Government Considers Revising RIDF Allocations

Mid-Year Review May Lead to Higher RIDF Outlay to Support Rural Economy

Context: The Indian government is likely to revise the allocation to the Rural Infrastructure Development Fund (RIDF) later this year, as part of a broader expenditure review aimed at strengthening the rural economy, according to two officials familiar with the matter.

About RIDF

The Rural Infrastructure Development Fund (RIDF) was established by the Government of India in 1995-96 and is managed by the National Bank for Agriculture and Rural Development (NABARD).
Its primary objective is to provide loans to state governments and state-owned corporations to complete ongoing rural infrastructure projects, thereby fostering rural development and reducing the rural-urban infrastructure gap.

Key Features of RIDF

Purpose: To fund rural infrastructure projects in sectors such as agriculture, irrigation, roads, bridges, drinking water supply, health care, education, and flood control.
- To address shortfalls in priority sector lending by commercial banks, which are mandated to contribute to the RIDF based on their agricultural lending deficits.
Corpus and Allocation: The initial corpus of RIDF (RIDF-I) was ₹2,000 crore. Over the years, the corpus has been increased annually.
- It currently has a budgeted allocation of ₹40,000 crore per year. This limit was last revised from ₹30,000 crore in FY22.
- In FY25, disbursements during the first 11 months reached ₹42,799 crore, while in FY24, the figure stood at ₹49,400 crore.
- In previous years, disbursements were ₹42,981 crore in FY22 and ₹47,138 crore in FY23, according to data from the Department of Financial Services under the Ministry of Finance.
Eligible Activities: RIDF funds a wide range of activities broadly categorised under:
- Agriculture and Related Sectors: Minor irrigation, watershed development, soil conservation, plantation and horticulture farms, cold storage facilities, etc.
- Social Sector: Primary schools, health centres, anganwadis, drinking water schemes.
- Rural Connectivity: Roads, bridges, rural haats (markets), and godowns.
Implementation: The fund operates as a “last-mile approach” to complete delayed projects due to financial constraints.
- Over time, its scope has expanded to include projects by Panchayati Raj institutions and innovative infrastructure initiatives in rural areas.
Achievements: RIDF has financed numerous impactful projects across India. For example:
- Irrigation facilities in drought-prone villages of Bundelkhand region in Uttar Pradesh with NABARD assistance of ₹146.2 crore.
- Construction of rainwater harvesting structures under RIDF Tranche XXV in Nagaland.
Guiding Principles: Projects should promote sustainable rural development.
- Special focus is given to North-East regions and hilly states.
- Infrastructure created should improve quality of life or stimulate demand for further development.

The RIDF, which is administered by the National Bank for Agriculture and Rural Development (NABARD), currently has a budgeted allocation of ₹40,000 crore per year.
- This limit was last revised from ₹30,000 crore in FY22.
However, actual disbursements have consistently exceeded the budgeted figures, highlighting the growing demand for rural infrastructure funding.
In FY25, disbursements during the first 11 months reached ₹42,799 crore, while in FY24, the figure stood at ₹49,400 crore.
- In previous years, disbursements were ₹42,981 crore in FY22 and ₹47,138 crore in FY23, according to data from the Department of Financial Services under the Ministry of Finance.

Rising Rural Stress Reflects in Job Scheme Demand

Despite modest improvements in headline economic growth, there are signs of emerging distress in rural India.
- A notable increase in demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) over the past six months points to deeper livelihood challenges.
Data from the Ministry of Rural Development shows that 26.6 million individuals sought employment under MGNREGA in February 2025 — the second-highest monthly figure for the fiscal year — following a peak of 27.1 million in January.

This upward trend in demand for rural jobs suggests that the government may need to prioritise increased rural spending in the upcoming review. A revised and expanded RIDF allocation could help address the infrastructure and employment needs of rural populations more effectively.