Home > Archives (2006 on) > 2010 > Back to Market Fundamentalism: The Myth of Inclusive Budget

Mainstream, Vol XLVIII, No 21, May 15, 2010

Back to Market Fundamentalism: The Myth of Inclusive Budget

Friday 21 May 2010, by K B Saxena

The changes introduced in the strategy of growth during the past two years had created an impression that politics has triumphed over economics in the sense that the concerns of the poorer sections of society have prevailed over the ambitions of economists and the dominant social groups to pursue an investment led model embedded in the primacy of the market and withdrawal of the state pursued since the onset of the reforms. As these changes had come about in the wake of the collapse of the global financial system, deep recession in the developed countries with grave uncertainties affecting the Indian economy as well, the view was gaining ground that the intensity of this crisis has signalled the demise of the neo-liberal orthodoxy and the re-emergence of the centrality of state intervention, enlarged sphere of a public expenditure and extension of a comprehensive social security to the poor in the economy. These impressions were sustained by a higher level of public expenditure disregarding the fiscal deficit, reduction in indirect taxes, waiver of farmers’ loans, introduction of the Employment Guarantee Act, implementation of the Sixth Pay Commission—a kind of stimulus different from the one pursued by the developed economies with a view to boosting internal demand and energising the market. It was hoped that the Budgets in the subsequent years would progressively follow this trend. Also, greater attention would be paid to control inflation. (EPW, 2010)

However, the current year’s Budget has shattered this illusion. There is a swift reversion to the strategy of high GDP growth with a view to crossing the ‘double digit’ barrier and a calibrated strategy to exit from public spending and movement towards fiscal consolidation. It is evident that no lessons have been learnt from the global economic crisis and the temporary retreat from this model during the last two years was an aberration resulting from the unavoidable, but short term, compulsion, both political and economic-political on account of electoral success of the ruling coalition on the plank of pro-poor measures, and economic on account of widespread slowdown in the global economy which engulfed the Indian economy as well. The Finance Minister, in his speech, has stated that inclusive development is an act of faith with the government evidenced by entitlements created in employment, education, forest resources, social security for unorganised workers with legal guarantees to which food security would be added shortly. However, the investment driven high GDP growth model with market as its determinant continues to be a matter of unadulterated conviction and the favoured goal to be pursued. There is, therefore, little room for doubt that conviction has prevailed over faith and would drive the course of economy.

As a corollary to the pursuit of this neo-liberal agenda, there is an unmistakable thrust towards further liberalisation of the economy and incentivisation of the richer sections of society. This is evident from the huge financial concessions given to the higher income groups as well as the corporates. The widening of income slabs for differential rates of taxation which would enable an individual with an income earning of Rs 8 lakhs and above a gain of Rs 50,000 and would involve an approximate revenue loss of Rs 21,000 crores. The reduction in surcharge on corporate taxation from 10 per cent to 7.5 per cent is expected to involve a loss of Rs 7500 crores. The total revenue loss in direct taxes has been conservatively estimated at Rs 26,000 crores. On the other hand, there is an increase in indirect taxation of estimated Rs 70,000 crores by increasing duties on petroleum and petroleum products, non-oil excise duties and enlarged taxes on services. The tax concessions given to the middle class benefit only three per cent of the population and effectively one per cent of those who pay a significant tax (Kumar, 2010) while the overwhelming majority has been squeezed by the additional tax burden. (Patnaik, 2010) The tax concession, rebates and incentives to the corporate sector are estimated to involve Rs 5,00,000 crores this year with no reciprocal obligation on the part of the beneficiaries. (Kabra, 2010) During 2009-10, tax revenues foregone included Rs 80,000 crores in corporate income tax, Rs 4,20,000 crores in excise and custom duties, Rs 41,000 crores in personal income. (Athreya, 2010) Rather than widening the tax base to finance a higher level of public expenditure, the deficit is sought to be reduced by cutting on public expenditure (food and fertiliser subsidy), levying indirect taxes and mobilising non-tax revenue of Rs 37,000 crores as fee from telecom operators and users of spectrum. Another Rs 40,000 crores would be garnered from divestment of PSUs. (Chandrasekhar, 2010) Indirect taxation, besides being regressive and inflationary, also disregards the Direct Tax Code which recommends a simple tax system with low rates of taxation and minimum exemptions even before it is introduced from April 2011. The divestment of PSUs and realisation from auction of 3G spectrum do not provide a sustainable revenue base as they are one-time resource accruals.

The fall in subsidies on petroleum products because of a hike in custom duties on petrol and diesel from 2.5 per cent to 7.5 per cent and excise duty on non-branded petrol and diesel by Re 1 per litre combined with cut in fertiliser subsidies by Rs 3000 crores has come in for widespread criticism from diverse sections of society. The reduction in food subsidy, though minor, has even more adverse implications in view of the widespread food insecurity in the country and 17.5 per cent food inflation. It seems particularly surprising since the government is committed to enact a Food Security law and the BPL head-count ratio is also likely to rise in view of the reports of the two committees set up by the government on the subject—the Tendulkar Committee Report set up by the Planning Commission (Planning Commission, 2009) and the Saxena Committee Report set up by the Ministry of Rural Development (MoRD, 2009). The trend towards further liberalisation of the economy is also evident from a large number of measures announced in the Budget which include opening up of retail trade, further removal of restrictions on FDIs and FIIs, liberalisation of pricing and payment of technology transfer fee, trade mark, brand name and royalty payments under the automatic route, divestment of central public undertakings, continued growth of SEZs, easier imports of capital goods and inputs with interest subvention, continuation of interest subvention of two per cent on pre-shipment export credit, encouragement to the Public Private Partnerships, retention of the low interest regime, decision to give additional banking license to private sector players etc.


