While additional allocations of ₹40,000 crore have been made for the MGNREGS, and this is a welcome step, the scheme is still struggling to meet current demand(ANI)
While additional allocations of ₹40,000 crore have been made for the MGNREGS, and this is a welcome step, the scheme is still struggling to meet current demand(ANI)

Decoding the dip in public expenditure

Despite enhanced commitments across spheres, the government has spent less this year than it did last year
By Avani Kapur and Sharad Pandey
UPDATED ON DEC 20, 2020 07:42 PM IST

Typically, when a crisis hits, the expectation is that the Centre — which has more revenue-raising abilities than states — will take the lead in preparing a fiscal road map, loosen its purse strings and raise expenditure significantly. The Covid-19 pandemic is unprecedented in its scale and impact. But this is also when the government is needed even more.

In the initial period when relief measures were the need of the hour, this required ensuring adequate social safety nets. Now, as the economy is opening up, for its multiplier effect on growth, priority needs to be given to infrastructure investments by increasing capital expenditure. The Centre has announced several stimulus packages aimed at doing just that. Unfortunately, a look at the data suggests a difference between rhetoric and reality.

First, despite announcements of over 20 lakh crore in fiscal packages, total expenditure till October this year increased by only 6,550 crore when compared to the same period last year. In fact, as a proportion of its initial Budget Estimate (BE), actual expenditure is lower by five percentage points than the same period last year. A deep-dive into the ministry-wise expenditure data shows that, in terms of the total quantum of funds spent, a staggering 41 out of a total 55 ministries spent less this year till October, compared to last year. The fact that the Gross Domestic Product (GDP) contraction was less severe in the September quarter than in the first quarter is not because of increased public expenditure, but despite reduced expenditure.

Second, low revenues necessitated a repurposing of expenditure. Areas considered essential for dealing with the pandemic such as health, rural livelihood and the public distribution system (PDS) were prioritised. Expectedly, the corresponding ministries constitute nearly 20% of the total central expenditure. But there are some puzzles here too.

There remains little doubt that there is an urgent need to expand and universalise the PDS to deal with the severity of the income and hunger crisis. A recent survey conducted by Hunger Watch across 11 states and covering 4,000 respondents found that more than half the surveyed households had no income source since April. As many as 62% households reported reduced incomes. Yet, the department of consumer affairs and public distribution, which is responsible for subsidising foodgrains, till October, spent 9% less this year than in the same period last year. If past trends are anything to go by, further downward adjustments may be seen by the end of the fiscal year.

This decline — despite measures to increase PDS entitlements and expand coverage to include 80 million migrant workers — suggests one of two things. Either the Centre has not paid the Food Corporation of India (from where the grains for the public system are procured) its dues, thereby increasing its debt burden, or the subsidy released to states which have opted for decentralised procurement has been cut, adding to the burden on state finances.

Similarly, while additional allocations of 40,000 crore have been made for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and this is a welcome step, the scheme is still struggling to meet current demand. As of today, 10 million fewer households have been provided employment than demanded. In fact, with nearly four months remaining in the fiscal year, the relevant ministry is running out of even the additional allocations.

Third, capital expenditure plays a key role in promoting growth, but this, too, is not showing a significant increase. In fact, only 47.9% of the year’s target (or BE) has been spent till October, as against 59.5% in FY 2019-20. This expenditure includes loans disbursements, which have naturally seen a substantial rise this year. Even ministries that have large infrastructure-related projects such as the ministry of jal shakti and the ministry of housing and urban affairs have seen over 20 percentage points less expenditure than in the corresponding period in the past.

For states, the Centre‘s failure to increase its expenditure spells trouble twice over. Over the years, the Centre has systematically encroached on areas traditionally under the domain of states, including education, health, nutrition, employment, agriculture, through a steady expansion of Centrally Sponsored Schemes (CSSs). For fiscally weaker states, these funds, despite the conditions attached to accessing them, have become an important source of non-wage finances. As states spend on welfare provisioning through CSSs, their dependence on the Centre has also increased. Simultaneously, lower tax devolution to state governments has hampered their own ability to increase expenditures. Till October, states had received 19% lower funds than they did for the same period last year.

In any country with a federal set-up, and that too one with a centripetal bias such as India, the Centre plays a key role in the social contract between the citizens and the State. Several ground-level surveys along with the government’s own expenditure numbers suggest a failure by the government to live up to its obligations. It’s less than two months to go before the Union government presents its estimates for the current and next fiscal year in Budget 2021. The Centre must present a clear roadmap for the country — one that can balance economic recovery while ensuring redistributive social welfare.

