of projects
consistent with the range of permissible works. Assets
so created are intended to enhance rural livelihoods and
help create a cleaner and healthier environment for the
population.
Te Ministry of Rural Development has recently
expanded the list of works permissible under the
Scheme to include activities related to agriculture,
livestock, fsheries, drinking water, food management
and irrigation (see Table A7). Tis indicates that
MGNREGS is moving towards more productive and
sustainable rural development works.
Works Completed Since Inception of the Programme
From the inception of the programme up to FY 2011
12, about 10 million works were completed (see Table
7.12). Of these, 49 per cent
relate to water, with a focus
on rainwater harvesting and
desilting and digging and
renovation of ponds, tanks
and wells. Another 19 per
cent relate to rural connectivity, but this is no longer
emphasised because MGNREGS is not the most
appropriate programme for road works. Finally, about
14 per cent relate to land owned by SC/ST/BPL/
SMF/IAY and land reform benefciary households.
Completion of Works
Work completion is important to evaluate progress in the
creation of assets, but it is not the sole criterion to assess
performance.
7
Equally important is the quality of assets
created (MoRD 2012a). Te CAG audit report pointed
out incomplete works as an issue in many states like
Bihar, Gujarat, Himachal Pradesh, Manipur Meghalaya,
Odisha Haryana, Madhya Pradesh, Punjab, Tripura
and Uttarakhand (CAG 2008). Long delays for reasons
such as public obstruction, inundation of executed part,
land dispute and absence of forest clearances sometimes
resulted in projects left incomplete or abandoned
(CAG 2013). Our case study in a tribal village of
TABLE 7.12 Works Completed and Activity-wise Percentage Expenditure
Under MGNREGS FY 200607 to FY 201112
Type of works Completed Expenditure on works
(million) (%) (% of total)
Water conservation and water harvesting 2.37 (24) 18
Flood control and protection 0.46 (5) 5
Drought proofng 0.62 (6) 10
Micro irrigation works 0.76 (8) 5
Renovation of traditional water bodies 0.72 (7) 12
Total water conservation and water-related works 4.93 (49) 50
Works on lands of SC/ST/BPL/SMF and IAY and land reform benefciaries 1.42 (14) 7
Land development 1.52 (15) 8
Rural connectivity 1.91 (19) 33
Others 0.30 (3) 2
Total works 10.08 (100) 100
Note: Others include Rajiv Gandhi Seva Kendra, Coastal Areas, Rural Drinking Water, Fisheries and Rural Drinking Water projects and other projects
and activities approved by MoRD.
Source: MIS data from MGNREGA website. http://mgnrega.nic.in, accessed on 7 June 2013.
7
National level data indicate that 39 per cent of all works were completed nationwide between 200607 and 201112. But given the
lack of clarity in the number of incomplete works carried over to the next fnancial year and the possibility of double counting, we have not
reported them.
From the inception of
the programme up to
FY 201112, about 10
million works have been
completed.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 259
Palamau district, Jharkhand, for example, found that
while the construction of 50 wells in 2010 was planned
at Rs 2 lakh per well and construction of 20 wells started,
to date only 2 wells have been completed. Focus group
discussions further revealed that while 70 workers were
documented in the muster rolls, only 30 people actually
worked leading to non-completion of work.
Reasons for Incomplete Works
Construction delays were often the result of irregular
fow of funds. In one of our case study villages in
Madhya Pradesh, a few wells constructed on poor
SC/ST farmers lands remained unfnished after
workers abandoned work due to payment delays and
the farmers could not aford to complete the works
themselves. Irregularity of funding was also reported
as a prime cause for a large number of incomplete
projects in Sikkim and Meghalaya (IIM Shillong
2009). Te fact that funds are generally released
more often in the frst few and last two months of the
fnancial year, also lead to intermittent starting and
suspending of works (World Bank 2011).
Rising project costs due to upward revisions in wage
and material rates and SoRs often resulted in projects
being left incomplete unless the higher costs were
approved.
Inadequate planning and scheduling of work. Water
harvesting works such as food control, building
of check dams, wells and desiltation of tanks, for
instance, need meticulous planning so that they are
completed before the monsoons. Delays in execution
can lead to partial or complete damage and works
being left incomplete. Incomplete wells constructed
on private lands in Jharkhand, for example, collapsed
when monsoons began (Mahapatra et al. 2011;
Aggarwal et al. 2012). Tis discourages the poor
from taking up such works as it damages their land
apart from failing to contribute to the purpose they
were envisaged for. Further, leaving works incomplete
also has adverse efects as soil is left loose and exposed
which could exacerbate the problem of soil erosion
and siltation (AFPRO 2009).
Te OG 2013 suggests various measures to address
these issues: frst, that in addition to the DPC approving
revised estimates, works taking over a year be split
into annual work elements, the progress of which can
be monitored; second, that sanctions be rejected for
project implementing agencies whose projects remain
incomplete for more than one fscal year after the
proposed completion dates.
Te studies that have examined successful completion
of works under the Scheme at the village level reveal the
important role that civil society organisations (CSOs)
play in the planning and administration of works. For
instance, the successful construction of a check dam in
Ashna village in Lalitpur district of Uttar Pradesh with
planning and technical support from an NGO allowed
farmers to harvest two crops. Better work completion
rates have also been observed in villages in Kerala
where PRIs and Kudumbashree play an important
role in completing works. In our feldwork in Andhra
Pradesh too we found high completion rates for projects
supported by SHGs and the state government rural
department. Te presence of strong local institutions
clearly is a prime factor in work completion.
Quality of Assets
As important for assessing
performance as the
completion of work is the
quality of assets created
(MoRD 2012a). Well-
planned and executed
durable works potentially strengthen the resource base
in rural areas. A study of the best performing water
assets under the Scheme across 75 villages in Bihar,
Gujarat, Kerala and Rajasthan found that 117 assets (for
which data were available) recovered their investment
within a single year of use, demonstrating the potential
of MGNREGS in improving rural conditions (Verma
and Shah 2012). But generally the quality of assets and
their relevance to the livelihoods of the poor has been
inadequate (Planning Commission 2011). Te World
Bank (2011) reported that, due to inadequate attention
on asset creation, many public works are of such inferior
quality that they are washed away the next monsoon.
Our own survey also showed that even the people who
use the assets created under the Scheme are dissatisfed
with the quality (see Figure 7.9). Tis is particularly
acute in Category II and III villages, which represent
the majority of the country. Te MIS of MGNREGS
does not track the quality of assets, the benefts derived
or their sustainability, and stops tracking works after
completion, complicating assessment of the quality of
assets created under MGNREGS.
Planning should also involve a thorough understanding
of local conditions, but this is not always the case. For
instance, a study of the Gujarat governments initiative
for the construction of over 260,000 boribandhs (tiny
dams using sand bags) found 86 per cent of the bandhs
Well-planned and
executed durable works
potentially strengthen
the resource base in
rural areas.
260 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
partially or fully damaged due to a failure to consider
local needs (Shah and Mistry 2012). In contrast, villages
that took interest and received support from capable local
administration produced assets of satisfactory quality.
Ownership correlates strongly to the creation of
quality assets. Our survey revealed that the quality of
common assetsstreams, forest and wastelands
has improved in Category I villages. But not many
people perceived an improvement in common property
resources (CPRs) in Category II and III villages (see
Figure 7.9). Such a lack of community ownership
of assets can lead to poor maintenance and reduced
durability (MoRD 2012a). In contrast, in our case
study villages in Rajasthan, NGOs and panchayats
worked together to improve degraded pastoral lands
by planting new grasses through MGNREGS labour
and monitoring controlled grazing through panchayat
committees. Category II and III villages lacked this
level of monitoring. Without community cohesiveness,
common property assets can be poorly maintained even
if they beneft the entire village population.
MGNREGS also allows asset creation on private
lands of poor and marginalised sections even for a small
number of benefciaries.
8
Most such works relate to water
harvesting and conservation activities. Since the Act
clearly defnes ownership for activities on private land and
the benefciaries themselves are involved in construction
or supervision, they can ensure better work quality and
more careful maintenance (Verma and Shah 2012).