The strategy of growth emerging from this conceptual framework narrowly focuses on high income groups as drivers of growth whose demand is fuelled by debt financed investment in housing and credit financed purchase of cars and other consumer durables and tax concessions. It substitutes private consumption of a small section for public expenditure which would have stimulated demand among the groups excluded from the market. This pattern of growth distorts production, resource allocation, consumption pattern and enlarges the already existing inequities. It ignores vast masses of the poor as the mainstay of the economy and fails to focus on generating their demand to fuel growth. The social sector expenditure has been included in the Budget merely as a palliative to sweeten the market penetration and has no potential to neutralise the inequities generated by the strategy of growth.

The Budget speech also clearly outlines a shift from an ‘interventionist’ state to an ‘enabling’ state. This implies that the focus of economic activities and delivery of services to citizens would move towards non-governmental actors. The government would function to facilitate the process of private/non-government agencies taking over this responsibility. The role of the state would be restricted to delivery of services in a very small sphere. The supply of extension services by the fertiliser industry and the introduction of the Rashtriya Swasthya Bima Yojana for BPL are pointers to this trend. If this is read with the Economic Survey 2010-11, the apprehension gains ground that the government may be preparing to introduce market based mechanisms for reaching benefits to the target group population such as vouchers and coupons to save administrative costs and eliminate corruption in areas such as PDS. Its optimism that the Unique Identification Card would solve the problem of leakages in a state delivered public service shows ignorance of the social realities and would end up strengthening the very forces which tend to deprive the poor beneficiaries of their entitlements.

How genuine is the claim of inclusive growth can be judged by the level of resources allocated to the programmes which benefit the common man. A cursory look at the outlays for the flagship programmes shows that the level of increase from that of the last year is ‘tokenistic’—that is, around 15 per cent or less. This small increase would be absorbed by the inflation which may be touching the double digit. Such a small increase does not help in expanding the coverage of the programme and improving its quality. Rather, it creates restlessness and frustration among the potential beneficiaries because their expectations get whittled down by inadequate resource allocation.

Let us take the programmes based on legal entitlements. These include the National Rural Employment Guarantee Act, Right to Education and Social Security for Unorganised Workers Act. The Food Security Bill is shortly going to be introduced. The Budget 2010-11 has merely increased Rs 1000 crores under the MGNREGS in last year’s allocation. This would slow down the implementation of the programme which has the widest appeal among the poor. Available information indicates that only 65 lakh people have got 100 days employment. The programme has benefited only four crore persons out of 6.52 crore BPL families, as per the Planning Commission estimates, and 10.96 BPL families estimated by the State governments. (Kabra, 2010) Those who have reported for work had an average 45 days of work. There is a huge pent-up demand on account of the non-issue of cards, suppression of cards, non-allocation of work and refusal to provide unemployment allowances, among others. There are widespread complaints about non-payment/under-payment of wages. The minimum wages are likely to be hiked to Rs 100 per day from this year. There is also a demand to increase the number of days of work in view of the widespread food insecurity. It has also been advocated that the ambit of entitlement should not be restricted to only one member of the family. It is, therefore, difficult to see the logic in the view of the Deputy Chairman, Planning Commission that everybody who gets a job card will not seek 100 days of work and in a normal year even the current level of demand may go down. (Ahluwalia, 2010) Although the Finance Minister has said that resources would not be a problem (Mukherjee, 2010), it is evident that there is an attempt at capping the expenditure.

Similarly, the additional allocation of a paltry Rs 2000 crores made for the Sarva Shiksha Abhiyan creates an apprehension that the government is not serious about operationalising the Right to Education Act which would require enormous resources. Estimates put this requirement at Rs 1,71,000 crores for five years while conservative assessment suggests Rs 32,000 crores per annum. The Budget has provided Rs 15,000 crores for the SSA as against demand of Rs 40,000 crores for the SSA and MDM by the HRD Ministry and Rs 35,000 crores recommended by the Planning Commission. (Tilak, 2010) The increase of 14.5 per cent over the previous year is insignificant considering the level of commitment required.

Secondary education has shown a reduction from Rs 6470.20 crores to Rs 6372.04 crores though the Rashtriya Madhyamik Shiksha Abhiyan has received a relatively better treatment as reflected in the stepped up outlay from Rs 1143.46 crores (2009-10 RE) to Rs 1527.54 crores in 2010-11. But this liberal increase conceals the fact that only 40 per cent of the BE was spent last year. Compared to the BE last year, the allocation this year does not seem that high. Considering that a substantial part of this allocation would be spent towards setting up of elite schools—Navodaya Vidyalayas, 6000 model schools—the expansion of secondary education would have insignificant spread across the country with the remaining resources.

The Mid-day Meal Scheme has received an allocation increase from Rs 7380 crores to Rs 9314 crores. While this increase may appear relatively higher, it is insufficient since the government has extended the scheme to all children up to upper primary level (from class 1 to VIII) in all areas across the country. There are also huge gaps in coverage besides non-functioning of the scheme in some places.

As regards the social security for unorganised workers, a National Social Security Fund is being set up with an initial allocation of Rs 1000 crores to support the scheme for weavers, toddy tappers, rickshaw pullers etc. This amount is too small considering that there are 350 million workers in the unorganised sector. (Hirway, 2010)

The allocation under ICDS shows an increase of only Rs 1995 crores. This increased allocation is inadequate for universalisation of the programme which has been mandated by the Supreme Court. Many Aanganwadi centres remain non-functional for want of food supplies. Nearly 26 per cent of posts of the Aanganwadi workers under the programme are vacant besides 40 per cent of CDPoS and 45 per cent of supervisors. A large number of AWCs are running from kuchcha buildings. (CBGA, 2010) It is, therefore, evident that the enforcement of these legal entitlements would be severely compromised.

