AN important feature of social sector expenditure in India is that the Central governments share is only about 20 per cent of the total expenditure, the rest being undertaken by the States. In other words, it is the ability of the States, rather than the Centre, to spend on social services that matters more for human development. In other words, the Central governments allocations are not large enough to make any dramatic impact on the social sector as a whole unless they are accompanied by a rise in the States expenditures, too.
Yet, recent discussions on social sector allocations in India have been disproportionately focussed on the initiatives of the Central government. This shift of focus has been associated with the emergence of a number of Central sector schemes after 2004, such as the National Rural Employment Guarantee Scheme (NREGS), the National Rural Health Mission (NRHM) and the Sarva Shiksha Abhiyan (SSA). The desirability of expanding Central sector schemes, independent of the initiatives of the State governments, has been questioned by a number of scholars. Nevertheless, Central sector schemes have continued to grow in number and scope. In Budget 2009-10, too, the major social sector allocations have been channelled through the recently introduced Central sector schemes.
It goes without saying that a socio-economically backward country like India needs urgent and massive infusion of public expenditure in the social sector. Given this need, the stagnation of the levels of social sector expenditure as a share of gross domestic product in the 1990s and early 2000s was a matter of great concern. Forced by the Left parties and progressive social movements, the first United Progressive Alliance government between 2004 and 2009 did increase the overall levels of social sector expenditure through a set of flagship schemes.
However, this increase in allocations was largely uneven across sectors and schemes. In sectors such as education, the flagship schemes themselves experienced a fall in allocation. In SSA, there was an absolute fall in expenditure after 2007. The Budget outlay for SSA, which was Rs.12,020 crore in 2007-08 (Revised Estimates), fell to Rs.11,940 crore in 2008-09 (Revised Estimates) and Rs.11,934 crore in 2009-10 (Interim Budget Estimates). Further, the share of the States contribution to SSA was raised without corresponding increases in total devolution to States. On the other hand, the most important beneficiary of the overall increase in social sector allocations was rural employment, where the NREGS was the flagship scheme.
In this context, four immediate measures were expected from any new government. First, the policy of increasing the overall social sector allocations had to be continued. Secondly, the cut in allocations effected in a few major flagship schemes, such as SSA, between 2004 and 2009 had to be reversed. Thirdly, for each Central sector scheme, conformity had to be ensured with the contexts and realities in different States as well as existing State-level schemes. Fourthly, the capacity of the States to spend in the social sector had to be expanded, both by increasing devolution and by allowing more flexibility in borrowing. The third and fourth tasks listed above are, of course, to be considered outside the budget exercise. In this article, I shall limit myself to examining the Budget vis-a-vis the first two tasks.
Budget 2009-10, presented by Finance Minister Pranab Mukherjee, is a disappointment in this regard. Let us take the governments revenue expenditures. First, while social services allocations on the revenue account have risen in absolutes between 2008-09 and 2009-10, the rate of increase in allocations has fallen compared with the previous year. As Table 1 shows, while the allocation for social services increased by 35.7 per cent between 2007-08 and 2008-09, it grew by only 19.7 per cent between 2008-09 (Revised Estimates) and 2009-10 (Budget Estimates).
The absolute increase in the allocation for social services has been inadequate to raise allocations as a share of GDP in any significant way. Between 2008-09 and 2009-10, allocation to social services as a share of GDP is slated to rise from 1.54 per cent to 1.68 per cent (Table 2).
The squeeze of the social services allocation in Budget 2009-10 is a reflection of a squeeze of total revenue expenditure itself. The rate of increase in total revenue expenditure fell from 39.2 per cent between 2007-08 and 2008-09 to just 1.6 per cent between 2008-09 and 2009-10.
In economic services, which include agriculture and rural development, there was an absolute fall in expenditures between 2008-09 and 2009-10 from Rs.4.5 lakh crore to Rs.3.8 lakh crore. However, this was because of a steep rise of expenditure in crop husbandry (with in agriculture and allied sectors) in 2008-09, on account of payments made to producers and agencies involved in the concessional sale of decontrolled fertilizers. If we consider the two-year period between 2007-08 and 2009-10 for comparison, the allocation for all economic services, as a share of GDP, is to rise moderately from 5.55 per cent to 6.42 per cent (Table 2).
