Praveen Jha and Pooja Parvati

‘Double-digit growth’ has been one refrain that has dominated the present government’s fancy for long now. Another favoured mantra that has been doing the rounds is ‘inclusive’ development. It was hoped that the Union Budget 2011-12 would go beyond the rhetoric and address some of the key concerns with regard to the social sectors and, more specifically, related to the welfare of the poor and the marginalised. Sadly, this hope has not translated into numbers!

The Union Government’s Total Expenditure as a proportion of GDP is projected to fall from 15.4 % in 2010-11 (Revised Estimates or RE) to 14% in 2011-12 (Budget Estimates or BE), which reflects that expenditure compression for reducing deficits is the overarching feature of this budget. Not much has changed since last year with the Union Government’s expenditure priorities remaining skewed against the social sectors. In fact the brunt of the conservative fiscal policy of the government is going to be borne mainly by the poor.

Priority for Social Services in the Union Budget

 

Expenditure from

the Union Budget

on Social Services*

(in Rs. Crore)

Expenditure from the Union Budget
on Social Services*

as % of
Total Expenditure

from the Union

Budget

as % of GDP
39123 7.9 1.2
49535 9.8 1.3
55246 9.5 1.3
78818 11.1 1.6
110542 12.5 2.0
122345 11.9 1.9
162501 13.4 2.1
165975 13.2 1.8


Notes:
* (1) This includes the Plan Expenditure and Non-Plan Revenue Expenditure from the Union Budget on the following services: Education, Youth Affairs and Sports, Art & Culture; Health & Family Welfare: Water Supply & Sanitation; Housing & Urban Development; Information & Broadcasting; Welfare of SCs, STs and OBCs; Labour & Labour Welfare: Social Welfare & Nutrition; and Other Social Services.
(2) This does not include Non-Plan Capital Expenditure from Union Budget on Social Services, if any. Non-Plan Capital Expenditure on Social Services is sporadic and usually of a very small magnitude. Hence, this figure captures almost the entire magnitude of expenditure on Social Services from the Union Budget.
Source: Compiled by Centre for Budget and Governance Accountability from Expenditure Budget Vol. I, Union Budget 2011-12, Govt. of India  

While the Union Budget 2011-12 pays some attention to a few important concerns pertaining to agriculture, infrastructure and climate change, allocations for social sector do not give any cause for cheer. Total Union Budget outlay for social sectors (excluding only Non-Plan Capital Expenditure on such sectors, which is usually very small and sporadic), has gone down from 1.9 % of GDP in 2009-10 to 1.8 % of GDP in 2011-12 (BE). Moreover, with the Union Budget contributing funds worth only 2 % of GDP for social sectors (such as education, health, water and sanitation), the country’s total budgetary spending on these sectors would continue to be less than 7 % of GDP in 2009-10, whereas the average figure for social sector spending by the OECD countries is as high as 14 % of GDP.

Before scrutinising spending in the social sectors, important economic sectors and interventions for the disadvantaged sections of population, it would be useful to highlight specific concerns emerging in the sphere of mobilisation of resources by the Union Government. The tax-GDP ratio (which is the gross tax revenues for the Centre as a proportion of the GDP) shows a small increase from 10 % in 2010-11 (RE) to 10.4 % 2011-12 (BE). The tax-GDP ratio for the Centre had reached the level of 12 % of GDP by 2007-08. It was a welcome trend given that India’s total tax-GDP ratio (i.e. combined for Centre and States) has been hovering around 16%, which is significantly lower than that for several other countries. Moreover, the Medium Term Fiscal Policy Statement presented with this Budget indicates that the tax-GDP ratio for the Centre would increase only up to 11.3 % by the year 2013-14, which implies that the tax base of the economy is expected to be stagnant over the next three years. This raises serious concerns.

Although Income Tax exemption limit for the general category of individual tax payers has been raised, the exemption limit for women tax payers has been retained at the earlier level of Rs. 1,90,000. The government should have made an effort towards improving the gender responsiveness of the tax system by increasing the exemption limit for women tax payers as well. Several steps have been proposed both for the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) to improve tax administration under the Central Government Tax System. The government has paid attention to the problem of ‘black money’; a five-fold strategy has been put forward to deal with this problem. The government has also paid attention to the issues relating to tax avoidance that are affecting the mobilisation of tax revenue; the steps taken, according to the Finance Minister, include discussions for 11 Tax Information Exchange Agreements, 13 new Double Taxation Avoidance Agreements (DTAAs) along with revision of 10 existing DTAAs, and steps to improve the effectiveness of Foreign Tax Division of CBDT to handle effectively the increase in tax information exchange and ‘transfer pricing’ issues.

Reviewing the outlays for some of the critical social sectors, it becomes clear that the overall thrust of the government remains largely to compress expenditure and presenting the existing schemes’ and interventions as ‘new and improved’ versions of the same, with, at times, lesser allocations!
 
