States spend lower than their budgeted estimates: PRS Legislative Research

Illustration by Binay Sinha
States tend to spend less than what they project in their Budget Estimates (BE), research by Delhi-based non-profit organisation PRS Legislative Research shows. States missed their spending targets consistently by 7 per cent from 2011-12 and 2015-16, the report went.

Telangana, at 27 per cent, and Assam, at 25 per cent, had underspent the most. Generally, 80 per cent of states’ budgeted funds come under revenue expenditure. The remaining 20 per cent is capital expenditure (capex). From 2011 to 2015, states witnessed an underspending of 6 per cent in their revenue expenditure and 16 per cent in their capex, the report added.

The study has evaluated the sector-wise funding pattern of states. It establishes that rural development witnessed the highest underspending at 16 per cent, followed by irrigation, and welfare of Scheduled Castes, Scheduled Tribes, and Other Backward Classes, each at 13 per cent. Other key sectors such as health (10 per cent), education (9 per cent), and agriculture (9 per cent) recorded underspending.

The report captures an interesting trend of overspending in the energy sector. States might have gone on an overdrive to spend on energy to cover the additional expenditure under Ujwal Discom Assurance Yojana (UDAY) scheme. Of the 19 states covered in the study, 12 states participated in the UDAY scheme and took over 75 per cent of their discoms’ (electricity distribution companies) debt. The debt burden of these states swelled, as their combined debt ran to Rs 2.19 trillion. Rajasthan, for instance, took over its discoms’ debt equal to 8.8 per cent of its gross state domestic product. It was 5.4 per cent for Haryana, 4.8 per cent for Madhya Pradesh, 3.8 per cent for Punjab, and 3.5 per cent for Uttar Pradesh (UP). The study expects states to spend 16 per cent of their estimate for education in 2017-18. The expenditure would be concentrated on schemes such as the Sarva Shiksha Abhiyan, constructing and maintaining of school buildings, and paying teachers. At 25 per cent of its BE, Delhi is expected to spend the most on education. Telangana ranks at the bottom on education spending at 9 per cent. Delhi is an outlier in education and health spending because it does not have to spend much on police, agriculture, rural development.

On health, states are expected to spend 4 per cent of their budgeted outlays in 2017-18. A major portion of this spending will be on paying salaries of doctors and constructing of hospitals. A sizeable part of expenditure will also be implemented on the National Rural Health Mission. Delhi leads the pack with 13 per cent of its budget spending on health. Telangana is budgeted to spend the lowest at 3 per cent.

Punjab, UP, and Chhattisgarh are tipped to be the top spenders on agriculture, with a share of 14 per cent, 12 per cent, and 12 per cent, respectively, of their Budget outgo. Average spending by states is seen at 7 per cent of the outlay. Apart from flagship sectoral schemes such as Rashtriya Krishi Vikas Yojana, crop insurance schemes will also consume a significant portion of the budgeted expenditure.  

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