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Business News/ Budget 2013 / Columns/  Budget 2013-14: A missed opportunity
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Budget 2013-14: A missed opportunity

Analysis of expenditure trends in most social schemes suggests that spending capacity is low

Given the overall fiscal environment, expectations from budget 2013-14 for any significant changes in social sector schemes were low and finance minister P. Chidambaram expectedly offered little in his budget presentation. Photo: Hindustan Times (Hindustan Times)Premium
Given the overall fiscal environment, expectations from budget 2013-14 for any significant changes in social sector schemes were low and finance minister P. Chidambaram expectedly offered little in his budget presentation. Photo: Hindustan Times
(Hindustan Times)

It’s business as usual for welfare schemes in India. Given the overall fiscal environment, expectations from budget 2013-14 for any significant changes in social sector schemes were low and finance minister P. Chidambaram expectedly offered little in his budget presentation. Overall, plan expenditure received a marginal increase of about 6.58%, with the rural development ministry receiving the largest increase at 46%. Sounding the poll bugle, Chidambaram made references to the proposed food security legislation and direct benefit transfers but offered little in terms of budgetary provisions or a road map on how the cash-transfer effort will move forward.

On balance, these limited increases may well be a fiscally prudent move. Analysis of expenditure trends in most social schemes suggests that spending capacity is low. Take the instance of the Sarva Shiksha Abhiyan (SSA), the country’s programme to provide universal elementary education. Since 2007-08, the budget for this—states and the Centre combined—has increased nearly three-fold from 21,360 crore to 61,734 crore in 2011-12. But expenditure have failed to keep pace with this increase. In fact, expenditure as a proportion of allocations dropped from 70% in 2007-08 to 61% in 2011-12, suggesting a serious capacity gap in spending capability.

A key reason for the low spending is that the current mechanism for transferring funds from one level of government to the next is beset with inefficiencies and bottlenecks. Consequently, the bulk of the money is transferred towards the end of the financial year, making it impossible for the system to spend money efficiently and appropriately. Take the instance of the Jawaharlal Nehru National Urban Renewal Mission. According to the latest report by the Comptroller and Auditor General, for two key infrastructure projects in 2010-11—the integrated housing and slum development programme and the urban infrastructure and governance programme—as much as 49% and 44% of the money, respectively, was transferred in March 2011. How can one expect states and municipalities to spend on time?

What makes matters worse is that the process of fund transfer is so opaque that most government actors have no prior knowledge on when to expect their funds and how much to expect. In such circumstances, inaction may well be a deliberate strategy to deal with financial constraints. Added to this, and this is an argument I’ve made often in columns in this newspaper, red tape, limited staff and centralized guidelines together can make spending a difficult task even for the most well-intentioned bureaucrat.

So, perhaps the right lens through which to assess budget 2013-14 is from the perspective of whether it offers a policy vision or reform agenda to deal with these problems and ensure that current allocations are in fact spent. And here the finance minister disappoints. Budget 2013-14 has little to offer by way of administrative reforms. There is however, one interesting reform statement in this budget—the move to consolidate centrally sponsored schemes (CSS) from the current 147 to 70. This move is based on the B.K. Chaturvedi commission report in 2011, which proposed that CSS be reduced to 59 schemes.

The presence of multiple CSS has been a serious impediment to effective spending and implementation. Most of these schemes are designed by central government ministries and have rigid implementation norms. Moreover, each scheme has developed its own unique planning, monitoring and accounting systems to be created at the district level. This has resulted in the creation of multiple, parallel departments, often with overlapping responsibilities at the district level, that make efficient management and expenditure near impossible. Converging these CSSes to a few consolidated schemes is an important step forward as this will help streamline management systems at the district level and, therefore, could contribute to improving expenditure capacity at the district level.

However, the real challenge with CSS is in its very design. The schemes by design promote a centralized system of delivery. These are schemes designed by the central government’s line departments. The central government determines budgetary allocations and implementation requirements for these schemes, while state governments are expected to contribute finances and take charge of implementation. With the proliferation of CSSes, most states have had to pool their resources towards contributing to their share of CSS, thereby reducing state discretion to spend money on programmes and schemes of their own choosing. The consequence: states often lack ownership of these programmes and implementation is weak while central governments can easily pass blame, as it does, for poor implementation onto states and no one can be held accountable for proper implementation. So, while the move to converge schemes will help in better management, it fails to address this larger question of accountability and state discretion.

Finally, a word on outcomes. In his first budget as finance minister in this government’s first tenure, Chidambram famously reminded the country that outlays do not translate into outcomes and made a strong push both for the importance of administrative reforms and for introducing an outcomes budget. It is indeed disappointing that not only did the outcomes budget disappear without a trace, but that his promise of introducing reforms to address the outcome failures have been long forgotten. By pushing a business as usual model for social sectors in his last budget as finance minister of this government, the opportunity to ensure that outlays do translate into outcomes has been lost.

Yamini Aiyar is director, Accountability Initiative, Centre for Policy Research

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Published: 01 Mar 2013, 12:52 AM IST
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