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Budget 2016: Change not backed by allocation

The actual taxes proposed and operationalisation of relevant schemes leaves one with mixed feelings.

Written by Amitabh Kundu |
Updated: March 1, 2016 5:02:39 am
budget, budget social sector, social sector budget, budget 2016, budget 2016 social sector, social sector budget 2016, budget news, india news A major disappointment in the last Budget, voiced even by the ministers concerned was the drastic reduction in social sector spending.

No pre-Budget Economic Survey in recent history has made a stronger case for pro-poor fiscal and financial measures than the one released last week. It demonstrates that 75 per cent of subsidies given through LPG, electricity, PPF, kerosene, gold and Railways are currently cornered by the non-poor. Taking the political message from the highest level — that there is a need to change the mindset of planners and administrators regarding ‘concessions’ given to poor and small/informal enterprises and examine them in relation to massive ‘incentives’ given to organised industry and the elite class — the Budget avoids being termed as pro-corporate and pro-upper-middle class.

The implicit recommendation is that there has to be better targeting of these subsidies through JAM — Jan Dhan Yojana, Aadhaar and mobile phones. The actual taxes proposed and operationalisation of relevant schemes leaves one with mixed feelings.

A major disappointment in the last Budget, voiced even by the ministers concerned — Panchayati Raj, Agriculture, Women and Child Development (WCD), Drinking Water and Sanitation (DWS), Water Resources, Social Justice, etc — was the drastic reduction in social sector spending. The argument that this was adequately compensated by the increase in transfer of central taxes from 32 per cent to 42 per cent to states, recommended by 14th Finance Commission, is based on the assumption that states would meet the deficit in these sectors from additional untied funds. It has proved to be completely unrealistic.

Watch video: The Big Picture Of Arun Jaitley’s Budget 2016

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Understandably, the ministries that suffered maximum loss — Panchayati Raj, DWS, and WCD —had to exceed their central allocation due to difficulties in obtaining compensatory funds at the state level owing to local pressing needs. It is true that spending proposed in Social Justice, Minority Affairs, Small and Medium Enterprises (SME), besides the three noted above in 2016-17, are similar to or marginally above the average revised figure for the last two years, while that for Water Resources has gone down. However, if we adjust the figures for inflation, which is likely to be high as a result of the 7th Pay Commission recommendations and OROP, these would lose their edge. Besides, the revised figures for last year in most cases are significantly below initial allocation.

The goal of ‘Housing for All’ to be achieved through PM Awas Yojana may be discussed as an illustrative case where investment of Rs 3 lakh crore is envisaged over 7 years. The announcement of housing shortage of 6 crore to be met by 2022 has been welcomed by the real estate lobby. Against this anticipated expenditure, budgetary allocation for the Ministry of Housing and Urban Poverty Allocation is only Rs 5,400 crore. This is higher than last year’s revised budget but less than initial allocation.

If spending is maintained at this level, public expenditure in housing would be less than 5 per cent of the targeted investment. There is no indication that this massive gap will be bridged though private-sector investment. Besides, would it be possible to meet housing shortage through such PPP model when 95 per cent of this is among households in EWS and LIG category?

Happily, the perspective towards rural development and employment has undergone a significant change. At current prices, allocation for rural development has been doubled but that under MGNREGA has, at best, been maintained at last year’s level considering the additional release. This allocation reflects the government’s concern for the deteriorating employment situation in rural areas, particularly among women, and low infrastructure investment. For bringing about an increase in the number of days of employment – at least to 50 days per household – an additional Rs 5,000 crore must be allocated, particularly when 71 per cent of employment go to women and 40 per cent to ST/SC population.

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Kundu is a former Economics professor, JNU.

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