Govt to spend Rs 19,000 cr more on social sector over Budget estimates

The government has sought parliamentary approval for an extra Rs 18,995 crore social sectors during 2015-16, almost half of the total extra spending asked for over the Budget Estimates (BE).

In a supplementary demand for grants, tabled in Parliament last week, the government placed additional expenditure for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Food Security Act (NFSA), Swachh Bharat Abhiyan, drinking water scheme, Pradhan Mantri Gram Sadak Yojana (PMGSY), Integrated Child Development Scheme (ICDS) and SABLA.

The sum asked for these schemes constituted 46.5 per cent of the Rs 40,822 crore that the government wanted for extra expenditure over the BE. The government's expenditure would swell by only Rs 25,495 crore, as the remaining sum would be met by technical transfers and savings.

The demand placed in Parliament sought its nod for Rs 7,000 crore increase in spending for MGNREGS , which, if approved, would take the total Budget for the scheme much higher than the 2014-15 Revised Estimate (RE).

The increase would raise the allocation under the scheme to Rs 40,700 crore, an increase of 25.40 per cent over Rs 32,456 crore allocated in the 2014-15 (RE). The BE of 2015-16 had only a marginally higher sum allocated to the scheme at Rs 33,700 crore compared to RE of 2014-15.

The increase in spending for MGNREGS could also be on account of the fact that the Centre expects higher demand for work from rural areas because of drought in some parts and pending demands from states. Rural distress is already taking a toll on revival of industrial growth. Industrial production in volume terms rose only 3.3 per cent in April and 2.7 per cent in May. Cumulatively, it rose three per cent in the first two months of the current financial year against 4.6 per cent in the corresponding period of last year. Buttressing the point of the impact of rural distress on the Index of Industrial Production (IIP), official data showed the decline in sales of tractors pulled down IIP by 0.17 per cent in May.

Similarly, allocation for ICDS was sought to be raised by Rs 3,600 crore that would increasing the outlay to Rs 11,845.6 crore. However, the sum would still be less by almost 28 per cent than the Rs 16,520 crore given in RE of 2014-15. This is so because the finance ministry wanted states to bear the extra burden on Centrally Sponsored Schemes (CSS), as the latter got higher allocation of 42 per cent of divisible tax pool of the Centre - following the recommendation of the 14th Finance Commission (FFC) against 32 per cent earlier.

Nonetheless, the rise in proposed expenditure for MNREGS and ICDS was higher than promised by finance minister Arun Jaitley in his Budget speech for the current financial year. "I hope to garner some additional resources during the year from tax buoyancy. If I am successful, then over and above the budgetary allocation, I will endeavour to enhance allocations to MGNREGS by Rs 5,000 crore, ICDS by Rs 1,500 crore...."

Not only MNREGS and ICDS, but the government also sought additional sum for the NFSA to the tune of Rs 4,495 crore. This would take the total provision for the scheme to almost Rs 70,000 crore in 2015-16, which is 11.28 per cent more than the RE for 2014-15. The BE was just Rs 64,919 crore for 2015-16.

NFSA seeks to provide legal entitlement for subsidised grains to almost 67 per cent of the population. Till date the 11 states have implemented the Act, while another 5-10 are expected to implement the state by the end of this financial year.

For PMGSY, the additional funding of Rs 1,000 crore, if approved by Parliament, will increase the total budgetary allocation to Rs 7,637.50 crore, around 17 per cent more than the RE.

For the Prime Minister's pet Swachh Bharat Mission, the allocation sought would increase the allocation by almost 80 per cent to Rs 5,125 crore in 2015-16, compared to Rs 2,850 crore in the RE of 2014-15.

A scheme for drinking water and SABLA, a scheme for adolescent girls for self-development and empowerment, would however continue to see less allocation in 2015-16, compared to the previous year's RE (see chart). In fact, there was no allocation made for SABLA, but Rs 400 crore was sought last week, which would still be less than Rs 600 crore allocated last year.

In total, the government sought to increase the expenditure on these schemes in 2015-16 over the RE of 2014-15, which was pegged lower in BE for the current financial year. The BE for 2015-16 had 8.4 per cent less allocation compared to the RE of the previous year but the additional expenditure sought would raise it by 6.2 per cent over the same comparable period.

Tax collections indeed showed increase in the first quarter of 2015-16, even though most of it came from excise duty on petroleum.

Gross tax revenues rose 17.53 per cent at Rs 2.15 lakh crore in the first quarter of 2015-16 against Rs 1.83 lakh crore in the corresponding period of the previous financial year.

However, due to higher devolution of tax receipts (42 per cent) recommended by the FFC for 2015-16 to 2019-20 compared to 32 per cent in the previous five years, the Centre's net tax receipts rose just over two per cent at Rs 1.01 lakh crore compared to Rs 99,087 crore during this period.

In fact, it was the main argument of the finance ministry for not increasing much and in some cases reducing the expenditure in these CSS. It had said the states would get much higher untied funds that enabling them to spend in these schemes in the manner they wanted.

Reetika Khera, associate professor, humanities and social sciences at IIT, Delhi, said, "Any increase in central allocation for social schemes is good as state Budgets for 2015-16 was framed assuming there wouldn't be any change in the funding pattern. But, suddenly the cuts were made after the FFC report was accepted, which states failed to supplement leading to reduction in the entitlements under programmes like ICDS for children."

Ideally, she said the central allocation to social sector schemes should be more than last year's.