Tackling resource deficiency

A popular question on the Interim Union Budget for 2019-20 would be: If and to what extent it could help the ruling political dispensation in the elections this year. The initiative of providing income support to small and marginal farmers, introduced in the Interim Budget, seems to be the only big measure announced in recent times that is backed adequately by budgetary commitments; but this too has come very late in this government’s term. This programme is meant to provide direct income support of Rs 6,000 per year to an estimated 12 crore small and marginal farmer households that have cultivable land up to 2 hectares. It has led to a visible increase in the budget allocation for the Department of Agriculture, Cooperation and Farmers’ Welfare from Rs 46,700 crore in 2018-19 (Budget Estimates or BE) to Rs 12,9585 crore in 2019-20 (BE). Since the programme is to be brought into effect retrospectively from December 2018, so that there is some direct income transfer to beneficiary households within March 2019, the allocation for the said department for the ongoing financial year (i.e. 2018-19) has been increased to Rs 67,800 crore in Revised Estimates (RE) for the current fiscal.

But this measure could hardly compensate for the under-achievement till date on the promise relating to doubling of farmers’ income. NDA-II did fix the Minimum Support Price (MSP) for all 22 crops at 50 per cent more than the “cost” of cultivation, but the “cost” definition adopted for this is less than the full economic cost of cultivation, and more importantly, even this substantive measure was taken last year only, with the first three fiscal years under the current government witnessing modest increases in the MSP for crops.

Among all those sectors where public spending directly impacts the lives of the poor and underprivileged sections, i.e. what could very broadly be referred to as the social sectors, Rural Development is perhaps the only sector that witnessed a trend of increasing priority in the Union Budgets over the last five years. This was mainly due to a step up of Union Budget allocations for the rural roads (Pradhan Mantri Gram Sadak Yojana) and rural housing (Pradhan Mantri Awas Yojana) schemes and a modest increase in the allocations of MGNREGA over the last few years. But the funding for MGNREGA, it has been argued, needed to have been much higher in the last two fiscal years compared to what was provided from the Union Budget. The latest Budget too presents a similar situation for this crucial intervention for wage employment in rural areas; the allocation for MGNREGA has gone up from Rs 55,000 crore in 2018-19 (BE) to Rs 61,084 crore in 2018-19 (RE), but it’s pegged at Rs 60,000 crore for 2019-20 (BE).

Ayushman Bharat, the much talked about health insurance programme launched last year, has been referred to as a significant step by the current government towards ensuring universal healthcare “coverage” in the country. But the poor state of provisioning of healthcare in the public sector, and the deep-rooted problems in private sector healthcare in the country, would pose a serious challenge to this health insurance programme translating into tangible benefits for large numbers of poor in the country. The situation in healthcare sector in India cannot be improved without a significant improvement in public provisioning of healthcare, which, in turn, requires a quantum improvement in public spending on the sector. While the current government has, creditably, reached the 22nd AIIMS like institution in the country, little attention has been paid to the acute need for strengthening public sector healthcare institutions at the district and sub-district levels through large scale recruitment of human resources, strengthening of infrastructure and provisioning of medicines and diagnostic facilities. The Union Budget allocation for National Health Mission, arguably the most important intervention for strengthening of public sector healthcare system in rural areas of the country, has seen a very small increase from Rs 31,187 crore in 2018-19 (RE) to Rs 32,251 crore in 2019-20 (BE).

In terms of budgetary commitment, the fate of another recent announcement by NDA II, that of 10 per cent reservation for the poor, seems to be similar. The FM’s Budget Speech acknowledges the need for creating approximately 2 lakh more seats in educational institutions for fulfilment of this measure. But public institutions of higher education in the country have been facing a serious challenge on the resource front for long; it has resulted in acute shortages of teachers and infrastructure in higher education institutions across the country. In this backdrop, the modest increase in the allocation for the Department of Higher Education from Rs 33,512 crore in 2018-19 (RE) to Rs 37,461 crore in 2019-20 (BE) leaves a lot to be desired.

The main reasons for the inability of the government to back its major initiatives with adequate budgetary commitments (with the exception of the income support for small and marginal farmers) are that: Resource deficiency across most of the social sectors in India has historically been so severe that modest increases in allocations, through incremental budgeting, cannot make any significant difference in the short run; and, secondly, resource mobilisation efforts of the government required a lot more tough measures on the direct taxation front compared to what have been adopted over the last few years. NDA-II has been more proactive than UPA-II on tax policy and tax administration front; yet, the landscape of public provisioning in India is so deeply affected by under-funding that the country needs a significant step up in its tax-GDP ratio.

The author is with Centre for Budget and Governance Accountability Views expressed are personal.