Contribution to Enhanced Agricultural Productivity
Te extent and type of impact of agricultural and
environmental works depend on the scale of activities,
their technical design as well as the quality and
durability of assets created (MoRD 2012a). Various
studies found that MGNREGS had a positive impact
at the micro level. Our feldwork shows that assets
created under MGNREGS, primarily water-harvesting
and conservation structures have helped increase
the availability of water for irrigation. We observed
in Bundelkhand, Madhya Pradesh, that irrigation
structures under the Kapildhara scheme increased water
availability, changed cropping patterns and increased the
area under cultivation in some cases. Other parts of the
country have similar reports.
While feld-level evidence suggests that MGNREGS
has the potential for improving village assets and raising
agricultural productivity, more scientifc studies are
needed to assess macro impacts, such as the impact of
MGNREGS on the viability of cultivation. Incomplete
works and asset quality is a serious concern, particularly
in poorer states. One perception is that the assets
created by labour intensive works are non-durable and
limited in use. Because MGNREGS does not support
maintenance, assets created are often left unmaintained,
reducing their longevity. Regulatory mechanisms and
incentives must fll these gaps so as to allow MGNREGS
to meet its potential of not merely creating employment
but also assisting the process of rural development.
7.6.3 Womens Participation
Womens empowerment is one of the important
objectives of the MGNREGS. Te Acts Operational
Guidelines have explicit provisions for encouraging
women to participate, both as workers and supervisors.
Tese include equal pay for men and women; provision of
FIGURE 7.9 Peoples Perception Regarding the Quality of CPRs in Terms of Their Use
100
80
60
40
20
0
52
42
83
33
55
85
20
23
64
33
48
20
27
68
16
50
67
0
Wells Tanks Canals/Dainage Forest Gazing Land Govt Land
Category I Category II Category III
Source: Based on authors survey.
8
Initially, this was only permitted on land belonging to SCs and STs, but since 2008 has been extended to land of BPL families, benefciaries
of land reforms and Indira AwaasYojana (IAY); small and marginal farmers as defned in the Agricultural Debt Waiver and Debt Relief Scheme,
2008; and benefciaries of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006.
P
e
r

c
e
n
t

h
o
u
s
e
h
o
l
d
s
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 261
crches at the worksite for care of children under 6 years;
encouraging womens representation in village Local
Vigilance and Monitoring Committees; conducting
social audits to check participation of women and
disadvantaged groups; and recognising single women
households to facilitate participation of widows and
other single women in work under the Scheme.
Indeed, a striking feature of MGNREGS is the high
participation of women. Women account for 48 per cent
of person days worked under the Scheme nationwide,
well above the 33 per cent guideline (see Table A7.1).
Womens participation exceeded 33 per cent in over half
the states (see Table A7.6). More than 80 per cent of
MGNREGS workers in Tamil Nadu, for instance, are
women (Drze and Khera 2011). Except in Jammu
& Kashmir, womens participation in MGNREGS
is strikingly higher than it was as a share of the rural
workforce in 200910 (see Table A7.6). Notably, it is
lower in poorer states than in less poor states (Dutta
et al. 2012). Te high participation rate can broadly
be attributed to three main factors, viz., labour market
conditions (including socio-cultural norms around
womens work), womens perception of MGNREGS
work and the village-level provisions to facilitate
womens participation.
Te sharp gender division
in wage rates in the labour
force provides one signifcant
explanation for the high
participation of women in
the Scheme. Other than
unpaid house work, rural
women have few paid work
opportunities, given the seasonal and irregular nature of
agricultural work. Tis is even less so for non-agricultural
wage work since the rural economy is predominantly
agricultural (Khera and Nayak 2009). In states with
high gender wage diferentials, women naturally prefer to
work and earn supplementary income under the Scheme
because, on average, wages under the Scheme are 30 per
cent higher than normal wages paid to them.
But wage diferentials are not the sole reason. Te
active participation of SHGs in the implementation
of MGNREGS in Andhra Pradesh has increased
womens awareness of the Scheme and thus their
participation (Galab and Revathi 2012). In states like
Rajasthan, CSOs have helped PRIs conduct social
audits that facilitate womens participation. Despite
the fact that MGNREGS wages were sometimes lower
than Rajasthans minimum wage, women participated,
probably due to the relative convenience and availability
of work under the programme.
By enabling women to
enter the workforce for the
frst time, MGNREGS
appears to have realised
a latent demand for work
by women. In a six-state
study by Khera and Nayak
(2009), half of the sample
women reported that, but
for MGNREGS, they would have worked at home
or remained unemployed either because they lacked
opportunities (in the area or at all) or were paid less
than their male counterparts. Other studies also show
women workers as new entrants under MGNREGS
in Rajasthan (Sudarshan 2011), Himachal Pradesh
(Pankaj and Tankha 2010), and Kerala (Nair et
al. 2009; Sudarshan 2011). In Category I villages,
especially in Kerala, we noted that many women
working in MGNREGS activities had never before
done casual labour. Tese are mainly women from lower
income groups who perceived work under the Scheme
as a regular government job with dignity that provides
social life and personal income. In a feld-based study
in Himachal Pradesh, however, a substantial number
of relatively better of women also participated, viewing
the Scheme as presenting an opportunity to earn
independently (Pankaj and Tankha 2010).
Te MGNREGS also performs a social security
function for many, especially women deprived of paid
work due to old age, widowhood or separation. Because
the Scheme has no age ceiling, it provides many the
relief of greater independence from family members. We
too found that persons over
60 years of age did almost 4
per cent of the total work,
indicating that the Scheme
provides social security
to those without access to
alternative employment and
are vulnerable due to gender
or age.
Participation of SC/
ST women in MGNREGS has generally been high.
In certain states like Bihar and Jharkhand that have
low female participation overall, SC/ST women
account for a large share of total participation because
higher caste women could not participate due to social
restrictions.
The sharp gender
division in wage rates
in the labour force
provides one signifcant
explanation for the high
participation of women
in the Scheme.
By enabling women
to enter the workforce
for the first time,
MGNREGS appears to
have realised a latent
demand for work by
women.
The Scheme has no
age ceiling and is thus
a relief for many as it
provides social security
to those without
access to alternative
employment and are
vulnerable due to
gender or age.
262 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Some states have encouraged female participation
in various ways. Integrating SHGs with MGNREGS
in Kerala and Andhra Pradesh has been a factor in
enabling greater womens participation. In Rajasthan,
the government has instituted an award for women
who complete 100 days of MGNREGS work in a year
(Kelkar 2009). Women have also been trained as mates
or supervisors in Rajasthan (Sudarshan 2011), but
nationwide, despite active female participation, women
are not in supervisory roles.
Overall, MGNREGS has been successful in
empowering women in many ways. Opening bank
accounts in their own names has given them greater
control over their fnances. Nearly 70 per cent of women
kept their own wages and spent them on personal needs
(Khera and Nayak 2009). As many as 76 per cent of
the women in sample states collected their own wages
and earned an average of one quarter of total household
earnings under the Scheme (ibid).
Yet, increased female participation faced a number
of impediments, the most prominent of which was
greater rationing of work for women than men. Tis
is attributed to womens lower awareness of rights,
less empowerment to demand work, and a prevailing
patriarchy in which GP functionaries and male family
members resist womens participation with equal pay
(Dutta et al. 2012; Pankaj and Tankha 2010; Khera
and Nayak 2009). Te unavailability of crches in many
states (e.g., Rajasthan, Himachal Pradesh and Kerala)
also made it more difcult for women to leave the house
or they had to transfer childcare responsibilities to their
older children (Sudarshan 2011). Some single women
faced exclusion and discrimination (Kelkar 2009) and,
in some states, the production norms resulting from the
SoRs are too harsh, especially for older and pregnant
women, reducing their efective wage rate and limiting
their participation in certain
types of works such as
digging wells. In states such
as Bihar and Chhattisgarh,
delayed payment of wages,
harassment of women by
(illegal) contractors and
male workers at worksites
also deterred participation.
Notwithstanding these impediments, though,
MGNREGS has substantially increased womens
participation in the workforce and brought them greater
independence.