Given the existing pattern of distribution of resources between the Centre and States, the latter are unlikely to finance additional expenditure. The inability to contribute matching share for the Right to Education programme expressed by several States would corroborate this. This is despite the enhanced States’ share from Central taxes and duties from 30.5 per cent to 32 per cent and a number of specific purpose grants (such as elementary education) by the 13th Finance Commission, because devolution and transfer continue to be 5.4 per cent of the GDP as in 2007-08 and 2008-09. (Jha, 2010)


The obsession with fiscal consolidation has blinded the government to the acute food insecurity which the poorer sections face. Nearly 77 per cent of India’s population are poor and vulnerable as they spend less than or equal to Rs 20 per day as total consumption expenditure. (NCEUS, 2007) India has the dubious distinction of being ranked 65th among 84 countries in the FAO’s Global Hunger Index (GHI), 2009. A major percentage of the world’s hungry live in India and over 20 crore people in the country are hungry. The number of undernourished persons has increased from 210 million in 1990-92 to 252 million in 2004-06. (Swaminathan, 2010) Around 50 per cent of children are undernourished and more than 75 per cent of women are anaemic in the rural areas.

One social activist associated with the PIL on food security in the Supreme Court has stated that more complaints of starvation deaths have been received in the past one year than in the last three years. (Patnaik, 2010) There has been a spate of starvation deaths of children in the past four months in the hunger ‘hot spots’ of Orissa, Madhya Pradesh and Jharkhand. This development is neither surprising nor a sudden or recent outcome but is rooted in the declining availability of foodgrains as also its uneven distribution. The availability of foodgrains has been declining and has come down from 186 kg per annum in 1991 to 160 kg in 2007. This level of availability is even lower than what was available in the period prior to the ‘Green Revolution’. This is on account of continued neglect of agriculture in the post-reform period. Along with this is the distressing evidence of a consistently declining level of total and cereal calorie consumption among the bottom decile from 1359 in 1983 to 1189 in 2004-05 and among the bottom quartile from 1580 to 1259 during the same period which, in any case, has been and continues to be 30-50 per cent less than that of the top quartile of the population and way lower than the calorie norm of 2400 kcal fixed for the BPL category by the Planning Commission in 1973-74. (MoRD, 2009)

More than 75 per cent of the rural population and around 60 per cent of the urban population have food less than the calorie norm. (Mehta, 2010) This is despite the fact that the poor need more calorie on account of the nature of the work they usually perform. The problem essentially lies with access to foodgrains which, despite the PDS with a network of five lakh fair price shops, is not within the reach of the poor. This access to foodgrains at prices which the poor can afford is undermined by lack of purchasing power which has been compounded by the food inflation—that has been witnessed to be the highest in recent years. What has contributed to this lack of access is the government’s obsession with the targeting of subsidised foodgrains to a small stratum of the BPL category of households to reduce the food subsidy bill. With this objective, the erstwhile PDS was changed to the targeted PDS (TPDS) with the issue of foodgrains to the category of households under the BPL, APL and Antyodaya Anna Yojana at Rs 415, Rs 615, and Rs 200 per quintal for wheat and Rs 565, Rs 800, Rs 300 for rice respectively. Given the widespread complaints of exclusion of the poor in the BPL list, this targeting has only served to deprive the poor households of the TPDS. Under the Antyodaya Anna Yojana, a beneficiary is supplied 25 kg at Rs 2 per kg for wheat and Rs 3 per kg for rice. But this covers only 2.5 crore households. The extremely low coverage of the AAY has helped perpetuate hunger and starvation.

A government adequately sensitive to the situation would have increased the quantum of subsidy and released the foodgrains from the buffer stock to eliminate widespread hunger. But the government, on the other hand, has reduced the allocation. Ironically, this has happened when the government is committed to enact a law on food security. This implies that either the government does not see the urgency of enacting the law to ease the situation or it would dilute the entitlement and coverage so as to keep the expenditure on food security low. If the report in a leading daily is to be believed, the latter seems to be true as the government is thinking of saving in food subsidy while fulfilling the commitment to enact the law. This is being done by reducing the entitlement, weeding out APL families and keeping the number of persons in the BPL list low. The draft Food Security Bill, approved by the Cabinet Committee, has curtailed the existing entitlement for BPL households from the mandated 35 kg to 25 kg. at Rs 3 per kg. With this reduced entitlement and the current level of BPL households (6.52 crores constituting 27.5 per cent of the population), the Central Government expects its expenditure to be only around Rs 25,248 crores. But States have never accepted the Centre’s figure of BPL families and insist on a figure of 45 per cent with Rs 10.96 crore households. If the latter is accepted, the expenditure would be around Rs 42,744 crores. The BPL list is in for revision in any case taking into account the two reports referred to above after social activists exerted pressure on the chairperson of the UPA. The two reports have recommended a higher level of poverty ratio—37.5 per cent by the Tendulkar Committee and 50 per cent by the Saxena Committee.

