Pressures and pulls of social infra spending

  • The previous UPA govt lifted spending on social infrastructure to a higher trajectory, the NDA govt kept it there
  • In last 15 years, allocation for ministries whose spends build social infra ranges from 5.7% to 9.1% of its expenditure

Given its choices and compulsions over time, the centre has tied its own hands on how much it can allocate to sectors that build social infrastructure. Typically, about 25% of its budget expenditure goes in paying interest on its borrowings. The next biggest head is defence (18%), and that too is a sticky spend. In other words, 43% of its budget is used up even before it starts apportioning to other sectors.

In the last 15 years—a period covering two UPA terms and the current NDA regime—central government allocation for ministries whose spends directly build social infrastructure ranges from 5.7% to 9.1% of its total expenditure. Here, we consider five ministries: health and family welfare, women and child development, human resource development, drinking water and sanitation, and social justice and empowerment.

Under this NDA government, this figure stood at 7.7% in 2016-17, the last year for which data is available. Overall, the government is poised to better UPA-I on this count, but not UPA-II . Having said that, it was during UPA-I that cumulative allocations to, and spending by, this set of five ministries catapulted into a higher trajectory, where it has stayed since. In 2004-05, the first year of UPA-I, cumulative spending by this set of ministries stood at 5.7%. The next year, this shot up to 7.5%. Under UPA-II, in 2012-13, this increased to 9.1%, which is a level that has not been reached since.

The UPA consistently provided for brisk increases to this set of five ministries. The average annual year-on-year increase in expenditure was 25.9% in its first term and 14.3% in its second term. By comparison, the average annual increase in expenditure in the first three years of this government’s tenure, for which final data is available, averaged 4%. Interestingly, the first year in the term of all three governments has been the most anaemic in terms of growth in allocations to this set of five ministries (see chart 1).

One thing common to all three governments is that the split in the pie of these five ministries has largely remained the same over this 15-year period. In 2016-17, the HRD ministry, which looks after education, accounted for 47% of the total spend. It was followed by health (about 26%), by drinking water and sanitation, and women and child development (11% each), and by social justice and empowerment (5%).

The expenditure made by this set of ministries under the first two years of the NDA government did not even come close to beating the rate of inflation: -0.3% in 2014-15 and 0.6% in 2015-16. In other words, spends declined in real terms. The next year was better, at 11.5%. And, for 2017-18, the revised estimates have projected an increase of 24% by this set.

In budgetary exercises, actual spending doesn’t always match budgetary estimates. That’s the case with these ministries also. Of the 65 points of assessment in our analysis (13 years and five ministries), on 53 occasions, these ministries did not end up using their allocations for that year. The worst years in spending efficiency were between 2012-13 and 2014-15. In 2015-16 and 2016-17, the NDA government, though spending less in relative terms, has utilised the cumulative funds budgeted for these ministries better (see chart 2). This is aided by additional spending by the ministry of drinking water and sanitation and the ministry of women and child development. But will it step up allocations?

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