7.6.4 Impact of MGNREGS Wages
and Labour Markets
In a completely fexible labour market, wages rise or
fall to match demand and supply. But a stylised feature
of the labour market is that wages are not fully fexible
downward due to the institution of a legal minimum
wage or due to a reservation wage below which a worker
would not be willing to work on a particular job. Before
the Scheme, a large proportion of rural workers earned
less than the legal minimum wage rate in several farm
and non-farm activitiesin other words, the reservation
wage was below the minimum wage. Several studies show
that in most states, workers under MGNREGS earn
close to the state minimum wage, although problems in
measuring work for piece wages has afected payment of
minimum wages under the Scheme in certain cases (as
discussed in Section 7.5.3).
With the introduction of MGNREGS, about 25 per
cent of rural households get additional work for about
4050 days per household per year, i.e., about 1215
per cent of days in a year. Tis means that MGNREGS
can absorb an average of about 34 per cent of the
rural labour force annually. In the lean season, the
demand for MGNREGS is much higher than this
annual average. Tis is obviously a substantial rise in
employment creation in public works, addressing over
half the rural unemployment rate. Had minimum wages
efectively prevailed before MGNREGS, absorption
of the unemployed in the public works at minimum
wages would not have afected the reservation wage.
Since reservation wages were lower, they were likely
to rise due to the new demand from MGNREGS. In
fact, given the demand-driven nature of MGNREGS, it
could potentially absorb the rural labour force for about
one-third of the working days in a year at the minimum
wage. Given this large potential threat, the reservation
wage would exhibit a rising tendency if it was below
the prescribed minimum wage. Our feld studies
support this hypothesis in that agricultural wages for
casual labour increased in all case study areas and then
stabilised at par with MGNREGS wages.
A related question is whether the increased
participation of casual labour in MGNREGS has
afected labour availability in other productive sectors,
particularly agriculture. Diferent studies have diferent
viewpoints regarding the likely impact of MGNREGS
on the agriculture sector. On the one hand, labour
shortage in agriculture has been observed since 2004
05, i.e., before MGNREGS. One study also claims that
Notwithstanding
impediments, MGNREGS
has substantially
increased womens
participation in
the workforce and
brought them greater
independence.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 263
high non-farm wages have played a more signifcant
role in the diversion of labour from agriculture than
MGNREGS (Murthy and Indumathi 2011). Early
studies nonetheless provide some evidence that the
movement of labour from agriculture to MGNREGS
was due to the gender gap in wages (Dasgupta and
Sudarshan 2011). Many female workers moved away
from plantation works in Tamil Nadu, for example, until
the gender gap was corrected. But a synthesising study
across states has found that the impact of MGNREGS
on labour availability varies too much by location to
allow generalisation (MoRD 2012a). Comparing the
prevailing wage rate to the average MGNREGS wage
rate for diferent states, Dutta et al. (2012) report that
the MGNREGS wage rate is actually lower than wage
rate for casual labour in about half the states, though the
two are very close nationwide.
Although several studies have examined the impact
of MGNREGS on the casual wage rate, especially
on the agricultural wage rate, the debate remained in
conclusive. Some found that MGNREGS afects the
labour supply and thus drives up casual wage rates, but
others did not. Based on cross-section data, Dutta et al.
(2012) postulate that due to the extensive rationing of
MGNREGS, the Scheme is unlikely to have any impact
on the casual wage rate. Tey fnd a negative relationship
between unmet demand and relative wage rate (non-
MGNREGS wage rate divided by MGNREGS wage
rate). But they argue that, for two reasons, this may not
indicate an increased tightening of the labour market with
decreasing rationing. First, the estimated relationship
between the relative wage rate and rationing would
imply an implausible equilibrium relative wage rate (of
1.5). Second, the observed relationship between the two
would nearly vanish when controlling for poverty levels.
Poorer states that tend to have lower casual wages due to
higher labour supply have high rates of unmet demand.
More recently, Berg et al. (2012) found that
MGNREGS had no impact on rural wages. Teir
study uses panel data on monthly agricultural wages
in the 200011 period for 249 districts, and the
programmes employment data. Tey use double
diference methodology by dividing the districts into the
three phases of MGNREGS rollout. After controlling
for district and time fxed efects and rainfall, the study
fnds that MGNREGS intensityaverage employment
days generated per rural inhabitanthas a signifcant
impact on changes in agricultural wages. Te study
concludes that an increase in MGNREGS intensity by
one day would result in a 0.6 per cent increase in the real
daily agricultural wage.
Our case study shows
difering impacts of
MGNREGS on various
sectors of the rural economy
(see Figure 7.10). In a
panchayat in the Palakkad
district of Kerala, for
example, the female farm
wage rate was initially lower than the prescribed
minimum wage and many female labourers switched
over to MGNREGS. But they returned to farm work
when womens wages were raised to approach the mens.
Labourers also never skip harvesting season to work
under the Scheme. In certain traditional rural industries
such as prawn peeling in Kerala, a signifcant shift of
labour to Scheme work has to be attributed to better
working conditions because the Schemes wage rate is
An increase in
reservation wage in
rural areas strengthens
the bargaining power of
the rural labour class as
a whole, including those
who do not participate
in the Scheme.
FIGURE 7.10 Increase in Average Agriculture Wage Rate Following MGNREGS (Rs/day)
85
75
59
107
52
42
115
129
122
217
124
85
MGNREGA
200607
Agricultural
200607
MGNREGA
201112
Agricultural
201112
Category I Category II Category III
Source: Focus group discussions for agricultural wages; MGNREGS wage estimated from MIS, MoRD.
264 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
lower. Other industries such as coir, that have better
labour conditions, have not undergone such a shift.
Critically, corrections for the minimum wage or for
gender diferential are one time corrections. Second, an
externality angle plays a role. An increase in reservation
wage in rural areas strengthens the bargaining power of
the rural labour class as a whole, including those who do
not participate in the Scheme.
7.6.5 Migration
Due to insufcient local
employment opportunities
and low remuneration in
the lean agricultural season,
casual labourers migrate to
cities or larger rural towns
in search of jobs, and return
when agricultural activities
resume. Such seasonal
migration is a form of
distress, with high associated
costs due to job uncertainty,
poor living conditions
and disruptions in family
life, including childrens
education. Seasonal migration increases sharply and
lasts longer in drought years. Te Scheme is intended to
reduce such rural-urban distress migration by providing
local employment opportunities in planned public works
programmes in the lean season. Most work under the
Scheme does in fact occur between January and May.
But a labour shift from low-growth (or sectors) to high-
growth areas, providing labourers a better deal, is a normal
feature of economic growth and this pull factor continues
in a developing economy. In any case, MGNREGS is
supposed to be self-targetinglabourers with better
employment opportunities can opt out of the programme.
In deciding whether to migrate, poor rural households
consider factors such as the certainty of local job
availability and timely wage payment. Many micro-
level studies have concluded that MGNREGS has
efectively reduced distress migration (see for instance,
Haque 2011; Verma and Shah 2012; Kumar and
Prasanna 2010; Mistry and Jaiswal 2009; Kareemulla et
al 2009), but not in all states. In Haryana, for instance,
higher wages in urban centres continued to draw
workers despite the Scheme (Ahuja et al. 2011). Poor
implementation and payment delays also contributed
to continued distress migration even where wage rates
under the Scheme were higher than market rates.
7.6.6 Promoting Decentralised
Development and Grassroots
Democracy
An underlying aim of
MGNREGS has been to
strengthen PRIs and make
them central to achieving
the Schemes desired
development outcomes.
PRIs are intended to
function as grassroots
governing institutions, not
merely as implementing
agencies. Tey are also
ideally placed to facilitate two
other aims of the Scheme
decentralised/democratic
and participatory planning,
and accountable and transparent governance.
But these aims have been met only to a limited
extent. Planning has been weak and PRIs have often
not participated in planning due to lack of capacity
(administrative overload and poor knowledge), poor
awareness of rights and responsibilities and outright
interference and corruption. Despite being close to
the people, PRIs have not shown a greater propensity
for transparency. Instead, they may have shifted
the locus of corruption downwards from the state
administration. In some cases, perverse incentives and
short-sightedness among local elites greatly impaired
the use of MGNREGS to create assets with long-
term community benefts. In others, well-meaning PRI
ofcials were helpless against interference from state
government ofcials.