The obsession to reduce the food subsidy bill has created a situation where the foodgrains rot in godowns but are not released to the needy persons. We had a record procurement of 54 million tonnes in 2008 and had in stock 52.5 million metric tonnes of rice and wheat in July 2009. Wheat stocks have touched 55 lakh tonnes against a buffer norm of 40 lakh tonnes and a strategic stock of 30 lakh tonnes. A report from Punjab recently has reported that millions of metric tonnes of wheat are lying in the open, being eaten by insects/rats of which 90 per cent are not fit for human consumption. Each year Rs 50,000 crores of food and 10.5 per cent of India’s total foodgrains are wasted. Ten lakh tonnes can feed one crore people for one year. (Chowdhury, 2010) But these foodgrains are not distributed among the poor to stave off hunger and malnutrition. The Cabinet Committee turned down a proposal to enhance the entitlement of APL to 15 kg per month because this would have entailed a subsidy of Rs 5000 crores and an outgo of 4.5 lakh tonnes of foodgrains. That the carrying cost of foodgrains and spoilage is Rs 3000 crores has been ignored. (Parsai, 2010)


The Budget also reflects a wide gap between what the FM says he intends to do and what he actually does. Agriculture provides a classic case. The Budget speech of the Finance Minister assigns the central place to growth in agriculture and has outlined a four-pronged strategy for this purpose, covering agricultural production, reduction in wastage of produce, credit support to farmers, and thrust to the food processing sector. With regard to the first, three new schemes have been introduced proposing to a) organise pulses and oilseeds villages in rain-fed areas for which a sum of Rs 300 crores has been assigned, b) promote the Green Revolution in the eastern region for which Rs 400 crores has been allocated, c) sustain the gains made in the Green Revolution areas with an outlay of Rs 200 crores. For reducing wastages in foodgrains, storage and operation, the retail trade is being opened up and this would also help in bringing down differences between farmgate prices, wholesale prices and retail prices. The wastage in buffer stocks and PDS would be neutralised by continued hiring of godowns from private parties for a guaranteed period of seven years. To improve credit flow, the target of banks for agricultural credit has been increased by Rs 50,000 crores. The period for repayment of the loan by farmers in flood and drought affected parts of the country has been extended up to January 30, 2010. For those farmers who repay their short-term crop loans as per schedule, an additional one per cent interest would be allowed as an incentive. The food processing sector is being gifted with five more food processing parks.

Agriculture has witnessed a negative growth rate of 0.2 per cent during 2009-10. Its share in the GDP has been declining over the years and is around 1.56 per cent. There is also a decline in the share of the agriculture sector as a proportion of the total Union Budget although there is an increase in budgetary allocation to Rs 15,647.97 crores in 2010-11 from the level of Rs 11,916.63 crores last year. This apparent increase in allocation, however, belies the claim that the sector has been given the attention needed to spur its growth. It cannot be reconciled with the lowering of fertiliser subsidy by Rs 3000 crores in the sale of the decontrolled fertilisers. This reduction has been rationalised on the ground that it would promote nutrient based subsidy. But the real intent is to cut the subsidy bill as a part of fiscal consolidation. It is well known that farmers use nitrogenous fertiliser in greater measure due to its lower cost which creates imbalance in the nutrient profile of the soil. Now the selling price of nitrogenous fertiliser has been increased while allowing the prices of potash and phosphatic fertilisers to be guided by the market. This does not contribute towards nutrient based pricing. (Alagh, 2010) Given the precarious financial condition of most of the farmers and the likely price fluctuation of P&K fertilisers in the market, the use of fertiliser would continue to be unbalanced.


As for the new schemes, the complex nature of problems involved in enhancing agricultural productivity in the eastern region, sustaining the gains of the Green Revolution and incentivising pulses production call for action on several fronts. The proposed small outlays are unlikely to address them. The constraints in extending the Green Revolution to the eastern region include, among others, huge areas of water- logging and soil degradation caused by floods, development of appropriate varieties of seeds for the crops, making inputs available to farmers, lack of marketing infrastructure, collapse of the extension system. Some of the areas are also affected by drought. In the Budget, there is no major initiative in the flood control programme of the Ministry of Water Resources. The allocation under irrigation and flood control has been stagnating since 2004-05. (CBGA, 2010) Similarly, there is little by way of thrust in agriculture research (crop husbandry) to meet this challenge. The allocation for agriculture research and education does not show any positive trend. The State agricultural universities are starved of funds to take initiative. Marketing infrastructure and road connectivity are neglected. The extension services have been ignored and devalued in the post-reforms period. The proposed scheme provides no indication on how this small allocation would tackle these problems in a large and diverse area constituting the eastern region.

Pulses production is concentrated in dry-lands and suffers from lack of minimum irrigation, low MSP (Minimum Support Price) to meet the cost of high yield seeds and pesticides, lack of attention in research and technological intervention for developing high yielding and pest resistant varieties, absence of extension services, non-availability of high quality certified seeds, wide gap in yields between research stations and farmers’ fields due to which pulses remain unattractive to farmers. (Down to Earth, 2010) The allocation of Rs 350 crores for 60,000 villages is too low a sum to address these complex problems which require multifaceted intervention. The FM’s speech gives the impression that water harvesting, watershed management and soil health account for poor pulse production. This ignores altogether the issue of research, seed production, extension and incentive price support. The allocation of Rs 200 crores for sustaining the Green Revolution is proposed to be spent on soil health, water conservation and preservation of bio-diversity to produce climate resilient agriculture. Evidently, only some pilot projects can be taken up with this meagre allocation.

It is a strange logic that wastage in storage of foodgrains as well as operation of the existing food supply chain can be tackled by the opening of retail trade which would also bring down the difference between farmgate prices, wholesale prices and retail prices. Apart from the negative effects on employment, experience shows that introduction of big players like MNCs does not bring down the prices for consumers. A study has shown that the entry of organised retail channels led to more than 10 per cent increase in prices of vegetables in agricultural mundies of Ahmadabad. (Alagh, 2010) The farmers too do not get the benefit of rising prices as marketing margins increase at both wholesale and retail levels particularly with the concentration of crop distribution. (Chandrasekhar, 2010)

The solution suggested for meeting the deficit in storage capacity of the buffer stock of foodgrains is continued and guaranteed renting of private sector godowns for an extended period. That the scheme has been in operation but has failed to provide required godown space is evident from the continued wastage of foodgrains stored in open and exposed to rot or consumed by rats and insects. The problem of inadequate storage infrastructure has been known for more than two decades. Private sector participation has not helped provide sufficient space. As a result, thousands of crores have been lost in the food- grains wasted. Why has the government not taken up construction of storage godowns in districts under Bharat Nirman? The inaction to construct godowns has a huge social cost besides financial loss as the wasted foodgrains could have saved the starving poor from avoidable deaths and severe malnutrition.

