We mustn't spread India’s social sector spending too thin

The biggest hit had been suffered by the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), with a nearly 33% fall in the allocated budget in 2023-24 from 2022-23. (Photo: Mint)
The biggest hit had been suffered by the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), with a nearly 33% fall in the allocated budget in 2023-24 from 2022-23. (Photo: Mint)

Summary

  • The political rhetoric on tackling poverty and ensuring social justice isn’t adequately reflected in our budget allocations, as many welfare programmes remain under-funded. We’d be better off focusing on a handful of initiatives.

India unhesitatingly desires to grow" were the words echoed by our former finance minister, the late Arun Jaitley, when he presented the Narendra Modi government’s first Union budget a decade ago. Its focus was conspicuously on poverty reduction, increasing employment opportunities, equitable development and fighting these challenges under the government’s pet phrase for collective development, “Sab ka Saath, Sab ka Vikas." New words have been added to it, like “Sab ka Vishwas" ( collective trust) and “ Sab ka Prayaas" (collective effort), highlighting the push for good governance and self-reliance. As of 2022, there were 740 central sector schemes (fully funded by the Centre) and 65 centrally sponsored schemes (financed by the Centre and implemented by state governments). Last year, finance minister Nirmala Sitharaman, while presenting the budget for 2023-24, highlighted the Centre’s vision for India’s journey towards its centennial year of independence. It included a focus on aims like the economic empowerment of women, integrating artisans and craftspeople with micro, small and medium enterprise (MSME) value chains, and promoting tourism and green growth.

In the interim budget for 2024-25, we again see the government’s tilt in rhetoric towards social inclusion and justice, with talk of a development approach that is “all-round, all-pervasive and all-inclusive." As per The Indian Economy: A Review released by the department of economic affairs, the government’s expenditure on social services has increased at a compound annual growth rate (CAGR) of 5.9% between fiscal years 2011-12 and 2022-23, with capital spending on these services growing at a CAGR of 8.1% over the same period. However, in 2022-23, the share of social-sector expenditure fell below 20%, at 18% of the annual budget. Looking at centrally sponsored schemes, an 8.9% change has been observed between the 2023-24 revised and 2024-25 budget estimates. We see a 3.3% change for central sector schemes between the 2023-24 revised and 2024-25 budget estimates, with the latest allocation set at 14,94,296 crore. The 2024-25 interim budget also saw an increase of 28.4% in the allocation for the social justice and empowerment ministry from the 2023-24 revised estimate.

At the same time, we see that the total expenditure in subsidies fell in 2023-24 by 28.3% from the revised estimate of 2022-23. Fertilizer and other subsidies, such as for agricultural price support, also fell. This trend continued in the 2024-25 budget, with the expenditure on food subsidies down by 3.3% over the 2023-24 revised estimate, and the fertilizer-subsidy outlay down by about 13%. Total outlays on subsidies fell by 7% in the current budget.

As for expenditure on particular schemes, the biggest hit had been suffered by the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), with a nearly 33% fall in the allocated budget in 2023-24 from 2022-23. The 60,000 crore for 2023-24 was the lowest in four years, though it was revised to 86,000. The same sum has been earmarked in the interim budget. However, compared to other major schemes, it is still high; the PM Awas Yojana, for example, has a lower outlay. That said, it has been opined that India’s rural job guarantee scheme continues to be under-funded, given the dependence of millions of people on it for employment.

The rhetoric of acting in favour of “the poor" has always been a part and parcel of the Indian policy discourse. This is particularly evident in budget speeches and expenditures. If we study budget speeches closely, there have been subtle attempts at redefining ‘poverty’ in India. The definition has broadened from a conservative focus on income and consumption to include factors like health, education and housing. Even when there is no mention of “inequality" or “redistribution of wealth," the country’s social-sector priorities have traditionally been driven by the larger focus on poverty reduction. This was fused with the idea of “social justice," which has been a central aspect of the ideological approach of the current government.

While criticism has been levelled at the incumbent government, arguing that its welfare schemes are built on a foundation laid by its predecessors, the problem at hand is a rather peculiar one. Our social sector suffers from a mix of inadequate budgeting combined with overcrowding of schemes. As a result, existing schemes receive inadequate allocations, which adversely impacts the lives of people dependent on them.

In February 2021, the Indian government had embarked on a mission to streamline its 131 centrally sponsored schemes and reduce them to 65 by 2022, with a total allocation of 442,781 crore. That year saw 157 central and centrally sponsored schemes in operation, with each receiving funding in excess of 500 crore.

At another level, the sheer number of schemes presents some risks. Identifying beneficiaries for multiple schemes involves many logistical and bureaucratic steps that can cause delays in their implementation. Additionally, these welfare schemes can be used for political gains, which leads to overcrowding, confusion, fiscal leakages and under-funding. The question facing us is whether we need more schemes or adequate funding to strengthen existing schemes. The answer is the latter.

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