Despite these problems, MGNREGS has arguably
been one of the most successful of the rural development
programmes. When PRIs have taken responsibility, with
or without external help, many positive developments
have resulted. With the powers vested in PRIs by the
Act, and the available funds, the Scheme can be clearly
used to strengthen local participation and grassroots
democracy, and improve infrastructure. Tis section
looks at some of these initiatives to draw lessons.
Since its formulation, a range of actorsNGOs,
state governments, and local leadershave attempted
to strengthen and improve PRI functioning to improve
Scheme implementation. In Chhattisgarh and Madhya
Pradesh districts, PRIs invited a group of CSOs
members of the National Consortium of Grassroots
Civil Society Organizations working in 30 districts
The Scheme is
intended to reduce
rural-urban distress
migration by providing
local employment
opportunities in
planned public works
programmes. Poor
implementation and
delay in payments also
may result in continued
distress migration even
where wage rates under
the Scheme are higher
than market rates.
PRIs are intended
to function as
grassroots governing
institutions, not merely
as implementing
agencies. They also
are ideally placed to
facilitate two other
aims of the Scheme
decentralised /
democratic and
participatory planning,
and accountable
and transparent
governance.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 265
across 7 statesto help them mobilise the local
population and provide technical capacity. Trough
activities such as door-to-door campaigns to register
workers for job cards and district-wide awareness drives,
the CSOs increased both the demand for employment
under the Scheme and womens participation in the GS.
As a result, some villages set up vigilance committees
to question the quality of materials used and to put
pressure on PRI leaders and bureaucrats to deliver
on projects.
In Odisha, the same group of CSOs was instrumental
in convincing the district administration to plan
projects in addition to roads for promoting sustainable
livelihoods, e.g., water-harvesting structures. In one GP,
this advocacy resulted in a six-fold increase in funds
allocated to them (Ambasta et al. 2008). Elsewhere in
Odisha and other states, CSOs lent technical support to
GPs. Te success CSOs have had in supporting PRIs has
led the MoRD to grant them pilot support with a longer
term goal of institutionalising this relationship. Tese
experiences show the potential of an aware and active
GS in bettering PRI performance and implementation.
In Madhya Pradesh, an informal organisationthe
Jagrut Adivasi Dalit Sangathan ( JADS)working
to protect the rights of adivasis and dalits in the
Badwani district of the state, also managed to leverage
MGNREGS to deliver work opportunities, development
projects and transparency. While the organisation does
not work directly with PRIs, it mobilised the GS as
the principal voice and decision-making forum. Te
organisation has raised awareness of the right to demand
work under the Scheme along with other entitlements
such as unemployment allowances and crche facilities
at worksites (Khera 2008). Even in the face of threats,
members maintained pressure on PRI ofcials and the
administration by uncovering, and protesting against,
attempts to override GS decisions on the type of work
a village demanded. Te organisation also enhanced
transparency by setting up Monitoring and Vigilance
Committees to track the use of MGNREGS funds.
Tis model is especially noteworthy because it was
initiated by marginalised members of the communities
themselves.
In Rajasthan, there have been eforts to overcome
the issue of capacity by a group of NGOs who work
closely with PRIs to design village plans. Te NGOs in
Rajasthanmany of whom work in the area of common
property resourcestypically develop and present plans
to PRIs for execution. Tey also extensively train the
mate to oversee and monitor the execution of the plan.
Te mate became well-versed in ensuring accountability
and transparency. In some cases, the NGOs entered into
MoUs with district administration so that the NGOs
own engineers could sign and approve projects in place
of the administrations engineer. Tis arrangement
proceeded with little confict between the local
populations and the NGOs because the latter worked
in the villages best interest.
Over the longer term, capacity needs to be created
within the village itself, rather than relying on external
support. In Kerala, Kudumbashree, a less-than-decade-
old programme for state-sponsored womens SHGs,
has lent technical support in fnancial and project
planning, and help in mobilising people to implement
MGNREGS. Since the SHG programme preceded
MGNREGS, trained Kudumbashree women could
support PRIs in implementing the Act and fostering
efective participatory implementation, either by
standing for elections to their wards and then the GP,
or from the outside as community members. Typically,
the identifcation of work starts with the meeting of
Neighbourhood Groups (NHGs), the lowest unit of
the Kudumbashree network. Tis is consolidated by
the programmes Area Development Society, a network
of NHGs at the panchayat ward level. Identifed works
are then presented to the GS meetings for approval.
A village-wide working group helps the Village
Panchayat Committee to fnalise the action plan. Te
Kudumbashree model needs to be better understood
so that it can be replicated. In Akathethara panchayat
of Palakkad district in Kerala, many of the incumbent
ofce bearers were MGNREGS workers who said that
their participation in MGNREGS had improved their
leadership and administrative skills. Similarly, many
ward members in Purakkad panchayat of Alappuzha
district were MGNREGS workers in 200809.
In Andhra Pradesh, village wage seeker associations
(WSAs) are encouraged by the state government,
recognised by the intermediate level of administration
and promoted by NGOs. Tey aim to increase access to
information on worker rights and entitlements, and can
negotiate with PRI functionaries and bureaucrats in the
planning and implementation of MGNREGS. One study
claimed that WSAs contributed to increasing worker
participation in villages (Galab and Revathi 2012).
7.6.7 Social Audits as Instruments of
Transparency and Accountability
Unfortunately rarely used, the social audit, is a critical
accountability feature of the Scheme. Te social audit
266 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
is an efective instrument
of transparency, revealing
cases of maladministration
and corruption, and helping
achieve greater awareness
and democratic participationempowering those who
participate in it. But Andhra Pradesh stands out as the
only state-driven scheme to successfully institutionalise
a system for conducting regular social audits,
9
including
several steps to strengthen transparency. One was to
computerise the process of implementing MGNREGS,
creating an MIS recording each registration, work
estimate and payment to workers. Social audits were
then used to monitor and verify the information.
An independent body, the Society for Social Audits
Accountability and Transparency (SSAAT), was
set up in 2009 to conduct social audits with detailed,
institutionalised procedures. Educated youth or Village
Social Auditors (VSAs) recruited from families
beneftting from the Scheme undertake the social audit
itself. To track whether follow-up actions are taken, the
audit is separated from the follow-up and grievance
redressal process by creating a vigilance cell within the
Rural Department (RD), independent of both SSAAT
and the team implementing MGNREGS.
How could this be done in the face of vested interests?
Andhra Pradesh had top-level political and bureaucratic
commitment from the chief minister and principal
secretary, Rural Development, which served to quell
local opposition. In its early days, a senior bureaucrat
led the process, which helped build trust and legitimacy.
Social audit champions also engaged regularly with the
frontline bureaucracy and locally elected representatives
to ensure that they did not feel threatened by social
audits. Co-opting lower-level bureaucrats, specifcally
mandal development ofcers, in fact, was an important
factor in its successful roll-out. A conciliatory approach,
with an emphasis on rectifying mistakes rather than
allocating blame, was key to co-opting ofcials.
Follow-through and en-
forcement of audit decisions
unfortunately has been in-
adequate. So, while social
audits are supposed to take
place semi-annually, people
feel discouraged by the lack
of follow-through on prior
audits. Enforcement becomes difcult because various
line departments come together and create multiple hi-
erarchies. Scheme ofcials therefore cannot take disci-
plinary action but can only make recommendations. A
project director (PD) who wants to take disciplinary
action against the mandal parishad (block level) admin-
istrative development ofcer (MPDO), for instance,
cannot do so because the MPDO is accountable to the
panchayati raj department, not the PD who works in
the rural development department. So, the PD can only
make recommendations to the panchayati raj depart-
ment for disciplinary action (Aiyar et al. 2011). Even
judicial courts cannot provide legitimacy to social
audits; certain feld assistants (FA), for example, have
obtained stay orders against social audit fndings, fur-
ther reducing their impact. Unless this issue is dealt
with urgently, people will lose confdence in the social
audit process. Perhaps the most crucial lesson from the
Andhra experience is that social audits must be accom-
panied by wider institutional and administrative reforms
to enable efective enforcement and grievance redressal.
