Finance minister Pranab Mukherjee announced a Rs1,000 crore increase in the budget allocation for the National Rural Employment Guarantee Act (NREGA), at Rs40,100 crore against Rs39,100 crore allocated in the previous Budget.

The finance minister said that as rural infrastructure development is a top priority for the government, he has allocated Rs61,000 crore for rural infrastructure development. The social sector spending has been upped to Rs1.37 lakh crore, or is 37 per cent of the total plan outlay.
He also plans to introduce banking for all villages with population of 2,000 and above by March 2012.

With this move the finance ministry expects an improvement in major areas of the social sector such as education, health, social justice and rural development, to aid in reducing poverty.

Given the perceived success of the NREGA, a much larger increase was expected. Last year, it had received a tremendous hike of 144 per cent over 2008-2009, from Rs16,000 crore to Rs39,100 crore. But apparently due to the downturn, this year's hike has been just 2.5 per cent.

The rural development ministry reportedly revealed to a source that it had demanded Rs44,000 crore for the NREGA (which is now called the Mahatma Gandhi NREGA), specially considering that it is supposed to have played a large part in the UPA winning the 2009 Lok Sabha elections. But this was not to be.

The policy guarantees work for 100 days to all below poverty line people in rural areas in a financial year. Till the end of January 2010, around 4.41 crore rural households had got employment under the scheme.

While there is not a remarkable increase in the amount for NREGA, the Indira Awas Yojana (IAY) will see a larger hike of 1,200 crore. IAY attempts to provide homes to the poor in the rural areas of the country.

The Pradhan Mantri Gram Sadak Yojana PMGSY will neither see an increase nor a reduction. It would remain 12,000 crore as it was last year. For the Swarnjayanti Gram Swarozgar Yojana (SGSY), there will be a slight increase of Rs530 crore. It is a self-employment scheme for the poor people in the rural regions of India.