In Education, the Union government announced that the outlays for Sarva Shiksha Abhiyan (SSA) have been increased from Rs. 15,000 crore in 2010-11 (BE) to Rs. 21,000 crore in 2011-12 (BE). However, when the outlays for 2011-12 (BE) are compared with the figures for 2010-11 (RE) that was Rs.19,000 crore, the increase hardly seems as magical as it was made out to be. More so, the scheme can hardly succeed in operationalising Right to Education Act with this size of allocations. The Union government’s  own estimation - a modest one from the point of view of quality - indicated that additional budget outlays for elementary education required for operationalising Right to Education Act would be Rs. 1.82 lakh crore over a period of five years. Hence, if just one-fifth of this had to be allocated in 2011-12 with the Union Budget contributing only half of it, the outlay for SSA should have been increased at least to a level of Rs. 33,000 crore.

The outlays for Health have hardly increased since the last few years’. When seen as a proportion of the country’s GDP, public spending on health has increased from 0.32 % in 2010-11 (RE) to 0.34 % in 2011-12 (BE). This, when seen as a share of the total Union Government’s expenditure comprises a mere 2.42 %. Allocations for National Rural Health Mission (NRHM) have shown a slight increase from Rs.15,037 crore in 2010-11 (RE) to Rs.17,924.76 crore in 2011-12 (BE). Critical human resource and infrastructural gaps in health warranted much greater focus in terms of outlays. For District Hospitals, allocations have been marginally increased from Rs. 200 crore in 2010-11 (RE) to Rs.260 crore in 2011-12 (BE). Albeit some increase has been made for the scheme on Human Resources for Health (outlays have increased from Rs.187 crore in 2010-11 RE to Rs.348 crore in 2011-12 BE).

Although the total budget for Department of Rural Development shows an increase from Rs. 66,138 crore in 2010-11 (BE) to Rs. 76,378 crore in 2010-11 (RE),  the allocations have been brought down to Rs. 74,144 crore in 2011-12 (BE). Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been provided Rs.40,000 crore in 2011-12 (BE). Outlay for Swarnjayanti Gram Swarozgar Yojana (SGSY) (renamed the National Rural Livelihood Mission) has been brought down to Rs. 2,621 crore in 2011-12 (BE) from Rs. 2,683 crore in 2010-11 (RE). Allocations for Indira Awas Yojana (IAY) has declined from Rs. 9,333.5 crore in 2010-11 (RE) to Rs. 8,996 crore in 2011-12 (BE). 

In Agriculture, annual average combined (Centre and States) expenditure towards agrarian sector (which includes expenditure on food subsidy, cooperation, fertiliser subsidy, agriculture and allied activities, rural development and irrigation) declined from 15.8 % in 1990-91 to 14.8 % during 2000-01 to 2009-10. Union Government’s total expenditure on the rural economy (which includes expenditure on Agriculture and Allied Activities, Rural Development, Special Area Programmes, Irrigation and Flood Control and Village and Small Industries) dropped from 3.3 % of GDP in 2008-09 (Actuals) to 2.3 % of the Gross Domestic Product (GDP) in 2011-12 (BE). Allocations for extending the “Green Revolution” to the eastern region of the country comprising six states and the eastern part of Uttar Pradesh, providing high yielding variety seeds, technology and irrigation to the farmers, and for pulses and oilseeds in 60,000 rain-fed villages have been made.

With regard to Food Security, despite a growing recognition of the need for significantly expanding the coverage of Public Distribution System for foodgrains and the persistence of price rise in food articles, Union Budget outlay for Food Subsidy has been curtailed from Rs. 60,600 crore in 2010-11 (RE) to Rs. 60,573 crore in 2011-12 (BE). Further, the Union Budget outlay for Petroleum Subsidy has been reduced significantly from Rs. 38,386 crore in 2010-11 (RE) to Rs. 23,640 crore in 2011-12 (BE). Given the predictions that international crude oil prices are going to rise further in the coming months, reduced subsidy in 2011-12 could result in further rise in prices of petroleum products and hence a persistence of the problem of price rise. 

Specific to Climate Change, customs duty and certain concessional excise duty for imported batteries for electrical vehicle to promote clean and green technologies in the existing public transportation system have been fully exempted. Concessional excise duty of 10 % has been waived for vehicles using fuel cell technology. Rs 200 crore has been allocated for Green India Mission from the corpus of National Clean Energy Fund (NCEF) towards enhancing forest coverage. Besides, National Water Mission has been provided Rs. 200 crore from NCEF for arresting and cleaning up pollution in rivers and lakes other than river Ganga. The budget, however, neglects key climate sensitive sectors such as protection and conservation of wildlife, biospheres, mangroves and coral reefs in the country. Allocations for Centrally Social Sectors (CSS) such as Project Tiger and Project Elephant have registered a downward slump as compared to last year’s budget.