Given the limitations of Andhra Pradeshs ex-post audit
approach, the SSAAT is experimenting with a concur-
rent audit system. Finally, the state is giving thought to
transitioning to a real, less bureaucratic peoples audit
instead of the parallel bureaucracy currently running
social audits.
Addressing corruption is key to ensuring proper
implementation of the Scheme, unlocking its
transformative potential and restoring faith among
those who want to work under it. Corruption and lack
of accountability have not only diverted funds for private
gain but have also led to delays and improper payments,
which, in turn, have reduced demand for the Scheme. To
deal with corruption at all levels, the OG 2013 requires
that the ofce of Ombudsman be established in all the
districts with powers of spot inspection, investigation,
FIRs and disciplinary and punitive actions. Our survey
revealed that NGOs and womens SHGs also safeguard
against many corrupt practices. In Category II villages,
NGO-conducted awareness building programmes have
helped people understand and articulate their rights
under the Act.
An early study in Maharashtra noted that increased
accountability and fewer opportunities for collecting
bribes under the Acts guidelines reduced political and
bureaucratic will to implement the Scheme (Datar
Unfortunately rarely
used, the social audit is
a critical accountability
feature of the Scheme.
9
In July 2011, MoRD issued a Government Order detailing rules for conducting social audits based on the AP experience, requiring every
state to set up an independent organisation to conduct social audits.
Social audits must
be accompanied by
wider institutional and
administrative reforms
to enable efective
enforcement and
grievance redressal.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 267
2007). Also, the states poor became disillusioned by
irregular payment and lack of assurance of wages and
seasonal migration rose due to waning demand for work
under the Scheme.
Despite as much as Rs 7 billion used in Odisha under
the Scheme in 2007 alone, the programme showed very
little real progress and had huge discrepancies in muster
rolls and attendance records (Das and Pradhan 2007).
A study across hundred villages also uncovered that
government ofcials had siphoned of over Rs 5 billion
and less than 30 per cent of the funds actually reached
the target population (Rai 2007).
Te lessons from these models are critical in crafting
a way forward for the Scheme.
7.7 The Way Forward
Despite shortcomings, MGNREGS has delivered
signifcant results and continues to hold tremendous
potential. Its primary objectiveto provide income, food
and livelihood security for the poor and vulnerablehas
been reasonably well served, employing almost 25 per
cent of rural households for an average of 4050 person
days per year. Critically, because it is self-targeting, it
has served more poor and disadvantaged households,
women, SCs and STs, than better-of households. In
so doing, it has directly alleviated poverty. Studies show
that MGNREGS income was a signifcant source of
income for the rural poor.
MGNREGS has also generated other benefts. It has
helped empower women by providing them employment
opportunities on equal terms and respecting their
need for childcare. Today, women account for almost
half the total person days of employment generated
under MGNREGS, much higher than in the total
nationwide rural work force. SCs, STs, the landless,
and other marginalised groups have not only beneftted
monetarily but also gained the status and confdence
that assured income and awareness of rights can bring.
Te reservation wage has risen in several states. By
allowing SC/STs, BPL families, small farmers and
others to use MGNREGS to undertake work on their
felds, the Scheme directly improves food security. In
Bihar alone, if rationing did not occur and all those who
wanted work were given 100 days work, MGNREGS
could reduce poverty by about 45 per cent (Dutta
et al. 2012).
Yet, from its inception, the need and efectiveness
of such a programme, and its costs, have been
debated. Economists have argued that being open-
ended, MGNREGS could blow the fscal defcit.
As administrative and other costs rise, this debate is
likely to intensify especially if current implementation
problems persist.
10
MGNREGS is by far the largest
rural development programme, representing about 45
per cent of the Department of Rural Developments
total plan expenditure. Te National Advisory Council
had estimated that MGNREGS would cost about 1
per cent of the GDP (Drze 2011). Going forward,
plausible upper estimates
11
of the potential cost, in our
view, are about 1.5 per cent of GDP, based on providing
100 days employment to all 45 per cent of rural
households that sought work in 200910 (including
administrative costs but not the signifcant staf increases
recommended in the OG 2013). Yet, compared to
various subsidy programmes that together constitute 2.4
per cent of GDP, MGNREGS appears to have delivered
signifcantly more to the people who most need it.
Te signifcant unmet demand amongst the poor
indicates the persistent need for such a programme.
Our calculations show a statistically signifcant positive
correlation between total demand for MGNREGS and
higher household poverty, across states (see Figure A7.2).
In this context, we consider two aspects important going
forwardone, how to address immediate challenges in
implementation; two, how to respond to unmet demand.
We discuss our key recommendations below, many of
which are in the OG 2013, which ofers a more extensive
list of recommendations. To operationalise the OG 2013,
identify policy and implementation issues and suggest
measures to address them, a Programme Advisory Group
of eminent researchers, development professionals and
academicians has been formed (MoRD 2013b).
7.7.1 Addressing the Immediate
Implementation Challenges
Several implementation challenges prevent MGNREGS
from delivering its potential, and may have reduced
demand for the Scheme as workers become disillusioned.
Some pressing challenges and potential solutions are:
10
Te scale of stafng proposed under OG 2013 can be tremendous. Our analysis demonstrates that in order to cover all PRIs in Bihars 38
districts, about 9000 personnel are required. As a comparison, NRLM, much smaller in scale, has about 900 staf members covering 9 districts.
11
Wage expenditure is calculated using NSS data (NSS 66
th
Round) on percentage of households that demanded jobs under the Scheme
and the average wage earning/day in 200910. Material and administrative cost is calculated using wage to non-wage expenditure ratio based
on MIS data for 200910.
268 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Addressing Delays in Granting Work and
Receiving Payments
Although MGNREGS is intended to be a work-on-
demand programme, in reality, there have been critical
delays in getting work and in receiving payments,
including:
Delays in preparing work orders and muster rolls,
and starting work.
Delays in measuring work and making wage payments
through banks
Solutions include:
Increased staf: Increasing JE stafng to handle the high
workload for planning and measurement is critical.
Given the seasonal spikes in demand for JEs, additional
private engineers could be used during busy periods, but
resistance to this from on-roll engineerswill need to be
addressed. Te OG 2013 also recommends increasing
administrative staf at the block level, including a
dedicated MGNREGS PO in accordance with the Act.
Set deadlines and penalise the GP for delays: Te Act
sets broad deadlines, such as delivering work within
15 days of demand, but does not provide more specifc
milestones with regard to the multiple steps and actors to
improve the chances of meeting the deadline. Deadlines
should be set at the district or state level, records and
MIS data used to help identify the sources of delay, and
delays penalised.
Make interim payments, through non-bank means if
necessary: Delays in payment also arise when rural banks
are not part of core banking, benefciaries must travel
far to collect payments, and approval delays. Using
business correspondents who use mobile phones to
make payments is one solution. Intermediaries such as
CSOs and PRIs also can pay workers by handing over
cash in a public place using biometrics to verify worker
identity. Wage payments made in public have succeeded
in ensuring timely wage payments in Tamil Nadu (Khera
2011). To ensure timely payments, interim payments
of 50 per cent of wages earned should be made using
surplus GP funds immediately after work is completed,
with the rest due later.
Revise the Schedule of Rates (SoR)
Wages are paid either by time-rate or piece-rate. Because
monitoring worker productivity on a time-rate basis
is difcult, wages are often paid on a piece-rate basis.
But piece-rates are calculated according to the SoR,
which establishes certain productivity norms. Te SoR
has proved to be a major disincentive to workers, who
receive less than the minimum wage under it because it
fails to account for natural diferences in productivity,
e.g., working in hot versus cold weather. Te OG 2013
recommends appointing technical teams at the DP level
to devise scientifc, up-to-date and appropriate SoRs
that accommodate gender, age, disability, agro-climatic
conditions and seasons.
Enforcing Social Audit Findings, Stemming
Corruption
Tat, even in the rare instances of social audits, the
fndings go unaddressed, has led to a loss of faith in the
Scheme. Te OG 2013 recommends that those found
culpable under the social audit compensate for losses.