Secondly, if we consider individual sectors, a continued fall in the growth rate of expenditures from 2007 onwards is evident. As figures in Table 1 show, in almost all major social sectors other than family welfare and water supply and sanitation, the growth rate of allocations between 2008-09 and 2009-10 is lower than between 2007-08 and 2008-09. In general education, the growth rate has fallen from 28 per cent to 17 per cent; in medical and public health, from 20 per cent to 18 per cent; in housing, from 95 per cent to 2.5 per cent; and in social security and welfare from 49 per cent to 10 per cent. The lack of seriousness in attaining an expenditure of 6 per cent of GDP in education and 3 per cent of GDP in health is striking.
In general education, the share of revenue expenditure to GDP is slated to rise only marginally from 0.52 per cent in 2008-09 to 0.56 per cent in 2009-10. What is most disheartening is that the allocations for specific flagship schemes in education, such as SSA, have continued to fall in absolutes between 2008-09 and 2009-10 (Table 3). Between 2008-09 and 2009-10, the allocation for SSA is to fall from Rs.11,939.3 crore to Rs.11,933.9 crore and for the mid-day meal scheme (MDM) from Rs.7,200 crore to Rs.7,014 crore.
Further, the shift of emphasis within education by diverting the much-needed additional expenditure in primary education to secondary education has been intriguing. While secondary education needs additional funds, the setting up of primary education and secondary education in competition with each other for funds can be a counter-productive strategy.
In the sphere of health, the share of expenditure of the Centre to GDP has tended to stagnate after 2007. In 2008-09 as well as 2009-10, the share of expenditure in medical and public health is unchanged at 0.12 per cent. In family welfare, the share of expenditure to GDP is to increase from 0.11 per cent in 2008-09 to 0.12 per cent in 2009-10, which is only a restoration of the levels attained in 2007-08.
The one area in the social sector that managed to gain much public attention in Budget 2009-10 was rural employment. The Minister announced an allocation of Rs.39,100 crore for 2009-10 for the NREGA, which marks an increase of 144 per cent over 2008-09 Budget Estimates. Unfortunately, the Finance Minister was using a clever trick to cover up the real numbers. A short history of the allocations to the NREGS would be in order.
In the full Budget for 2008-09, the then Finance Minister P. Chidambaram had allocated Rs.16,000 crore for the NREGS. After the presentation of this Budget, the government decided to expand the coverage of the NREGS to all the 596 districts in the country. Being a demand-driven scheme, the actual expenditure on the NREGS went up and settled at a revised estimate of Rs.36,750 crore in 2008-09. In 2009-10, the budgeted allocation for the NREGS is Rs.39,100 crore, which is just 7 per cent higher than the revised estimate for 2008-09. The strange comparison with the outdated Budget Estimate of 2008-09 to dress up the Budget has, rightly so, received criticism from many scholarly quarters.
Much discussion has also been focussed on the statement in the Budget speech that we are committed to providing a real wage of Rs.100 a day as an entitlement under the NREGA. In the absence of major increases in allocation to the NREGS, this commitment is likely to remain unfulfilled even in 2010.
The presence of grandiose announcements without the required allocations was another major feature of the Budget speech. For instance, almost no money has been specifically allocated for the distribution of 25 kg of rice and wheat a month at Rs.3 a kg for below-poverty-line households. The allocation for food subsidy has risen only marginally from Rs.43,627 crore in 2008-09 to Rs.52,490 crore in 2009-10.
Similarly, no specific rise in allocation is visible for the important task of universalising the Integrated Child Development Services (ICDS). For the much-needed social security schemes for unorganised workers, the only solace is the statement that necessary financial allocations will be made for these schemes.
In conclusion, the new UPA governments first Budget is marked by the absence of a strong commitment to raise social sector expenditures. While the overall allocations remain inadequate, the recent fall in the allocations for many important flagship schemes has been allowed to continue. Many of these flagship schemes are central to the achievement of medium-term goals in the social sector, which the Finance Minister unveiled in his speech. The chances of fulfilling these goals appear bleak if the trends in allocations are any indicator.
R. Ramakumar is with the Tata Institute of Social Sciences, Mumbai.