This apart, interrogating the allocations from the perspective of what the Union Budget offers to the disadvantaged and the marginalised reveals the stark mismatch in terms of the professed focus on ‘inclusive’ development. It is felt that the Union government continues to do lip service to the welfare of the poor and the marginalised without actually attending to the gaps in terms of the development deficits through sustained budgetary focus.

Specific to Women, while the total size of the Gender Budget has marginally increased from 6.1 % (2010-11 BE) to 6.2 % this year, there have been no significant revisions made in the methodology of preparation of the Gender Budgeting Statement. Further, the number of Ministries/departments reporting in the Gender Budgeting Statement has remained 33 since the last five years. Allocations for several women-specific schemes such as Swadhar, Priyadarshini, Support for Training and Employment Programme have declined as compared to the previous year’s outlays. Another serious concern is that critical sectors such as Water Supply and Sanitation that impact women significantly are not part of the Gender Budgeting Statement.

Although the government has announced an increase in the remuneration of Anganwadi Workers and Anganwadi Helpers within Integrated Child Development Services (ICDS) that has been doubled to Rs.3000 and Rs.1500 respectively, it remains to be seen how this can be materialised as the overall outlays for ICDS have not been increased substantially (from Rs.9370 crore in 2010-11 RE to Rs.10330 crore in 2011-12 BE). A Women’s SHG Development Fund with an initial allocation of Rs. 500 crore has been introduced. This is in keeping with the rather narrow interpretation of what constitutes as gender-responsive budgeting.

Union Government’s total allocation earmarked for Children has registered a small increase from 4.1 % of the total Union Budget in 2010-11 (RE) to 4.5 % in 2011-12 (BE). In the ‘Child Budget’ (i.e. the total allocation for all child-specific schemes) in 2011-12 (BE), which stands at Rs. 56748.6 crore, the share of Child Education is 76.4 %, the share of Child Development 18.6 %, interventions in Child Health account for 3.6 % and those pertaining to Child Protection account for 1.33 %. The increase in the share of interventions pertaining to Child Protection in the total ‘Child Budget’ from 0.60 % in 2010-11 (RE) to 1.33 % in 2011-12 (BE) is a welcome development. However, outlays for Integrated Child Protection Scheme (ICPS) witness a sharp cut from Rs.300 crore in 2010-11 (BE) to Rs.100 crore in 2010-11 (RE).

In the context of Scheduled Castes (SCs) and Scheduled Tribes (STs), some encouraging steps have been taken by this Budget. Thanks to the concerted activism by various civil society organisations, the Union government has begun to report budgetary provisions that benefit SCs and STs in two separate Statements. Further, Union Government Ministries/departments like Animal Husbandry, Dairying and Fisheries, New and Renewable Energy are now allocating funds for the welfare of SCs while Ministries/departments like Industrial Policy and Promotion, Environment and Forest, AIDS Control, Housing and Urban Poverty Alleviation, Land Resources and Drinking Water and Sanitation have begun to report outlays for the welfare of STs.

As per the statement 21 (that reports provisions for the welfare of SCs) and 21 A (that reports provisions for the welfare of STs), allocations under Scheduled Caste Sub Plan have increased to Rs. 30551 crore in 2011-12 BE from Rs. 23795 crore in 2010-11; while under Tribal Sub Plan, the allocation has increased to Rs. 17371 crore in 2011-12 BE from Rs. 5445 crore in 2010-11. Scheduled Caste Sub Plan (introduced during the Sixth Five Year Plan) and Tribal Sub Plan (in the Fifth Plan) are strategies adopted by the government where Plan allocations for SCs and STs are set aside in proportion to the size of their population in the country, which is currently 16 % and 8 % respectively. There is increase in outlays for primitive tribal groups from Rs.185 crore in 2010-11 (BE) to Rs.244 crore in 2011-12 (BE). Minorities have not given much attention in this year’s Union Budget except with regard to the achieving 15 % target under Priority Sector Lending and increase in allocation of Maulana Azad Education Foundation.

The Finance Minister in his Budget Speech rightly noted that, “at times the biggest reforms are not the ones that make headline, but the ones concerned with the details of governance, which affect the everyday life of aam aadmi.” Sadly, the Union Budget 2011-12 that could have fortified several provisions made in the last few years and given a thrust to social sector spending has missed the mark yet again. While the Budget outlines “a chosen path of fiscal consolidation and high economic growth”, it disregards the persistent development deficits in the social sector, more specifically for the poor and the marginalised. Despite having made note of the fact that “India stands at the threshold of a decade which presents immense possibilities”, the Union Government seems to have turned a blind eye to most of these critical concerns.


(Praveen Jha is faculty in the Centre for Economic Studies and Planning, Jawaharlal Nehru University and Economic Advisor with the Centre for Budget and Governance Accountability. Pooja Parvati works as Research Coordinator at the Centre for Budget and Governance Accountability. The authors draw substantially from the analysis done by CBGA, a think-tank based in New Delhi.)