But inter-departmental overlaps and the lack of judicial
enforcement of social audit fndings currently cause
delays and obstacles in holding the accused accountable.
Widespread corruption has had a similar discouraging
efect, and must be addressed. Due to the Schemes
many in-built checks and balances, corruption is
actually usually only possible through collusion, making
it difcult to address. A required random, third-party
audit of 10 per cent of GPs every year, with reports
submitted to the State Council, may help by separating
implementation from inspection. In addition, the ofce
of the ombudsman and the Rozgar Divas are two new
steps to counter corruption and put pressure on ofcials
to deliver.
Although the OG 2008 clearly states that account
statements, payment orders and other records should
be made public, bank ofcials have kept them private,
making verifcation difcult, in social audits and
elsewhere. Banks must also be brought under the
transparency provisions to ensure that they publicly
disclose all MGNREGS-related documents they
maintain.
Address the Poor Quality of Works
Corruption and lack of technical capacity are the main
causes of the poor quality of assets created under
MGNREGS. Tat the GS and other implementing
ofcials are in charge of assessing quality has allowed
ample room for collusion and corruption. Stringent
quality metrics are essential both for ensuring the
durability of assets and for developing a transparent,
impartial institutional structure for verifcation and
monitoring. Te OG 2013 suggests a three-tier quality
monitoring system using internal and external (third-
party) monitors: Technical Assistants (TA) at the GP,
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 269
block and district level as the frst level, followed by
State Quality Monitors for each district, and fnally
National Level Monitors engaged and paid by the
central government.
Quality is also a function of good design. Te OG
2013 strongly focuses on augmenting technical capacity
at all levels. But maintenance is critical to continued
asset durability. GPs could be required to earmark funds
for maintenance or GPs that build good quality assets
could be given maintenance grants. But money alone is
not the answer; community groups must be formed to
take ownership of the maintenance process.
7.7.2 Addressing Unmet Demand
Unmet demand arises for three main reasonslack of
awareness, deliberate attempts to suppress demand, and
poor planning of a shelf of works.
Increase GS Awareness and Knowledge
Raising awareness can address the frst two causes.
CSOs have played a critical role in this. Mandating
door-to-door registration programmes, monthly
Rozgar Divas events, formalising relationships with
CSOs and so on, increase awareness. Government-run
media outreachthrough radio or televisioncould
also play a vital role. To address suppression of demand,
the OG 2013 recommends mobile-phone-based
registrationwhereby a potential worker can register
via text or voice message. Tis can be managed at the
state level or lower.
Holistic Planning
Te lack of capacity to prepare holistic plans, with works
that complement each other over time or works that take
a habitation level, longer-term approach to secure village
livelihoods and develop priorities also creates unmet
demand. To address this, the OG 2013 recommends
institutionalising existing successful relationships with
CSOs. It also recommends creating CFTs that can
advise clusters of villages that together constitute a mini-
watershed on projects best co-ordinated across villages,
such as those relating to soil or water conservation.
While the OG 2013 heavily emphasises capacity
building at all levels going forward, capacity alone will
be insufcient without the will to implement.
To ensure adequate work to meet demand, the
OG 2013 requires that an annual plan be prepared
after recording both the size and timing of each GP
households demand. Work must be provided at the
right time to reduce seasonal distress migration. Villages
also must create a two year shelf of projects so that even
if some are not approved, there is a sufcient pipeline
of works.
To better accommodate demand, create more useful
projects, and allow for better complementarity with
other rural development programmes, the OG 2013
has expanded the list of permissible works. It also
recommends that planning be inclusive, rather than
prioritising the needs of some community members
over others, and emphasise sustainability.
In Conclusion
Collecting better data on works undertaken, quality and
cost will be imperative to better monitor the Scheme
and its efectiveness, and must be done. Yet the most
fundamental issueand one that has plagued not
only MGNREGS but all development schemes
is that of governance. Te high correlation between
poor states and high unmet demand might indicate
pervasive poor governance that has not only exacerbated
implementation but also led to poor developmental
outcomes. Incentives, institutions, and entitlements
must be structured to ensure better delivery. Whether
this comes from above, below, or both, governance will
be key to unlocking the programmes transformative
potential.
270 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Appendix
TABLE A7.1 Performance of the MGNREGS (National Overview)
Year 200607 200708 200809 200910 201011 201112
No. of districts 200 330 615 619 626 626
Cumulative no. of job cards issued (cr) 3.8 6.5 10.0 11.3 12.0 12.3
Employment provided to households (cr) 2.1 3.4 4.5 5.3 5.6 5.0
Person days (crore) (per cent of total person days)
Total 91 144 216 284 257 211
SCs 23 (25) 39 (27) 63 (29) 86 (30) 79 (31) 47 (22)
STs 33 (36) 42 (29) 55 (25) 59 (21) 54 (21) 38 (18)
Other caste 35 (38) 62 (43) 98 (45) 138 (49) 125 (49) 126 (60)
Total women 37 (41) 61 (43) 104 (48) 136 (48) 123 (48) 102 (48)
Person days per household 43 42 48 54 47 42
Financial details (Rs crore)
Budget outlay 11,300 12,000 30,000 39,100 40,100 40,000
Total available funds* 12,074 19,279 36,300 45,682 52,649 41,564
Total expenditure (% of available funds) 73 82 75 83 75 90
Expenditure on wages (% of total expenditure) 66 68 67 67 65 66
Work details (lakh)
Total works taken up 9.0 18.1 27.7 46.2 51.0 80.8
Works break up (lakh) (per cent of total works taken up)
Water conservation 4.7 (52) 8.8 (49) 12.8 (46) 23.4 (51) 24.3 (48) 48.8 (60)
Irrigation facility to SC/ST/BPL /IAY lands 0.9 (10) 2.6 (15) 5.7 (20) 7.7 (17) 9.1 (18) 9.2 (11)
Rural connectivity 1.9 (21) 3.1 (17) 5.0 (18) 7.6 (17) 9.3 (18) 13.9 (17)
Land development 0.9 (10) 2.9 (16) 4.0 (14) 6.4 (14) 7.0 (14) 6.3 (8)
Any other activity 0.6 (7) 0.6 (3) 0.3 (1) 1.0 (2) 1.1 (2) 2.6 (3)
Note: * Total available funds include opening balance; other activities include Rajiv Gandhi Seva Kendra, Coastal Areas, Fisheries and Rural Drinking
Water and Sanitation projects, and other projects approved by MoRD.
Source: MoRD (2013b); MIS data from MGNREGA website, http://mgrega.nic.in, accessed on 7 June 2013.
TABLE A7.2 Details Regarding the Location of Selected Sample Villages
Categories States Districts Panchayats Villages
Category I Kerala Palakkad Akathethara Akathethara
Alappuzha Purakkadu Purakkadu
Pathanamthitta Vechuchira Kollamula
Andhra Pradesh Anantpur Gurramvadndlapalle Bathinigaripalle
Chittoor Jambugumpala Thanda
Kolimipalyam
Rajasthan Bhilwara Kakaroliya Ghati Hasthinapur
Nandrai Gurjarkheda
Madhya Pradesh Tikamgarh Madori Madori
Shahpur Khurampur
Roopganj Sitapur
Gotate
Category II Uttar Pradesh Lalitpur Udguwan Tindra
Jalaun Madhogarh Megni
Rampura Kasba
Kota Mustakil Malhanpura
Muralipur
Chhattisgarh Bilaspur Ameri Ameri
Mungeli Birkana Birkana
Boirpara
Bihar Gaya Patluka Hahesari
Danwan Boirpara Amarbigha Boirpara
Jharkhand Palamau Rabda Rabda
Salatua Salatua
Source: Based on authors survey.
