A push to the rural and digital economy but not much for the rest

With the budget for 2017-18, the Union Government has continued adhering to the path of fiscal consolidation, which has res­ulted in the magnitude of total expenditure from the Union Budget declining from 13.4 per cent of GDP in 2016-17 (revised estimates) to 12.7 per cent of GDP in 2017-18 (budget estimates). In the wake of the impact of demonetisation on economic activities in a number of sectors, many would argue that an expansionary fiscal policy stance was needed at this juncture. The total expenditure is projected to increase to Rs 21.46 lakh crore, from Rs 20.14 lakh crore in the revised estimates for the current fiscal. This increase of Rs 1.32 lakh crore is mainly on account of an increase of Rs 35,000 crore in capital outlay across sectors and an increase of Rs 40,000 crore in interest payments in 2017-18 (BE). What this indicates is the absence of any significant increase in Union Budget allocations in most of the sectors.

With regard to budgetary priorities for the sectors where public provisioning of services and government interventions are directly relevant for the poor and underprivileged sections, development programmes for rural areas have received relatively better attention in this budget.  The overall budget outlay for the Ministry of Rural Development has been stepped up from Rs 97,760 crore in 2016-17 (RE) to Rs 1,07,758 crore in 2017-18 (BE). However, the only scheme under this ministry that seems to have witnessed a significant increase in the allocation is Pradhan Mantri Awas Yojana – Rural (from Rs 16,000 crore in 2016-17 RE to Rs 23,000 crore in 2017-18 BE). But one should also take into account the increases in allocations, in 2017-18 (BE) over 2016-17 (RE), for some of the programmes under other ministries such as the National Rural Health Mission (from Rs 19,462 crore to Rs 21,189 crore), the Swachh Bharat Mission (SBM) - Rural (from Rs 10,500 crore to Rs 13,948 crore) and the Pradhan Mantri Krishi Sinchai Yojana (increased from Rs 5,189 crore to Rs 7,377 crore). Thus, one would not be off the mark in acknowledging that the 2017-18 Budget does make an attempt to step up government interventions in rural areas at least to some extent.

The other social sector ministries that seem to have got a better deal in this budget, as compared to their outlays in 2016-17 (RE) include the Ministry of Women and Child Development (with its budget increasing from Rs 17,640 crore to Rs 22,095 crore) and the Ministry of Health and Family Welfare (the overall budget for which has gone up from Rs 40,995 crore to Rs 50,281 crore).

On the other hand, there are several social sector prog­rammes for which the allocations in 2017-18 (BE) are either at the same level as those in 2016-17 (RE) or only marginally higher. These include the Sarva Shiksha Abhiyan, the Rashtriya Madhyamik Shiksha Abhiyan and the Mid-Day Meal scheme, among others.. This could have been influenced by a number of factors, one of which is the expectation that state governments would step up their shares of funding for these programmes in the post-14th Finance Commission phase. However, the government will not be able to address the problem of growing disparity in public spending on social sectors across states in the coming years, unless it continues to provide adequate budgetary resources for the central programmes in social sectors. The other factor underlying this stagnation in allocations could be the perspective that it is more important to improve public expenditure management so as to get better results from the programmes rather than putting more money into those.

Nonetheless, the changes introduced this year in some of the budgetary processes (like, advancing the presentation of Union Budget to push ministries to expedite fund flow and a consolidated outcome budget covering all ministries) are steps in the right direction. But these steps alone won’t be very effective in improving the results from the government’s spending in social sectors; district planning committees and decentralised planning in schemes need to be strengthened and the problem of acute shortages of staff across sectors needs to be addressed fast. Moreover, while doing away with the plan and non-plan classification in this budget would help ­address the problem of non-plan expenditures being neglected by most states, too much emphasis on the other classification of public expenditure, i.e. revenue and capital expenditure, could be problematic for ­important social sectors like education and health, where large proportions of government spending are ­reported as revenue expenditure.