Budgets are no longer statements of accounts or expenditure. In the contemporary context, they are to be seen more as a statement of intent, ambition, reform and politics of inclusion. If these are the parameters on which Budget 2011 is to be judged, it fails despite an implicit statement of intent.
For a government which has been elected on the agenda of inclusion, even the statement of intent is not new. What has been missing is the translation of intent to outcome. At a time when the country has been reeling under the shock of high food inflation (for almost two years now) mere intent is not sufficient. Unfortunately, Budget 2011 presents neither a clear roadmap to control inflation nor any matching expenditure items which will together ease the pressure on the common man. Worse, the economic survey has already come out with a post-facto economic theoretic explanation as to why inflation persists.
While the message is clear—inflation is inevitable—the least that was expected from Budget 2011 was that the programmes and expenditures which are necessary for inclusion should be indexed to inflation. This is not an unfair demand given the stated objective of inclusion. The reality is that most social sector expenditures have seen a decline in real terms and some even in nominal terms.
The gap between rhetoric and delivery cannot be clearer than in the case of the two ambitious programmes of the United Progressive Alliance government. The first is the MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme), a flagship programme of the government. While MGNREGS was already dealt a severe blow by the government’s decision to delink it from the Minimum Wages Legislation, even the budgeted expenditure was reduced by Rs100 crore this year compared to last year (from Rs40,100 crore last year to Rs40,000 crore this year).
The second ambitious agenda of the government is the National Food Security Act (NFSA) which is yet to be passed but is at least clear on ambition. Food subsidy is all the more important given the continuous run of inflation for the last two years despite overflowing granaries of the government. But if judged by the expenditure budgeted in this budget, the ambition looks likely to remain just that. Budgeted food subsidy this year is Rs60,573 crore as against Rs60,600 crore last year. Given the international spike in foodgrain prices and the expected increase in prices in domestic markets, this neither provides a cushion for protecting existing food subsidy nor accommodates the larger ambition of the proposed NFSA.
While this decline in the nominal budget on food subsidy alone may be small, the total budgeted expenditure this year, including storage and warehousing, is Rs60,912 crore as against the revised expenditure of Rs66,995 crore according to revised estimates of last year. That is a decline of Rs6,000 crore in year when the rhetoric has been of increasing food subsidy as well as improving storage and management of foodgrains. Even the ambitious village grain bank scheme has seen budget being cut by 30% this year.
What about other programmes for inclusive development? Indira Awas Yojana, the flagship programme for rural housing has seen its budget decline from Rs9,334 crore in revised estimates of 2010-11 to Rs8,996 crore this year. The National Rural Livelihood Mission (Swarnjayanti Gram Swarozgar Yojana) has seen its budget decline from Rs2,675 crore in 2010-11 to Rs2,621 crore in 2011-12. The ambitious programme of providing connectivity to rural areas through the Pradhan Mantri Gram Sadak Yojana has seen its budget decline from Rs18,996 crore (revised 2010-11) to Rs16,006 crore in 2011-12. At a time when rural areas have been suffering the brunt of recession and inflation, the total budget of the rural development ministry has been slashed to Rs74,143 crore in the current budget from Rs76,378 crore last year.
There has been some increase in expenditure on education and health. Budgeted expenditure on health and education has seen an increase this year compared to last. The total expenditure on elementary education has increased from Rs26,208 crore (revised 2010-11) to Rs29,129 crore this year. But even this increase is not the largesse of the Finance minister but more an outcome of the increase in tax collection out of the primary education cess. Taking that out, the net increase of Rs200 crore hardly justifies any intent to provide for the right to education introduced this year.
Finally, it is not a matter of expenditure. What is important is the statement of intent. While the intent may not be consistent with the larger ambition of inclusive growth, it is certainly consistent with the overall objective of delinking the delivery mechanism from direct provisioning of subsidies to that of cash transfers. Seen in this context, the reduction in subsidies and expenditure on inclusive growth is a step forward. The only worry is that this may turn out to be neither consistent with the intent of delivering benefits to the poor nor with the ambition of inclusive growth. At least the limited evidence that is available seems to suggest so.