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Spend more on social sectors: RBI

india Updated: Feb 02, 2007 16:35 IST
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CONCERNED OVER dip in spending in social sector, the Reserve Bank of India (RBI) urged the state governments, including Madhya Pradesh, to take steps for improving human development yardsticks.    

The bank has urged state governments to spend more on social sectors like education, public health and family welfare. Madhya Pradesh Principal Secretary, Finance, Sumit Bose, however, said a sizeable amount is being spent on health and education sectors from outside the budget. If the amount used from outside the budget would be included in it, the real picture would emerge, he added. “The State Government is giving due importance to both these sectors,” he added.

The RBI in its latest report on state budgets said, “States need to reprioritise expenditure to ensure adequate investment in the social sector. Spending on basic social services within social sector expenditure presumes importance in order to have greater impact on human development”.

Madhya Pradesh, West Bengal and NCT-Delhi have experienced a higher decline in fiscal priority to social sectors, while Gujarat, Kerala, Maharashtra, Orissa and Rajasthan experienced a lower decline in their fiscal priority for
social sectors during 1990-2005, the RBI report said.

The bank also noted improvement in finances of states over the last few years should enable them to step up expenditure on education and health, which would improve the quality of national social infrastructure. “In the process of ongoing fiscal correction and consolidation, the states may ensure the level of social sector expenditure is not curtailed,” it noted.

The proportion of expenditure (revenue and capital outlay) under education (including sports, art and culture) and health (medical and public health and family welfare) as a percentage to aggregate expenditure though improved in recent years, it is still poorer compared to those in 2000-01, the report pointed out.

Even the official figures of the State Government are affirming the charges of declining expenditure on social sector as mentioned in the RBI report. Though the amount of expenditure under both heads increased in absolute terms, in percentage of total expenditure they were declined from 2001-02 to 2005-06.

In 2001-02, the state government incurred an expenditure of Rs 2,022 crore on education sector and Rs 688 crore on health sector, which is 12.3 and 4.18 per cent of total expenditure. This expenditure was swelled up to Rs 2,833 crore and 1,004 crore in 2005-06, which is 10 per cent and 3.5 per cent respectively of total expenditure.

During the same period, the total expenditure of the State Government witnessed a 67 per cent hike. Against the expenditure of Rs 16,438 crore in 2001-02, the State incurred expenditure of Rs 28,021 crore in 2005-06 whereas expenditure on health and education sector increased by 40.2 and 41.8 per cent respectively.  

The Twelfth Finance Commission (TFC) has also underscored the need for social sector investments by states. The commission considered certain common and specific needs of the states, and has accordingly provided grants-in-aid for these sectors to meet deficiencies in fiscal capacity.

Principal Secretary, Finance, Sumit Bose said lot of expenditure is being made in health and education sectors from outside the budget. If the amount used from outside the budget would be included in it then only real picture would emerge, he added. “The state government is giving due importance to both these sectors,” he added.