Did Union Budget - 2016 allocate more for rural India and the social sector? Not really

Avani Kapur |  Apr 13, 2016 08:30 AM IST

Budget speeches are about messaging – you play up what you want and downplay the less appealing. What makes this easier is the fact that budgets, in India, tend to be complicated, opaque documents that very few people actually have the bandwidth or interest to go through in details. Let’s not forget India ranked 46/100 on transparency in the Open Budget Index. Simple tricks of the trade can be employed by undertaking comparisons between 2016-17 projections (budget estimates) with previous year’s budget estimates (BE) or revised estimates (RE) – depending on which is a more “interesting” story to tell. A few years ago the UPA government had done just that. The budget speech for 2011 spoke about Sarva Shiksha Abhiyan (SSA) allocations increasing a whopping 46% compared to the previous year. The truth is those were BEs- but if one compared it with REs, the increase was only 10%. 

One month after the announcement of budget, there continues to be significant confusion regarding some of the statements in the speech and whether the data matches up to the announcements. This blog throws light into some of these. 

New Schemes? Not Really

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Keeping the rhetoric of pro-farmer budget, the speech spoke about the launch of a number of schemes for agriculture. For instance, the ‘Parmparagat Krishi Vikas Yojana’ to bring 5 lakh acres under organic farming over a three year period”. The scheme was in fact launched last year –with an allocation of Rs. 300 crores. This year’s allocations was Rs. 3 crore less that last years BE. Similarly, it spoke about approving the “path breaking Crop Insurance Scheme, namely, Prime Minister Fasal Bima Yojana”. While it is true that the scheme has a number of new features and aims to expand coverage, in truth however it is a revamped version of a number of previous schemes and will replace existing agriculture insurance schemes.

Other mixed messaging includes, the rationalisation and restructuring of “more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes”. In actuality however, schemes continue as before but have been grouped under a common name – such as National Education Mission, resulting in mere relabelling rather than restructuring. 

New focus on Rural and Urban Local Bodies?

Another common misconception after the budget was that the budget increased allocations to Rural and Urban local bodies significantly. While the speech spoke about this being part of the 14th Finance Commission recommendation, the statement that the “funds now allocated, translate to an average assistance of over Rs 80 lakh per Gram Panchayat and over Rs. 21 crore per Urban Local Body” has been misunderstood by many as a yearly grant. This is however the total quantum over a five year period and includes both the basic grant as well as the performance incentive and had started from last year. From past experience, a significant amount of money is often not released (particularly performance incentive) – and the centre too has a share of the blame. Let’s hope this time releases and capacity to spend will be higher!

Defining Social Sector

The speech spoke about the social sector being an important pillar and education, health and sanitation as key areas. However, in terms of the numbers, most of these schemes have remained at previous levels. Instead, social sector appears to be defined in terms of universal subsidies, health insurance, a dialysis scheme and skill development. In fact, the Ministry of Finance’s (MoF) own graphic for social sector seems to have reduced it to these few items. 

Accounting Jugglery

Finally, coming back to accounting jugglery this year’s budget is particularly confusing. For one, line items have now been combined in fact making it easier to understand how much is spent for a particular scheme. Consequently however, this results in incomparability across years through just line item names. For example, a common misconception was that the budget has slashed funds under the University Grants Commission by half from Rs. 9,315 crore to only Rs. 4,492 crore. However, a look at the note below the budget indicates that it was as “provision for assistance to Central Universities is being distinctly made” in another line item. In effect then, the funds remain more or less the same. 

Similarly, the misconception that spending on farmers (Department of Agriculture, Cooperation and Farmers Welfare) nearly doubled from Rs. 15,809 crores to Rs. 35,984 crores was in part due to Rs. 15,000 crores under interest rate subvention shifted from the MoF to the Agriculture Ministry. Including interest rate subvention in both years, the increase was 25 percent.
The confusion regarding budget numbers highlights the need for greater budget transparency in India. Budgets are an important tool to not just understand government intent but also as an accountability mechanism for both governments and citizens to “monitor” expenditures. This would require regular and meaningful opportunities for people to engage in both the process and outcome of the budgets. A simple first step could be to prepare a pre-budget statement to provide a framework for public participation in budget processes. This would then need to be followed with efforts to strengthen the quality of budget information as earlier suggested by the Sundarmurti Committee and others. And finally, efforts to simplify and disseminate information across levels. I wonder if the removal of plan and non-plan classification is an opportunity for undertaking this much-needed reform!

Avani Kapur works as Senior Researcher: Lead Public Finance, Accountability Initiative at Centre for Policy Research, New Delhi. Her work is focused on public finance & accountability in the social sector.
She writes about developments in the social & educational policy landscape on her blog, Social Specs, a part of Business Standard's platform, Punditry.
Avani tweets as @avani_kapur
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