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Union Budget 2017: Social sector funding up, but not up to scratch

The Centre will provide Rs 21,46,735 crore, about 13% higher than last year, for development to ministries and states.

union budget Updated: Feb 02, 2017 01:42 IST
Chetan Chauhan
A farmer checks on his traditional method of irrigation at his paddy field in Roja Mayong village, east of Gauhati, India, Wednesday, Feb 1.
A farmer checks on his traditional method of irrigation at his paddy field in Roja Mayong village, east of Gauhati, India, Wednesday, Feb 1.(AP Photo)

While the overall funding has increased, the social sector continues to get lesser amount as proportion of the GDP in Arun Jaitley’s fourth budget.

The Centre will provide Rs 21,46,735 crore, about 13% higher than last year, for development to ministries and
states.

The amount would be 12.7% of the GDP, as against 13.4% of GDP in the revised estimates of 2016-17, indicating that the pro-people schemes have not got enough while tax rebates for industry have increased.

Finance minister Arun Jaitley’s fourth Budget has introduced two key changes from the past – it is the first budget without any linkage to a five-year plan; and marks the end of plan-non plan distinction in expenditure.

Both the moves have long-term implications on how public money is spent.

The government has also introduced an outcome budget for each ministry, paving the way for a new monitoring mechanism to be implemented by National Institution for Transforming India (Niti) Aayog.

The government’s fiscal policy statement said the plan-non plan distinction resulted in a skewed pattern of expenditure allocation, resulting in an excessive focus on plan expenditure.

“This also caused substantial distortion in the expenditure profile, whereby important manpower related or maintenance needs of assets, particularly in the areas of public delivery of services were neglected,” statement said.

The change, government believes, will result in “efficient deployment” of the public resources to develop a “performance-oriented” approach.

As part of that, the government has now “linked the outlays with the anticipated medium term outcomes”
with sunset clause for all schemes.

“This could help, provided there is an effective monitoring mechanism and incentives to meet the agreed outcomes,” said former former Chief Statistician of India Pranob Sen.

The outcome linked outlays was also introduced by P Chidambaram when he was finance minister in the UPA government, but measuring the real impact was a challenge. The NDA government plans to overcome that through an Aadhaar-based system.

The new changes on expenditure under different heads --- Finance Commission, transfer for schemes and others --- to central ministries and states starts with end of the 12th five year plan on March 31, 2017.

Prime Minister Modi’s promise of higher allocation to states continues in 2017 with increased devolution of share of taxes from 32% to 42%, as recommended by 14th Finance Commission.

The states got over ₹10,85,075 crore with around ₹6,74,565 crore as share of Central taxes.

For the first time in the NDA government, the money provided under the state plans and for the pruned Centrally Sponsored Schemes also increased.

Read| Budget 2017: What finance minister Arun Jaitley said versus what the numbers show