The focus in this pre-election budget has shifted from the flagship MGNREGS to cash transfer-related schemes

If there was any expectation that the combination of an economic crisis and an election year would alter the government’s priorities, the Finance Minister was quick to dismiss it. Early in his Budget speech, he made it clear that “we must unhesitatingly embrace growth as the highest goal … without growth there will be neither development nor inclusiveness.” He went on to put the numbers to back this contention, with the fiscal deficit being kept closer to target levels than many thought would be possible. This commitment to growth at all costs demanded a price in terms of providing less than what is needed for the social sector. And the way Mr. Chidambaram has paid this price suggests the Congress party will be going into an election year without the resources that the government had in 2009.

Frozen on MGNREGS

The first step in this strategy has been to gloss over those parts of the social sector where there is no real increase in allocations. The most striking example is that of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which acted as the main vehicle of the Congress’s electoral fortunes the last time round. Mr. Chidambaram has kept the allocation for this activity frozen at the level set in the last Budget. He has spoken of this as an increase by comparing it to the Revised Estimates for the current year rather than the Budget Estimates. But the fact that the revised estimates for MGNREGS was 11 per cent less than the budgeted figure only suggests that the decision not to make this scheme the leading light of the next election campaign has already been taken.

With poor growth restricting the resources available for an electorally rewarding boost to the social sector, the emphasis would have to be on more sharply focused social sector expenditure. And the broad contours that this approach could take are evident in the budget documents. At the heart of this approach is the Direct Benefit Transfer (DBT) or the direct cash transfers to beneficiaries identified using the Unique Identification Authority of India (UIDAI). In a year when MGNREGS has been frozen at the level of the previous budget, the allocation for UIDAI has been raised by 40 per cent over the current year’s Budget Estimates and 65 per cent over the year’s Revised Estimates, to reach Rs.1,819 crore.

There does seem to be some recognition, though, of the need to hasten slowly on this front. The budget figures do not suggest any move to expand cash transfers rapidly into new areas. The cash transfers are supposed to reduce subsidies by preventing leakages. But the budget documents do not suggest any reduction in the major subsidies. On the contrary, while the fertilizer subsidy is budgeted to be kept at around the Revised Estimate for the current year, the budget estimates the food subsidy to go up to Rs.90,000 crore, up from Rs.85,000 crore in the Revised Estimates for the current year and Rs.75,000 crore in the Budget presented last year. Thus when Mr. Chidambaram assured the House in his speech “that the DBT scheme will be rolled out throughout the country during the term of the UPA Government,” he was apparently referring to the spread of only the schemes that are currently covered in the various pilot projects of the DBT or a few other similar ones.

Focus on women, children

Having decided to focus on a relatively narrow base of schemes that are compatible with cash transfers the budget also reveals a clear focus on women and children. In listing the three faces that he saw as representing the country the Finance Minister began with women and youth before going on to the DBT related poor. It is then no surprise that the budget has substantially increased allocations to schemes that allow for direct cash transfers to women and young Indians. The Indira Gandhi Matritva Sahyog Yojana (IGMSY) that envisages providing cash assistance directly to pregnant and lactating women has seen its Budget allocation for the coming year going up to almost five times the Revised Estimate for the current year. Similarly, the allocation for pre-matric scholarships for Other Backward Classes has been trebled from the Budget and Revised estimates for the current year. The allocation for post-matric scholarships for the same category has also gone up by 44 per cent to reach Rs.810 crore.

Food Bill

This focus on cash transfer related social sector spending does not rule out expenditure on other more traditional electorally rewarding social sector activities. The offer of food at low prices has been a staple of Indian politics in several States. The proposed Food Security Bill is designed to take this benefit to the national stage. By making an allocation for the incremental costs of the food subsidy after the Food Security Bill becomes a law the Finance Minister has sought to confirm his party’s commitment to this cause. But the less-than-adequate allocation of Rs.10,000 crore suggests that Mr. Chidambaram only expects the Food Security mechanism to come into play for a relatively small part of the year; perhaps just long enough for it to have a political benefit.

With the size of the allocation for the implementation of the Food Security Bill being small enough to create doubts about when, and even if, the Bill will come into effect, the main social sector take-away from the Budget would remain its clear focus on the cash transfer related schemes. The slow growth rate and the government’s prioritisation of growth over welfare may have constrained the resources for the social sector. But in the distribution of those limited resources, the Finance Minister has made it clear that the electorally rewarding schemes come first.

(Prof. Narendar Pani is with the National Institute of Advanced Studies, Bangalore.)

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