Avani Kapur is the director of Accountability Initiative (AI), Centre for Policy Research. Sharad Pandey is a research associate at AI
The views expressed are personal
SHARE THIS ARTICLE ON
app
Close
How do we address this cyclical pattern of hailing and rubbishing financiers? It is time for an honest review of the entire issue (Getty Images/iStockphoto)
How do we address this cyclical pattern of hailing and rubbishing financiers? It is time for an honest review of the entire issue (Getty Images/iStockphoto)

The policy landscape around digital and physical micro-lending

By Amol Agrawal
UPDATED ON JAN 25, 2021 06:08 AM IST
In 1870s, a similar backlash emerged in Poona and Ahmednagar districts of the Bombay presidency. The agriculture boom in the early 1860s led farmers to take loans from moneylenders
Close
A tiny tax on stock market transactions can help fund India’s vaccination drive without burning a hole in the wallets of stock market investors and give the government headroom for other expenditure to help save lives (AFP)
A tiny tax on stock market transactions can help fund India’s vaccination drive without burning a hole in the wallets of stock market investors and give the government headroom for other expenditure to help save lives (AFP)

Vaccinating all Indians, for free

By Praveen Chakravarty
UPDATED ON JAN 25, 2021 06:08 AM IST
The markets are at an all-time high. Impose a Covid-19 surcharge on transactions and use it for vaccination
Close
Why is it that, despite the government displaying its willingness to take a step back, the matter was not resolved? (PTI)
Why is it that, despite the government displaying its willingness to take a step back, the matter was not resolved? (PTI)

Farm protests: The costs of a prolonged standoff

By Shashi Shekhar
UPDATED ON JAN 25, 2021 06:08 AM IST
The government has extended an olive branch. The farmers must respect this and reciprocate. The tone set on Saturday should pave the way for a permanent solution.
Close
Pushing against the climate crisis — in spite of the terrible fire and hurricane damage — was his way of putting the economy before all else. This is what Biden-Harris will have to overcome with smart policies and even smarter communication. (AFP)
Pushing against the climate crisis — in spite of the terrible fire and hurricane damage — was his way of putting the economy before all else. This is what Biden-Harris will have to overcome with smart policies and even smarter communication. (AFP)

On climate, what the US needs to do

By Sunita Narain
UPDATED ON JAN 24, 2021 06:25 AM IST
Joe Biden has done well to rejoin the Paris accord. But his administration will have to overcome Trumpism, take responsibility for historic emissions, and change energy consumption patterns at home
Close
The JPC, hence, has a daunting task ahead, balancing the needs of State security against individual privacy. Giving entry to security agencies will compromise the encryption grid and data of millions. The State has to collaborate with tech giants in using the meta-data more meaningfully and for meeting other requirements without breaking the encryption. (Getty Images/iStockphoto)
The JPC, hence, has a daunting task ahead, balancing the needs of State security against individual privacy. Giving entry to security agencies will compromise the encryption grid and data of millions. The State has to collaborate with tech giants in using the meta-data more meaningfully and for meeting other requirements without breaking the encryption. (Getty Images/iStockphoto)

Data bill: The security vs privacy debate

By Yashovardhan Azad
UPDATED ON JAN 24, 2021 06:26 AM IST
The Data Protection Bill also does not touch upon State surveillance methods. Who watches over the watchers? How can an officer of the same rank give permission to another for snooping? And how can another in the same system oversee its justification?
Close
The massive sacrifice of hundreds of Secret Service officers of Netaji Subhas Chandra Bose’s Indian National Army remains a secret and an enigma. On the 125th anniversary of Netaji’s birth, I appeal to the nation to document and recognise these sacrifices (HT PHOTO)
The massive sacrifice of hundreds of Secret Service officers of Netaji Subhas Chandra Bose’s Indian National Army remains a secret and an enigma. On the 125th anniversary of Netaji’s birth, I appeal to the nation to document and recognise these sacrifices (HT PHOTO)

The secrets of Netaji’s secret service

By Amit Mitra
PUBLISHED ON JAN 22, 2021 06:49 PM IST
The Indian National Army’s Secret Service men remain unrecognised, despite their sacrifices during the freedom struggle. We must revere them
Close
Prime Minister Imran Khan has contended that Pakistan's economy has made a remarkable turnaround.(Facebook/ImranKhanOfficial)
Prime Minister Imran Khan has contended that Pakistan's economy has made a remarkable turnaround.(Facebook/ImranKhanOfficial)

Imran Khan jumped the gun. This time, over Pakistan’s economic turnaround

UPDATED ON JAN 22, 2021 03:51 PM IST
  • Pakistan's GDP growth had slowed down much before the coronavirus outbreak, growing by 1.9% in 2019 as compared to a decade-high of 5.8% the previous year when Imran Khan's Pakistan Tehreek-e-Insaf came to power.
Close
While social media has the ability to democratise politics, it can also silence voices. This is troubling (AFP)
While social media has the ability to democratise politics, it can also silence voices. This is troubling (AFP)

