Despite the Hype, States Don't Have Enough to Spend on Welfare Schemes

The much-touted increase in budgetary allocations to states has been offset by less talked about decreases on other counts.

Several reports on the shocking lack of essential supplies in hospitals, poor infrastructure in nutrition and healthcare centres, and delays in due payments to employees and workers in various welfare schemes have raised the question whether state governments have adequate resources for meeting essential commitments towards the social sector and weaker sections of society. The amount of resources available to state governments for this is supposed to have improved after the implementation of the 14th Finance Commission, but this does not appear to be the case on the ground.

Since 2015-16, the share of central taxes meant for states was raised from 32% to 42% on the basis of the recommendations of the 14th Finance Commission, which on its own is a significant increase. But this was accompanied by other less publicised changes, which negated this increase to a considerable extent. As the Centre for Budget and Governance Accountability (CBGA) pointed out in its analysis of 2015-16 Budget, at the same time as this increase, the overall magnitude of central assistance to states for plan spending fell sharply from Rs 3.3 lakh crore in 2014-15 to Rs 1.96 lakh crore in the budget estimate for 2015-16. CBGA’s analysis said, “This is because the Centre is not only going to discontinue most forms of untied assistance for Plan spending by states, it is also going to stop incurring Revenue Expenditure  on Plan Schemes in a number of sectors expecting the States to take those up from 2015-16.”

More specifically, the research organisation’s report continued,

“What is most important to note is that starting from 2015-16, the Centre would reduce its commitments on salaries of staff incurred at the State level in the different Centrally Sponsored Schemes, implementation of some of which may be crucially dependent on human resources, such as the National Health Mission, Integrated Child Development Services, Rashtriya Krishi Vikas Yojana, Rashtriya  Madhyamik Shiksha Abhiyan, National Rural Drinking Program, Swachh Bharat Abhiyan, Indira Awas Yojana and National Rural Livelihoods Mission.”

The net increase in the spending capacity of states in 2015-16 was projected in this document to be only 0.33% of GDP, which means that social sector spending was expected to remain much the same. At the same time, the Union Budget registered a decline in social sector allocation, from 1.92% of GDP in 2013-14 (actual) to 1.68% of GDP in the budget estimate for 2015-16 – a decline of 0.24%. CBGA found social sector allocations to be shrinking rather than increasing, while the publicity blitz was that the states have got much more for priority sectors directly related to the welfare of people.

It is in this wider framework – of increases in some areas being offset by possibly higher decreases in others – that the overall complex situation of funds available for the social sector should be examined. A recent paper titled ‘Recent Changes in India’s Fiscal Architecture’ by Subrat Das, Amar Chanchal and Jawed Alam Khan has argued that while allocations for some politically-favoured programmes may have been protected, allocations for other programmes critical for welfare may have suffered.

This paper, published in the India Exclusion Report 2016, says,

“In terms of the social sector programs, major initiatives like the Integrated Child Development Services, SABLA, Mid-Day Meal , National Rural Drinking Program and National Health Mission seem to have been adversely affected in terms of support from the union government as the funding pattern between the Centre and the state has changed after 2015-16. These programs show a decline in their allocations compared to 2014-15. The onus is now on the states to compensate for the reduction for a higher state share, which can become difficult for some of the poorer states as the volume of  increase in resource transfer from the union government might not be sufficient to protect budgetary allocation for different social sector schemes. However the allocation for programs with stronger political backing  like Swach Bharat Abhiyan , Pradhan Mantri Gram Sadak Yojana and to some extent Sarva Shiksha Abhiyan seems to have been increased or at least protected.”

The availability of funds for priority schemes is definitely a cause for concern, particularly in states like Uttar Pradesh and Bihar, where per capita expenditure on the social sector is extremely low.

Bharat Dogra is a freelance journalist who has been involved with several social movements and initiatives.

Join The Discussion