As part of its resurrected focus on further de-regulation and incentivisation of foreign invest-ment, the Budget also permits external commercial borrowing for cold storage and cold room facilities for preservation of storage of agricultural and allied produce. This would permit the corporate sector to compete for and corner a part of the limited agricultural credit meant for farmers. But, more important is the grim situation painted by continued farmers’ suicides. Vidharbha has witnessed 30 farmers’ deaths in the recent past as reported by the electronic media—all on account of pressure for repayment by banks and private moneylenders and the disappointing cotton crop. This exposes the failure of the farm policy to tackle on a systemic basis the problem of indebtedness to moneylenders and pressure for repayment of loans even when the crop has failed or the market has crashed notwithstanding the one- time loan waiver granted sometime back which also could not reach many needy farmers. What prospect does the agriculture have to grow if the farmers are forced to commit suicides in the absence of a responsive and effective state support to tide over their difficulties both on the credit and marketing fronts?


The Finance Minister, in his speech, spelt out three challenges which would engage the Indian policy-planning. One of them is to harness economic growth to make development more inclusive for which 37 per cent of the total Plan outlay has been allocated for the social sector. How genuine is this claim of inclusive development? The growth of social sector spending was 67.2 per cent in 2008-09 and 15.8 per cent in 2009-10 but is only 11.2 per cent in 2010-11. (Nayar, March 15) The total expenditure on social services had been increased from 8.9 per cent of the GDP in 2007-08 to 10.4 per cent of the GDP in 2008-09. But the Budget estimates show no enhancement of this level either during 2009-10 or in the current year’s Budget.

The same level of stagnation is manifested in the total expenditure from Budget of all States in social services and rural development which remains at six per cent of the GDP in the current year as it was in the last year. (CBGA, 2010) Sector-wise allocation would further bring out the weakness of this claim. There is a 13 per cent reduction in allocation for social security and welfare while the allocation for nutrition provides an increase of only six per cent as against the massive level of 46 per cent nutritional deficiency the country faces. (Nayar, March 15) The expenditure on education as a proportion of the Union Budget shows a marginal increase from 3.88 per cent (2009-10) to 4.5 per cent (2010-11). As a share of the GDP, the expenditure remained at 3.23 per cent (2009-10) as against the promised six per cent. (CBGA, 2010)

Similarly, the Central Government’s allocation in the health sector increased by 11 per cent from the level of last year of which 16 per cent comes from external aided projects. If this input is excluded, the increase is only nine per cent. The total outlay of the Central and State governments in the health sector together is only 1.06 per cent of the GDP despite the commitment of the UPA Government to raise it to two-to-three per cent. The allocation for the flagship programme of the NRHM has shown a measly increase of 15 per cent from Rs 12,096 crores to 13,910 crores this year. No provision has been made for the proposed national annual survey of health profiles. The allocation for disease control programme, which is a vital component of the health sector spending, has come down marginally from Rs 1063 crores to Rs 1050 crores for which no rationale is evident since there is no let up in the profile of the diseases covered under it. Similarly, the reduction in outlay for medical education and training from Rs 3265 crores to Rs 2671 crores lacks any plausible explanation because the neglect of training, particularly among the in-service medical personnel, is widely acknow-ledged even by the government. Equally surprising is the reduction in non-Plan allocation of all Central Government hospitals—the AIIMS (Rs 86 crores) PGMER (Rs 82 crores) Safdarjung (Rs 50 crores) and RML (Rs 10 crores). The non-Plan expenditure is vital to the provision of patient services and impacts on the level and quality of care. This allocation should have substantially increased in view of the ever increasing patient load in these hospitals, long queues in the OPDs and huge waiting lists in surgeries. The apprehension is that some of the non-clinical services and clinical investigations in these hospitals are slated for privatisation/outsourcing to reduce public spending and transferring part of the cost to the users. This apprehension gains ground since there is considerable pressure from the government to implement the Valiathan Committee Report for the AIIMS which would introduce private sector linkages with its functioning much against opposition from the faculty.

The new six AIIMS type of institutes proposed for establishment in State capitals have already incorporated outsourcing of non-clinical services in their proposals. Despite the shortage of beds in government hospitals, there is no provision for their increase. It is evident that the govern-ment is pushing future expansion of facilities to take place in the private sector for which FDI norms have been further relaxed and concessions given in payment of duties on import of medical equipments while retaining full duty exemption on items already granted earlier. There is continued neglect in many areas of health affecting the poorer sections and rural population in the scheme of intra-sectoral distribution of allocated resources such as occupational health, environmental health. The manufacture of sera and vaccines continue to be ignored apparently for promoting private sector production.

In respect of the social determinants of health, drinking water and sanitation form vital components. The allocation for rural water supply and sanitation as a percentage of the Union Budget remained at 8.5 per cent as last year. In the allocation for water supply, there is a marginal increase of 13 per cent. The rural sanitation allocation has fared better with 33 per cent more than last year. The low cost sanitation campaign geared to the elimination of manual scavenging has received 58 per cent increase in allocation. (CBGA, 2010) But both the drinking water and sanitation sectors suffer from problems which go beyond allocation to which we shall come shortly.