The democratic dilemma posed by social media

By Manjari Chatterjee Miller
UPDATED ON JAN 22, 2021 06:20 AM IST
The banning of Trump and others from Twitter and Facebook, and the shutdown of Parler made clear that the power to silence voices, whether of the one or of millions, lies with just three men on the planet – Mark Zuckerberg of Facebook, Jack Dorsey of Twitter, and Jeff Bezos of Amazon. No wonder defending democracy will be a huge and unenviable task for President Biden’s team.
Close
The Supreme Court, in 2019, acknowledged that internet access is integral to the right to freedom of speech and expression while adding that any restriction on internet access must pass the test of proportionality, and suggested the evolution of a rules-based mechanism to govern the internet. (Getty Images/iStockphoto)
The Supreme Court, in 2019, acknowledged that internet access is integral to the right to freedom of speech and expression while adding that any restriction on internet access must pass the test of proportionality, and suggested the evolution of a rules-based mechanism to govern the internet. (Getty Images/iStockphoto)

Putting the consumer at the centre of Digital India

By Lloyd Mathias
UPDATED ON JAN 22, 2021 06:21 AM IST
One way to empower consumers is by creating mechanisms to ensure inter-operability, by making it easier to switch services from one platform to another. In telecom, interoperability is implemented. However, in the internet space, and more prominently in the app space, consumers do not have this choice.
Close
Project finance economies have different imperatives from working capital economies. They need investment to fill the gaps in their infrastructure and lack the resources to do so (Pratik Chorge/HT PHOTO)
Project finance economies have different imperatives from working capital economies. They need investment to fill the gaps in their infrastructure and lack the resources to do so (Pratik Chorge/HT PHOTO)

The working of a ‘project finance economy’

By Janmejaya Sinha
UPDATED ON JAN 22, 2021 06:19 AM IST
It is time to question neo-classical economic precepts on deficit and inflation for an economy of India’s nature
Close
Their success highlights the depth and strength of talent in the country (PTI)
Their success highlights the depth and strength of talent in the country (PTI)

Courage, calibre, character: India’s greatest series win

By Ayaz Memon
PUBLISHED ON JAN 20, 2021 08:07 PM IST
The experienced pros and newcomers combined to prove a point to themselves, the opponents and the world. And created history
Close
The Centre ensured the supply of drugs with equitable and integrated access (REUTERS)
The Centre ensured the supply of drugs with equitable and integrated access (REUTERS)

Managing drug security effectively in times of a pandemic

By Sudhansh Pant
UPDATED ON JAN 20, 2021 09:19 PM IST
The Centre’s strategy to ensure sufficient access, monitor stocks and distribution, issue approvals, maintain seamless supply chain of drugs, effectively communicate with stakeholders, and evolve a dynamic Clinical Management Protocol (CMP) has contributed significantly to India’s Covid-19 management success
Close
A new report by Chatham House describes India as UK’s ‘rival’ or ‘at best, an awkward counterpart’ on par with Russia, Turkey and Saudi Arabia. It also weighs in against the idea of expanding G7 to include India (Getty Images)
A new report by Chatham House describes India as UK’s ‘rival’ or ‘at best, an awkward counterpart’ on par with Russia, Turkey and Saudi Arabia. It also weighs in against the idea of expanding G7 to include India (Getty Images)

Is ‘Global Britain’ inimical to India?

By Syed Akbaruddin
UPDATED ON JAN 20, 2021 09:10 PM IST
There are disturbing signals from both segments of British polity and civil society. India will need to assess the UK’s position carefully
Close
Pakistan's opposition parties had united last year under the aegis of Pakistan Democratic Movement to launch coordinated attacks on Prime Minister Imran Khan(AFP)
Pakistan's opposition parties had united last year under the aegis of Pakistan Democratic Movement to launch coordinated attacks on Prime Minister Imran Khan(AFP)

Imran Khan gets squeezed between shrinking economy and proactive opposition

UPDATED ON JAN 20, 2021 05:48 PM IST
  • Differences between China and Pakistan over funding of CPEC's biggest railway project spotlights the growing pressures on PM Imran Khan on the economy front
Close
There is evidence to indicate that the PLA's work and engineering force deployed to upgrade infrastructure in occupied Aksai Chin moved back after completion of work last month
There is evidence to indicate that the PLA's work and engineering force deployed to upgrade infrastructure in occupied Aksai Chin moved back after completion of work last month

India should be wary of Chinese mind games

UPDATED ON JAN 13, 2021 12:31 PM IST
  • Withdrawal from the vast Tibetan and Xinjiang military region means little in an era of stand-off weapons and long-range missiles. The Chinese PLA has capacity to deploy troop divisions within a week with metalled roads and optical fibre cables up to the last military post and advanced landing grounds (ALGs) all along the LAC.
Close
SHARE
Story Saved
OPEN APP