Category III
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 271
TABLE A7.3 Socio-economic Characteristics of the Households in Selected Villages
Category I Category II Category III Total
Total Households 272 (100) 421 (100) 118 (100) 811 (100)
ST 48 (18) 68 (16) 25 (21) 141 (17)
OBC 165 (61) 198 (47) 28 (24) 391 (48)
Others 19 (7) 8 (2) 3 (3) 30 (4)
Total Population 1141 (100) 1662 (100) 696 (100) 3499 (100)
Male 598 (52) 911 (55) 375 (54) 1884 (54)
Female 543 (48) 751 (45) 321 (46) 1615 (46)
Literacy 742 (65) 856 (52) 391 (56) 1989 (57)
APL Cards 106 (39) 180 (43) 9 (8) 295 (36)
BPL Cards 156 (57) 134 (32) 63 (53) 353 (44)
Antyodaya cards 9 (3) 38 (9) 15 (13) 62 (8)
Without ration cards 1 (0.4) 69 (16) 31 (26) 101 (12)
Households with job cards 265 (97) 312 (74) 53 (45) 630 (78)
Total workers 581 (51) 895 (54) 100 (14) 1576 (45)
Note: Figures in parentheses are percentages of households in each category.
Source: Based on authors survey.
TABLE A7.4 Comparison of Provisions of 2008 and 2013 MGNREGA Guidelines
MGNREGS 2008 MGNREGS 2013
Registration of The GP will issue job cards to To ensure that the unregistered households are registered, a
households and issue every registered household. door-to-door survey should be undertaken by each GP every year
of job cards The GP will undertake an to identify eligible households who have been missed out and
annual updating exercise in wish to be registered under the Act. It needs to be ensured that
the same manner as regi- this survey is held at that time of the year when people have not
stration, the time for which migrated to other areas in search of employment or for other
should be fxed keeping in reasons.
mind the work and migration The PO will lay down a schedule for this survey and ensure that all
season of the local workforce. GPs in his/her charge have done this survey.
Apart from door-to-door survey for identifcation of eligible
household for registration under MGNREGS, details of individual
in the registered households should also be verifed by the
Panchayat Secretary with the assistance of Gram Rozgar Sahayak
(GRS) and Data-entry Operators.
Custody of job card The job card will be in the It must be ensured that the job card is always in the custody of
custody of the household to the household to whom it is issued.
whom it is issued. Job cards found in the possession of any panchayat or
MGNREGS functionary, without a valid reason, will be considered
as an ofence punishable under Section 25 of the Act.
Rozgar Diwas (Em- Each GP should organise Every GP should organise a Rozgar Diwas at least once every
ployment Guarantee Rozgar Diwas on a particular month. At this event the GP should pro-actively invite
Day) day of the week. This day applications for work from potential workers for the current as
should be earmarked for well as subsequent quarters. The Rozgar Diwas should be
processing work applications earmarked for processing work applications and related activities
and related activities such as such as disclosure of information, allocation of work, payment of
(contd ...)
272 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
disclosure of information, wages and payment of unemployment allowances.
allocation of work, payment
of wages and payment of
unemployment allowances.
Muster roll Muster rolls will be main- A record of muster rolls issued by the block and muster rolls
tained by the Gram Panch- received by the GP shall necessarily be maintained and strictly
ayats (GPS) and other monitored.
Executing Agencies. Only numbered muster rolls will be maintained on the worksite.
No kachcha muster roll, i.e., a document which is not authorised
or issued by the Programme Ofcer (PO) can be used at the
worksite for recording attendance.
Dealing with The state government The state government will establish the ofce of ombudsman in
corruption may consider setting up a all the districts.
system of ombudsman at The powers of the ombudsman include issuing direction for
the state and district levels. conducting spot investigation, lodge FIRs against the erring
parties, and initiate proceedings suo moto, and directing redressal,
disciplinary and punitive actions.
In cases of corruption, the ombudsman will forward the matter to
be taken up for criminal prosecution.
Communication Awareness generation Use of helplines and rural common service centres.
strategy through IEC. Wall paintings not only in all the ofces of panchayats and other
Wall paintings at the panch- ofces but also in anganwadis, schools and fair-price shops.
ayat bhawan. Templates for wall writings will be shared by MoRD with the
Information should be widely states whenever national-level campaigns are realised.
disseminated, especially in Social mobilisation and awareness generation through door-to-
remote areas, SC/ST hamlets door contact campaigns.
through TV, radios, flms, print Interactive sessions on MGNREGS and quiz competitions
media including vernacular targeting schools and colleges.
newspapers, pamphlets, Village libraries should be provided with copies of MGNREGS
brochures, etc. Guidelines, local labour budgets and performance data.
State governments may engage volunteers of Nehru Yuva Kendra
and Bharat Nirman Volunteers to mobilise GSs and PRIs.
Members of SHGs can be engaged for mobilisation of workers
and to educate them on their rights and entitlements.
State governments may prepare an inventory of the best
practices related with the implementation of MGNREGS and place
it on the website for wide dissemination.
Development plan Every GP shall prepare a A survey of job card holders is to be mandatorily conducted in
development plan and every GP in order to prepare a baseline to assess the quantum
maintain a shelf of works and and timing of demand for employment in the GP.
forward it to the PO for The baseline assessment will be a mandatory component of the
scrutiny and preliminary development plan of the GP and the district.
approval.
Shelf of projects The number of works in the The list of works recommended by the GS should contain enough
shelf of projects in a village number of projects so that the shelf of projects that emerges is
should be adequately more more than adequate to meet the projected demand for work for
than the estimated demand. at least 2 years.
The projects recommended for inclusion in the shelf of projects
must not be like a disparate list of works. These must be part of
(Table A7.4 contd ...)
MGNREGS 2008 MGNREGS 2013
(contd ...)
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 273
an integrated plan for local development based on the basic
principles derived from some foundational approaches to Natural
Resource Management (NRM), food protection and drainage
management, on-farm development, and creation of sustainable
livelihoods.
Human resource at To ensure that all the organi- The state may ensure that at least one GRS is deployed in every
GP and block level sational responsibilities with GP except in GPs where demand for work under MGNREGS is
respect to the implement- almost non-existent. More than one GRS may be deployed in GPs
ation of MGNREGS are efect- that have high labour potential and GPs with scattered
ively discharged by the GP, habitations and tribal areas.
the appointment of a Gram GRS should be engaged exclusively for MGNREGS and shall not
Rozgar Sahayak (GRS) in each be assigned any other work. The status on deployment of GRS
GP is suggested. should be updated in MIS every month.
For supervision of work and A mate or worksite supervisor is required for each work-site. At
recording attendance of least one Mate should be present for every 50 workers.
worksite, a mate may be Professional support for MGNREGS needs to be deployed for
designated for each work. a cluster of GPs. Human resources for this level, led by the PO will
The PO essentially acts as a consist, inter alia of: (a) Technical Assistant, (b) Computer
co-ordinator for MGNREGS Operator-cum-Accounts Clerk, (c) Voluntary Technical Corps (VTCs),
at the Block level. and (d) Cluster Facilitation Team.
The PO is the overall in-charge of all MGNREGS works in the Block.
A Block Resource Centre (BRC) will be set up as a resource and
facilitation centre for knowledge inputs, capacity building and
convergence.
Human resource at The state government will A full-time Additional DPC exclusively appointed for MGNREGS
district level designate a District Programme should look into the day-to-day operations of MGNREGS and
Coordinator (DPC), who can be provide leadership in programme implementation at the district
either the Chief Executive Ofcer level.
of the District Panchayat, or the The District Collector or Chief Executive Ofcer, Zilla Parishad is
District Collector, or any other designated as DPC for the implementation of MGNREGS.
District-level ofcer of approp- A District-level Technical Committee (DTC) will be set up to guide
riate rank. the implementation of the Act.
VTCs may be set up at the cluster and district level drawing
specialist volunteers from within and outside government in
areas like soil and water engineering, NRM, social mobilisation,
monitoring, etc.
Human resource at At the state level: State At the state level: State Employment Guarantee Mission (SEGM)
state and centre level Employment Guarantee At the centre level: National Management Team (NMT); Programme
Council (SEGC) Management Division; Human Resource Development and
At the centre level: Central Capacity Building Division; Monitoring and Evaluation Division,
Employment Guarantee and IT Division
Council (CEGC)
Role of CSOs and SHGs Roles of CSOs and SHGs not CSOs working at the grassroots can play a very signifcant role
defned. in awareness generation among wage-seekers and in supporting
and building capacities of GPs and State Governments in
planning, implementation and social audit of MGNREGS.