The Rural Development Sector, which shoulders a heavy burden of catering to the poorer sections, has received a paltry six per cent increase in allocation. This does not even take care of the near double digit inflation. A mere 2.5 per cent increase in the most highly publicised and increasingly more relevant MGNREGS, has already been referred to. In the Indira Awaas Yojana, the government has recently increased the unit cost of the scheme by 30 per cent, fixing it at Rs 45,000 for general and Rs 48,500 for particular areas. But the allocation for the programme has been increased by only 13 per cent. This implies that the coverage of the programme will get significantly reduced from the level of last year despite the huge demand for it and the acute shortage of rural housing acknowledged in various national level surveys. The allocation under the BRGF has received a little higher increase of 26 per cent but this turns out to be modest since this programme has been projected as a major initiative to address the infrastructural deficiency in the Naxalite affected areas and a key strategy to reach out to the people residing therein and feeling alienated due to their neglect.

A study of the allocations made in key social sectors during the four years against the outlays recommended in the Eleventh Five Year Plan is another way of testing their adequacy. The analysis made by the CBGA indicates that in the education sector, among the major programmes, the RMSA has received 12.21 per cent, MDM 65.57 per cent, SSA 76.57 per cent, teacher’s training 36 per cent during the four years of the Plan. In the health sector, the NRHM has received 54.2 per cent while drinking water got 77.9 per cent and sanitation 67.9 per cent. In agriculture, micro-irrigation was provided 66.7 per cent, the horticulture mission 46.3 per cent, Rashtriya Krishi Vikas Yojana 59.7 per cent and macro-management of agriculture 60.6 per cent. Except for the SSA and drinking water, no other major programmes cited above have come any way near to the recommended Plan outlays.


One dimension of inclusive growth is how the marginalised groups (SCs, STs, Minorities, and Women and Children) have fared in the resource distribution. The allocation for SCs/STs are reflected in the Plan allocation earmarked for SCs/STs by different Ministries from their budget pooled under the Scheduled Caste sub-plan and Scheduled Tribe sub-plan. The Scheduled Caste Sub-plan is only 7.19 per cent and Tribal sub-plan 4.30 per cent of the total Plan expenditure of the Union Government excluding Central assistance to the State Plan. In both cases, this percentage is lower than the percentage of population of these groups 16 per cent and eight per cent respectively which is the norm recommended for earmarking resources from sectoral budgets. The allocation for the Ministry of Social Justice and Empowerment shows a substantial increase from Rs 2583 crores to Rs 4574 crores. Of this, the provision for SCs has shown an impressive increase from Rs 1802 crores (RE) in 2009-10 to Rs 3154.75 crores (2010-11). However, the bulk of this increase is in the Post-Matric Scholarship scheme which has been doubled from Rs 818.56 crores (2009-10) (RE) to 1675.00 crores (2010-11). An enquiry from the official sources revealed that this increased allocation would go towards meeting the enhanced unit cost of the Post-Matric Scholarship amount which has not been revised since 2003. The increase, therefore, does not signify enhanced coverage. But more important, this increased allocation appears to be an attempt at Budget engineering rather than higher spending by the government. This conclusion is drawn from the fact that allocation for the National Means-cum-Merit Scholarship scheme under the HRD Ministry has been slashed from Rs 750 crores in 2009-10 to Rs 81.45 crores in 2010-11 and diverted to the Post-Matric Scholarship scheme under the Ministry of Social Justice and Empowerment. (CBGA, 2010) Thus, a major part of the substantial increase in the latter represents a transfer from the allocation of one Ministry to another. Similar is the case with the Ministry of Tribal Affairs whose allocations have increased from Rs 2016.17 crores (2009-10) to Rs 3220.37 crores. The major increase is in the upgradation of Post-Matirc Scholarship from 216.35 crores (2009-10) to Rs 469.93 crores (2010-11). The burden of promoting ‘inclusion’ of these communities in development lies with the other Ministries which deliver beneficiary focused programmes by expanding their coverage. A number of problems have been encountered in achieving this objective.

In the case of Minorities, the total budgetary allocation of the Ministry has shown an increase of 49 per cent over last year from Rs 1755.50 crores to 2615.37 crores. Here too, a substantial increase has been provided in Pre-Matric Scholarship from Rs 180 crores (2009-10) to Rs 405 crores (2010-11) and in Post–Matric Scholarship from Rs 135 crores (2009-10) to Rs 238 crores (2010-11) which, it is surmised, would largely go towards increased unit cost. The scheme for Multi-Sectoral Development has also witnessed an increase of around 45 per cent. Four new schemes have been introduced but with meagre allocations which has implications for their coverage and reach. The allocation for the Ministry in any case has a marginal role in improving the status of the Minorities as there is no sub-plan for them compared to the SCs and STs.

