Non-development expenditure overshoots development expenditure in state budgets

While the total non-development expenditure increased by 15%, total development expenditure increased by 11.2%

Ahead of the general elections, the expenditure pattern of states are showing a higher increase in non-development expenditure over development expenditure, according to data recently released RBI study on State Finances A Study of Budgets of 2013-14.

While the total non-development expenditure (budget expenditure for 2013-14 over revised estimate of 2012-13) of states increased by 15%, total development expenditure increased by 11.2% (budget expenditure for 2013-14 over revised estimate of 2012-13), according to the study.

Interestingly, the non-development expenditure of states had seen a reduction of 2.2% in 2012-13. (2012-13 revised estimates over 2012-13 budget estimates). Within development expenditure, welfare of scheduled caste, tribes and other backward caste saw the highest increase of 20.2% (2013-14 Budget estimates over 2012-13 revised estimates).

Table1 :Development and non development expenditure variation in states
Expenditure Type	Percentage increase in 2012-13 Revised Estimate over 2011-12 Budget estimates	Percentage increase in  2013-14 Budget Estimates over 2012-13 Revised estimates
Development Expenditure	3.9	11.2
Non-Development Expenditure	-2.2	15

“The increase in development expenditure in recent years is a welcome feature and should be maintained. Going forward, the states may have to focus on cutting down non-development primary expenditure, particularly untargeted subsidies,” the study noted.

Among states in the non special category, states which saw a higher increase in non-development expenditure (2013-14 budget estimates over 2012-13 revised estimates) include Gujarat, Madhya Pradesh, Tamil Nadu and Maharashtra.  

Meanwhile, the implementation of the National Food Security Act 2013 is expected to entail an additional responsibility at the state level.  Several states like Bihar, Gujarat, Haryana, Tripura and West Bengal have also announced plans for improving the supply chain, including increase in the storage capacity by constructing godowns and developing market linkages through modern wholesale markets, sub-market yards and cold storage facilities (Himachal Pradesh).

Under the existing targeted public distribution system (TPDS), the central government allocates foodgrains to states at the central issue price (CIP) fixed by it for the three categories of TPDS beneficiaries: below poverty line (BPL), Antyodaya Anna Yojna10 (AAY) and above poverty line (APL).

Table 2: Development and Non development expenditure increase in  non-special category states
State	Increase in Development Expenditure (2013-14 Budget Estimates over 2012-13 Revised Estimates) (%)		Increase in  Non-Development Expenditure       (2013-14 Budget Estimates over 2012-13 Revised Estimates) (%)
1. Andhra Pradesh		15.6	19.4
2. Bihar		3.8	11.2
3. Chhattisgarh		16.6	8.8
4. Goa		10.6	9.7
5. Gujarat		9.1	23.2
6. Haryana		13.3	17.7
7. Jharkhand		4	12.2
8. Karnataka		13.4	20.5
9. Kerala		19	13.2
10. Madhya Pradesh		9.8	19.1
11. Maharashtra		7.7	14.2
12. Odisha		16.4	21.1
13. Punjab		7.6	6.1
14. Rajasthan		10.5	10.6
15. Tamil Nadu		6.7	27
16. Uttar Pradesh		13.4	9.6
17. West Bengal		10.3	8.3

However, some states have gone beyond the provisions made under the existing TPDS by including other items like edible and cooking oils, sugar, pulses and milk and extending the coverage to other segments of the population. For instance, Tamil Nadu and the union territory of Puducherry have a universal system since June 2011 under which 20 kg of rice is distributed free of cost to all families covered under PDS. The governments of these state/UTs also distribute pulses and pamolein oil at subsidised rates. In Andhra Pradesh and Chhattisgarh, the existing public distribution systems are near universal. Chhattisgarh enacted its own Food Security Act in January 2013 which entails antyodaya and priority households to highly subsidised foodgrains, iodised salt, black gram and pulses, according to the RBI report.