hile the government highlights its top priority and penchant for lavish spending on the social sector and productive investments, the opposition assails the claims, outright. But both sides conveniently forget their concerns once the annual budget rituals and the related euphoria dies down.
The worry of critics is mostly regarding the budget year’s figures, but not about what happened to the previous year’s allocations and of the year before that — the revisions of last year’s budget and the actual spending budgeted two years back.
During budget presentation, it is the democratic responsibility of the Opposition to demand and pressure the government into making adequate allocations for important sectors. It should question and expose inadequate allocations and neglect of the important areas in the budget being discussed. This responsibility to question does not end with the presentation and approval of budgets. They must look at the way budgeted monies are spent — if they are indeed spent.
The questioning of budget outcomes is as important as allocations proper. They should also see if the budget is spent at least to the extent earmarked. So, should they question when there are deviations in budget spending, approved by Parliament. The questions raised on the discrepancies, seldom noticed, would discipline governments on the proper budget allocations, revisions and spending outcomes.
In the absence of such questioning, there is no guarantee that whatever is budgeted would be actually spent on important sectors such as health and education, and on employment generating activities.
Budget details should be scrutinised thoroughly beyond budget speeches. Even a cursory look at the overall trends, gives a fair idea of the direction and utility of government spending.
Happenings in at least two broad areas in the budgets presented over the past several years give us clues to low investment in general and on social sectors in particular which result in gaps in economic growth and social development.
The government’s overall spending itself has been on the wane. The Union budget’s volume as a percentage of GDP has declined from 17.43 per cent in 2009-10 to 13.52 per cent in the latest budget, 2020-21. Although it is a notch above the previous year’s 13.2 per cent, the actual may turn out to be still lower than what is apparent, going by the experience in recent years.
With the overall budget size itself coming down drastically, the spending on the social sector and capital investment, too, will surely get downsized. The government has no choice than doing this because of its poor revenues and high unavoidable expenditure needs in other areas, although both are the outcomes of the policies it has been pursuing.
Certain expenditures on which it has no control, such as interest payment, defence, subsidies, finance commission and other transfers and pensions themselves aggregated to about 50 per cent of the budget rupee as seen in recent years. It was a little less, but still a high 48 per cent in 2020-21 budget. In addition, the states’ share in taxes has been hovering around 23 per cent, which was 20 per cent in this budget. In effect, the government is left with about 20 to 25 per cent of the budget rupee for state and central schemes, social spending and capital investments.
Second, the government has not been able to actually spend money even to the extent allocated in the budget. According to the latest data available, the actual spending in 2018-19 was Rs 1,27,100 crore less than the budget estimate; thus, the overall spending was equal to 94.79 per cent of the budgeted amount. Of course, there were times when the actual spending was more than the budget estimate; it was 100.74 per cent in 2015-16. That will not happen now.
There is no guarantee that the government will actually spend even to that low extent in the latest (2020-21) budget, too. The government constraints are freshly evident when it revised downwards the current year (2019-20)’s budget by Rs 87,797 from Rs 27,86,349 to Rs 26,98,552. So, the actuals in the current year, that is the budget year, are unlikely to stay at least at the revised or estimated extent. And the actual figures for 2020-21 will be known only when the opponents are busy with their criticism of the 2022-23 budget; nobody will bother about the shortfall anyway.
Naturally, expenditure on health, education and other sectors will be far less than their need; no further detailed exercise is necessary to understand this after knowing the eroding overall size of the budget and what is left after the government’s compulsory spending.
In fact, the allocation made in the budget for social sector is evidently paltry. For instance, the Rs 69,000 crore allocated to health (equal to 0.3 per cent of the anticipated GDP of Rs 2,24,89,420 crore), is apparently higher by 10 per cent over last year’s budget. But it is no increase if the likely inflation is factored in (the consumer price index inflation was 7.5 per cent in December 2019). Also, it is nowhere near the 2.5 per cent GDP level recommended by the Planning Commission in 2011. Poor allocations for the health sector are not making our path closer to universal healthcare.
Similarly, the shrinking budget doesn’t help the government to either increase its own capital investment or facilitate that of state governments or the private sector; it would not be possible to expand output, incomes and employment without increasing investment.
Without boosting investment, the current crisis of low growth, high unemployment and demand compression cannot find an effective solution. There can be no alternative to increased investment; no magic wand. Therefore, the government should expand its expenditure in productive sectors, if it is serious about creating jobs and bringing about growth and development.
The writer is a development economist and commentator on economic and social affairs. e-Mail: firstname.lastname@example.org.