The Ministry of Women and Child Development has received an additional allocation of Rs 2446 crores which is an increase of around 25 per cent in the Plan outlay. But this increase is largely confined to two or three schemes. The gender budgeting also shows an increase from 5.5 per cent of the total Union Government expenditure to 6.1 per cent. (CBGA, 2010) But the bulk of the allocation of the Ministry is accounted for by the ICDS with an outlay of Rs 8700 crores which, as indicated earlier, despite an increase of Rs 1995 crores over last year, is insufficient for meeting the commit-ment of universalisation. The Integrated Child Protection Scheme has received a boost from Rs 44 crores (2009-10) to Rs 270 crores (2010-11). However, the National Creche Scheme for children of working mothers has shown a nearly 30 per cent reduction from Rs 90 crores to Rs 63.35 crores. The allocations for the National Child Labour Project, substantially reduced last year, has only been partially restored. For women, two new schemes have been introduced, one of which is for women farmers with an allocation of Rs 100 crores Although the contents of the scheme have not been spelt out, considering that 74.9 per cent of the female workforce is engaged in agriculture, its coverage with this allocation is likely to be very modest. The second new scheme is the Indira Matritva Sahayog Yojana with an allocation of Rs 390 crores. The scheme would provide cash directly to pregnant and lactating women up to a period of six months—a kind of income support. Though the allocation is not substantial, considering the number of beneficiaries who would be eligible in the first year of the scheme, the coverage may not be very large due to the time taken in operationalising it. A significant allocation of Rs 40 crores has also been provided for the National Mission for Empowerment of Women which is an inter-ministerial convergence mechanism to oversee the implementation of women related development schemes of the State and Central governments. It is, however, not a distributive scheme. Swadhar, the Step Rehabilitation of Rape Victims, and the scheme of empowerment of adolescent girls have also received substantial allocations relative to what was provided last year. But the negative feature is the reduced allocation for the National Commission for Women, Rashtriya Mahila Kosh, and low allocation for the existing scheme of shelter homes and short-stay homes whose spread is very inadequate. (AIDWA, 2010) Though the allocation for a few schemes seem substantially stepped up, their contribution to the empowerment of women is small. It is the share of benefits from the larger sectors of economy and the programmes of other Ministries which contribute to the gender inclusion. The position is far from reassuring in this respect.

The budgetary exercise is to be looked at not merely from the view of adequacy or otherwise of allocations but also how the allocated amount has been utilised and whether the intended outcomes from expenditure have been achieved. There are huge deficits both in the utilisation of the allocated amount as well as in the realisation of objectives. To cite a few examples, in the rural water supply scheme, 10 States were not able to avail of the Central assistance. The underutili-sation in their case ranged from 45 to 75 per cent of the Central financial assistance. (CBGA, 2010) Under-utilisation was also observed in the SSA scheme of the HRD Ministry. In the women related schemes, virtually negligible expenditure was recorded on the rehabilitation of rape victims besides poor utilisation in the schemes of other departments. The scheme of multi-sectoral development for Minorities showed a low utilisation of 5.8 per cent of the allocation. The allocations were not spent under schemes of tele-medicine and transplant programme of the Ministry of Health. These shortfalls in expendi-ture reflect poorly on the planning of pro-grammes and their implementation.

A similar gap is observed between financial utilisation and the intended outcomes. The rural sanitation programme serves as a glaring example, where 62 lakh toilets have reportedly been constructed and 61 per cent households are claimed to have been provided access to latrines. (CBGA, 2010) But this coverage has not translated into use of latrines and behavioural change which is the objective of the programme. According to the WHO-UNICEF report, India ranks number one among countries where people defecate in the open. Indians comprise 58 per cent of all people across the world who share this stigma. (Sinha, 2010) Of this percentage, 18 per cent are in the urban areas and 69 per cent in the rural areas. People do not use toilets for several reasons which have been highlighted in various evaluation reports. These include non-availability of water, quality of construction, nearness of the toilet to the living accommodation, poor maintenance. Similarly, the scourge of manual scavenging continues to exist (even in Delhi) despite a law prohibiting this practice and a rehabilitation programme for the released manual scavengers in operation for more than twenty years. The government has failed to enforce the law and plug the deficiencies of the schemes to improve outcomes. The rural water supply scheme also suffers from problems of quality, sustainability and maintenance (CBGA, 2010) which have been widely known but remain to be holistically addressed. The result is that the deficiency of access continues to exist despite enhanced expenditure.


This brings us to the politics of Central budgeting. This politics consists of the ever expanding number of schemes by the Central Government (around 10 in the current Budget) with a small coverage and meagre allocation of resources. Most of these schemes are in sectors which fall in the States’ list in the Constitution and relate to subjects which should appropriately be handled by the Panchayati Raj Institutions. The proliferation of schemes creates huge problems of delivery. Each scheme has its own guidelines and structure of implementation. The number of schemes is so large (around 200) that the implementation machinery at the district level cannot even remember their names. It should cause no surprise that there are huge bottlenecks in execution of schemes which lead to non-utilisation/underutilisation of the amounts allocated. The additional factor is lack of administrative support for implementation of such a large number of schemes. The district level administration does not expand in proportion to the number of schemes increased nor does its infrastructure catch up with it. This governance problem is not taken cognisance of while initiating schemes. Besides, most Central schemes carry with them the conditionality of State contribution ranging from 50 to 10 per cent. States do not have the level of resources which the Central Government commands. As a result, poorer States are unable to draw Central financial assistance under different schemes while the financially better-off States draw larger resources than their normative share. The pattern of Central Plan budgeting, therefore, contributes to regional inequalities. The politics of it lies in the fact that the Central Government likes to project a more progressive image vis-à-vis the State govern-ments to draw political mileage. The strategy suits the Central bureaucracy as well because it provides them some authority and leverage in dealing with the State governments and justifying their position.

Though resentful of encroaching on the State’s sphere, the States meekly submit to this design because most of them suffer from resource crunch and do not have the option to initiate new development schemes. Therefore, some resources coming from the Central Government through these schemes are welcomed by them. Besides, they cannot give the impression of critiquing these initiatives lest the Central Government gains a propaganda value from it. But this approach violates the federal structure of the Constitution. It increases centralisation of planning, disempowers the States and devalues the PRIs. It also conveys conflicting signals to the people. On the one hand, the Central Government advocates village and district level planning by the PRIs, on the other it imposes schemes from above which should best be handled by the PRIs. In this context, the entire talk of decentralisation of planning and devolution of authority becomes suspect. The PRIs are conceived as merely executing agents of schemes formulated by the Central Govern-ment rather than units of self-governance as envisaged in the Constitution. The result is that there are huge complaints of under-utilisation of resources which, in turn, is used as a stick by the Central Government to beat the State governments with and politically embarrass those which perform poorly. The blame for non- implementation and therefore lack of concern for the poor is thrust on them.