SHGs can play a direct role in spreading awareness, organising
work, accessing entitlements and ensuring social
accountability.
(Table A7.4 contd ...)
MGNREGS 2008 MGNREGS 2013
(contd ...)
274 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
Timely payment of In the event of any delay in In case wages are paid beyond 15 days of work done,
wages wage payments, workers are compensation as calculated under provisions of Payment of
entitled to compensation as Wages Act, 1936 shall be paid along with wages without the
per the provisions of the worker having to fle a claim for compensation.
Payment of Wages Act, 1936. It is recommended that action under Section 25 of the Act be
Compensation costs shall be taken against agencies/ofcials responsible for causing the
borne by the state delay.
government. Compensation required to be paid to the workers shall be
recovered from the agency/ofcial responsible for the delay.
The DPC will be responsible for invoking these provisions.
Capacity building All key agencies will need to Capacity building and technical support of State/District/Block-
be trained in discharging level rural development functionaries/agencies and PRIs ofcials
their responsibilities under and awareness generation of potential and existing workers
the Act. forms the most strategic aspect in efectively implementing
Basic training on core issues MGNREGS.
pertinent to the Act and A Cascading Model as an interdependent chain, from national to
guidelines must be arranged State to District levels would be adopted to build the capacity of
by the State Government functionaries engaged in the implementation of MGNREGS.
with priority accorded to its
key functionaries, especially
the DPC, the PO and PRIs.
Social audit Apart from the ongoing Social audit as a continuous and ongoing process, involving
process of social audit, there public vigilance and verifcation of quantity and quality of works
will be a mandatory review at diferent stages of implementation. It is to be conducted in
of all aspects of the social every GP at least once in 6 months, involving a mandatory
audit at the GS meetings to review of all aspects.
be held at least once every Every State Government shall identify or establish an independ-
6 months for this purpose. ent Social Audit Unit (SAU) to facilitate conduct of the Social
Audit of MGNREGS works.
The SAU shall identify appropriate number of State Resource
Persons (SRPs), District Resource Persons (DRPs), Block Resource
Persons (BRPs), and Village Resource Persons (VRPs) to facilitate
the GS in conducting social audit.
The SAU shall have Quality Monitors to facilitate evaluation of
asset quality during the social audit. This will ensure durability of
assets and their intended usefulness.
(Table A7.4 contd ...)
MGNREGS 2008 MGNREGS 2013
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 275
TABLE A7.5 Minimum Wage Rate for Agriculture, Range of Minimum Wage Rate
for Unskilled Workers and Notifed Wage Rate for MGNREGS
State Minimum wage Range of Revised notifed
rate for agriculture minimum wage wage rate for
(Rs/day) rate for unskilled MGNREGS with efect
workers (Rs/day) from 1 April 2012 (Rs/day)
Andhra Pradesh 112 69.00231.71 137
Arunachal Pradesh 134.62 134.62153.85 Area I124
Area II124
Assam 100 100.42 136
Bihar 114 138.00144.00 122
Chhattisgarh 104.6 104.60151.04 132
Goa 157 150.00157.00 158
Gujarat 100 100.00181.80 134
Haryana 173.19 186.42 191
Himachal Pradesh 110 120 Non-scheduled Areas126
Scheduled Areas157
Jammu & Kashmir 110 110 131
Jharkhand 111 127.00145.54 122
Karnataka 133.8 130.08220.73 155
Kerala 150 85.20353.00 164
Madhya Pradesh 114 146.49174.80 132
Maharashtra 120 (Zone I) 100.00248.15 145
110 (Zone II)
105 (Zone III)
100 (Zone IV)
Manipur 81.4 122.1 144
Meghalaya 100 100 128
Mizoram 132 132 136
Nagaland 80 80 124
Odisha 90 92.5 126
Punjab 132.54 (with meal) 154.46 166
148.06 (without meal)
Rajasthan 135 (Farming) 135.00166.46 133
Sikkim 100 130 124
Tamil Nadu Men (6 hours) 100 88.29222.35 132
Women (5 hours) 85
Tripura 100 65.77130.00 124
Uttar Pradesh 100 100.00171.20 125
Uttarakhand 117.02 98.67200.77 125
102.50 (with food) 112.50169.30 136
West Bengal 112.50 (without food)
Source: MGNREGA website http://mgnrega.nic.in/nerega_statewise.pdf, accessed on 7 February 2013.
276 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
TABLE A7.6 Share of Women Participation in MGNREGS: Rural Workforce and Worker Population
Ratio in 200910 (Per Cent)
State MGNREGS Rural Worker population
workforce ratio of rural
women aged
15 and above
Andhra Pradesh 58 35 41
Arunachal Pradesh 17 25
Assam 28 12 13
Bihar 30 9 6
Chhattisgarh 49 36 36
Goa 62 24 13
Gujarat 48 31 19
Haryana 35 9 23
Himachal Pradesh 46 22 46
Jammu & Kashmir 7 9 25
Jharkhand 34 21 15
Karnataka 37 31 31
Kerala 88 21 22
Madhya Pradesh 44 23 27
Maharashtra 40 37 35
Manipur 48 21
Meghalaya 47 42 36
Mizoram 35 40
Nagaland 44 31
Odisha 36 14 22
Punjab 26 7 23
Rajasthan 67 24 27
Sikkim 51 37 30
Tamil Nadu 83 33 40
Tripura 41 18
Uttar Pradesh 22 7 12
Uttarakhand 40 26 38
West Bengal 33 14 11
All India 48 22 22
Note: Women participation in rural work force and worker population ratio for rural female is provided by their usual status, where, usual status =
principal status+subsidiary status.
Participation of women in MGNREGS (%) = (total person days generated for women in a year under MGNREGS/total person days generated in
a year under MGNREGS)*100
% of female share in workforce = (number of female employment/total employment)*100
Worker population ratio for female of 15 and above age group = (number of employed female in 15 and above age group/total female
population of 15 and above age group)*1000.
Source: NSS 66th Round, 200910; MIS data from MGNREGA website, accessed on 7 June 2013.
NSS Report Number 537: Employment and Unemployment Situation in India, 200910 for worker population ratio of rural female.
Performance of the Mahatma Gandhi National Rural Employment Guarantee Scheme 277
TABLE A7.7 Expanded List of Works Allowed Under MGNREGS
Watershed-related works
1. Contour trenches
2. Contour bunds
3. Boulder checks
4. Farm bunding
5. Gabion structures
6. Underground dykes
7. Earthen dams
8. Dugout farm ponds
9. Stop dams
Watershed-related works in mountain regions
1. Springshed development
Agriculture-related works
1. NADEP composting
2. Vermi-composting
3. Liquid bio-manures
Livestock-related works
1. Poultry shelter
2. Goat shelter
3. Construction of pucca (permanent) foor, urine tank
and fodder trough for cattle
4. Azolla as cattle-feed supplement
Fisheries-related works
1. Fisheries in seasonal water bodies on public land
Works in coastal areas
1. Fish drying yards
2. Belt vegetation
3. Construction of storm water drains for coastal
protection
Rural drinking water-related works
1. Soak pits
2. Recharge pits
Rural sanitation-related works
1. Individual household latrines
2. School toilet units
3. Anganwadi toilets
4. Solid and liquid waste management
Flood management-related works
1. Deepening and repair of food channels
2. Chaur renovation
Irrigation command-related works
1. Rehabilitation of minors, sub-minors and feld channels
Source: MoRD (2012a)
JK
PB
HP
SK
MZ
TR
TN
CT
RJ
MH
WB
JH
BR
OR
MP
UP
NL
AP
HR
ML
UT
KL
GJ
KA
AS
40
35
30
25
20
15
10
5
0
0 10 20 30 40 50 60
Percentage of poor households
r = 0.565 y = 0.383x + 8.635
R
2
= 0.319
FIGURE A7.1 Poor Households vs Unmet Demand for MGNREGS
Note: r is correlation coefcient.
Source: NSSO, 200910; Authors calculations from unit record data of 200910, National Sample Survey Schedule 10.
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278 I NDIA RURAL DEVELOPMENT REPORT 2012| 13
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