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Unstimulating spending

Unstimulating spending
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First Published: Tue, Dec 30 2008. 10 13 PM IST

 Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Wed, Dec 31 2008. 03 23 PM IST
With the government toying with the idea of another fiscal stimulus for the economy and the din for increased public spending rising by the day, questions about the fate of government projects have emerged as never before. Were these projects completed on time? Was the money well spent? Did they have a multiplier effect on the economy?
Illustration: Jayachandran / Mint
Many of the questions defy an analytical answer due to lack of data. For some, however, a cursory look at the data shows a sorry state?of?affairs.
One trend is clear: In the last 15 years, the number of government projects has increased regularly. At the same time, the number of projects on schedule has remained near constant in these years. The quarterly status reports on the implementation of Central sector projects show this clearly. In end-March 1994, there were 371 projects which were evaluated by government agencies and 119 of them were on schedule. This makes roughly 32% of the projects. Zoom forward to March this year. Of the 909 projects above Rs20 crore, 243 (or only 27%) were on schedule. There were cost and time overruns. Of the total, 381 projects showed time overruns. The 13 intervening years from 1995 to 2007 show a similar trend of tardy project implementation.
Even if the government increases spending through more projects, its ability to deliver remains constant. And gigantic sums of money go to waste without having any tangible effect on citizens.
The record of the United Progressive Alliance (UPA) government is particularly egregious. A quantum jump in the number of projects over Rs20 crore has taken place since 2005. A large number of them remain unimplemented.
In the annual budget for 2008-09, the Centre allocated at least Rs75,000 crore for “flagship” programmes. These include behemoths such as the National Rural Employment Guarantee Scheme. Their shortcomings have been amply demonstrated in various government audit reports.
The question, then, is what sustains the idea of such funding? It is easy to say “blame populism”. But what is required is a deeper introspection on the part of citizens in whose name such massive amounts of money are wasted. Alas, that is unlikely in the political atmosphere that prevails in the country.
Policymakers would do well to dwell on these issues before they commit large amounts of money to such projects.
Does government spending help the economy or is it wasted? Write to us at views@livemint.com
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First Published: Tue, Dec 30 2008. 10 13 PM IST