Not only this, the under-utilisation of allocations for schemes is also used by the Central Government as an alibi for lower level of allocation in the succeeding years which defeats the purpose of the schemes. The under- utilisation is not merely related to the overload of schemes and inability of some States to contribute their shares but also due to poor design of the schemes, unrealistic unit cost, shortage of staff, deficient administrative infrastructure, poor training of officials, lack of resources for mobility and consumables, poor coordination among different agencies of the government and little attempt at disseminating the schemes among the intended beneficiaries. These realities are known to the Central Ministries implementing these schemes. Some-times there is an ad-hoc scheme-specific attempt to resolve these problems. But there is no radical alteration of the strategy. The whole politics of the Central Budget, therefore, is to score brownie points against the States and to politically manipulate the people.


The conclusion that emerges from the foregoing is that the pattern of growth embedded in the neo-liberal structural framework unleashes forces which exclude the poor and widen inequalities all around. No attempt to promote inclusion within the confines of this paradigm can neutralise the adverse externalities. The structure of the economy has to be changed radically to reverse the trend towards exclusion of the poor and vulnerable groups.

Even as a palliative exercise to promote inclusion without altering the fundamental structure of the economy for rhetorical gains, the effort lacks seriousness because of insignificant/insufficient resource allocation in programmes which are of vital concern for the excluded groups. This would severely compromise the accrual of benefits to them from the legal entitlements and make them restless.

The paucity of resources cannot be offered as an alibi for provision of inadequate allocation because huge concessions, by way of exemptions, incentives, deductions, given to the corporates and higher income groups have narrowed the public resource base and frittered away the potential for resource mobilisation to undertake enhanced public expenditure.

The thrust on fiscal consolidation to reduce deficit is heavily loaded against the poor who suffer from multiple whammy—indirect taxes, cut in subsidies and inadequate allocation of resources in programmes which benefit them over and above the high food inflation.

The politics of the Union Budget continues the inglorious tradition of one-upmanship in the proliferation of Central schemes with small allocations which disempower the States, devalue the PRIs and enormously constrain the delivery of services and governance of development. n


Ahluwalia, Montek Singh, ‘Growth allows spending with fiscal prudence’, interview, Outlook, March 15, 2010.

AIDWA, ‘Budget 2010-11: Reactions’, People’s Democracy, March 14, 2010.

Alagh, Y.K., ‘Budget was mixed for agriculture’, Financial Express, March 4, 2010.

Athreya, Venkatesh, ‘Seductive Sophistry’, Frontline, March 26, 2010.

Centre for Budget and Governance Accountability, Union Budget-2010-11 Which Way Now? Response to the Union Budget, 2010.

Chandrasekhar, C.P., ‘Pushing Reforms’, Frontline, March 26, 2010.

Down to Earth, ‘Headline: Low Pulse’, Vol. 18, No. 19, February 15, 2010.

Economic and Political Weekly, Budget-2010, ‘The State Takes a Back Seat’, Editorial, March 6, 2010.

Hirway, Indira, ‘Scrape the Barrel’, Outlook, March 15, 2010.

Jha, Parveen, ‘Less for the Poor’, Frontline, March 26, 2010.

Kabra, Kamal Nayan, ‘Budget 2010: Empty Promises, New Slogans’, New Age, Vol. 58, No. 10, March 7-13, 2010.

Kumar, Arun, ‘Union Budget 2010-11: Too many gambles’,

Mainstream, March 5-11, 2010.

Mehta, Jaya, ‘In Search of an Inclusive Growth’, New Age, Vol. 58, No. 10, March 7-13, 2010.

Ministry of Rural Development, Report of the Expert Group to Advise the Ministry of Rural Development on the Methodology for conducting the Below Poverty Line (BPL) Census for the Eleventh Five Year Plan, August 2009.

Chowdhury, Vikram, ‘Foodgrain rots in Punjab as prices soar’,, accessed on March 19, 2010.

Nayar, Lola, ‘The Alphonso Syndrome? UPA II’s first full Budget has shown welfarism the door’, cover story, Outlook, March 15, 2010.

National Commission for Enterprises in Unorganised Sector, Conditions of work and promotion of livelihood in Unorganised Sector, 2007.

Mukherjee, Pranab, ‘Where is the question of Abandoning the Aam Admi’, Interview,, accessed on March 8, 2010.

Parsai, Gargi, ‘National Food Security Bill to be vetted by Law Ministry’, The Hindu, March 19, 2010.

Patnaik, Biraj, Statement cited on Outlook, March 15, 2010. Patnaik, Prabhat, ‘The March of Neo-liberalism’, Frontline, March, 26, 2010.

Planning Commission, Report of the Expert Group to Review the Methodology for Estimation of Poverty, November 2009.

Sethi, Nitin, ‘Food Bill a Win-Win: Brownie Points and

Savings’, The Times of India, New Delhi, March 24, 2010.

Sinha, Kountaya, ‘17 per cent of the world has no toilets’, The Times of India, March 17, 2010.

Swaminathan, M.S., ‘Pathway to Food Security for All’, The Hindu, March 29, 2010.

Tilak, Jandhyala B.G., ‘Education in the Union Budget’, The Hindu, March 6, 2010.

A distinguished former Secretary (now retired), Health and Rural Development, Government of India, the author is currently a Visiting Professor of Governance at the Council for Social Development, New Delhi.

Notice: The print edition of Mainstream Weekly is now discontinued & only an online edition is appearing. No subscriptions are being accepted