Economy

Budget sets priorities for government spending

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The rural sector, a priority, is in a mess, so the Centre has to take action

Budget 2016-17 has introduced a new classification system for the Centre’s spending, according the Mahatma Gandhi National Rural Employment Guarantee Scheme the highest priority by deeming it ‘Core of the Core’.

The new system divides Centrally Sponsored Schemes (CSS) into three categories: Core of the Core, Core, and Optional Schemes. This system is based on the recommendations of a sub-committee of chief ministers formed by Niti Aayog for the rationalisation of the CSS.

“For effective outcome based monitoring of implementation of the programmes and schemes and to ensure optimum utilisation of resources, an exercise to rationalise Plan and Non-Plan schemes of all Ministries and Departments had been undertaken,” a Plan Outlay document tabled in Parliament along with the Budget said. “The existing programmes and schemes have been re-organised into outcome-based Umbrella programmes and schemes to avoid thin spread of resources.”

This system has been put in place as a run-up to the next financial year, when the Plan/Non-Plan distinction in government expenditure will be done away with.

As per the new system, the Core of the Core schemes will retain their expenditure allocation framework. For example, MGNREGA had 75 per cent of the material expenditure from the Centre and 25 per cent from the states.

The Core schemes will have a 60:40 formula, while the Optional schemes will have a 50:50 formula, with the states having the flexibility to decide whether to invest in these or not.

“This new classification system is meaningless,” M Govinda Rao, Professor Emeritus at the National Institute of Public Finance and Policy said. “You cannot have 30-odd specific-purpose transfers (where central funds are transferred for a specific use) without any standard of outcomes. The new system does not address this issue of linking expenditure to outcomes, it simply re-classifies the expenditure.”

Under the new classification, eight schemes will be classified as Core of the Core. including MGNREGA and all the umbrella schemes for the upliftment of minorities, Scheduled Castes, and Scheduled Tribes.

The Core schemes, 33 in number, include schemes as far-ranging as the Krishi Unnati Yojana, the Smart Cities programme, and the modernisation of the police force.

“It is a good move. The classification is trying to segregate the schemes by importance,” Rajiv Kumar, senior fellow at the Centre for Policy Research told The Hindu. “The state governments were earlier taking their own decisions regarding many of these schemes. Now the Centre has said that some are important schemes and the states can take their own decisions regarding the others.”

“Till 2014-15, out of 66 CSS, almost 86 per cent of the Central assistance was accounted for by only 17 schemes (known as 'Flagship Schemes' on account of their size and scale). The balance 49 schemes received low budgetary allocations,” the report by the Niti Aayog sub-committee found.

“However, since even in the low-budget schemes, some Central assistance was available; the States therefore felt compelled to implement them all, so as to avail of matching assistance,” the report added.

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Printable version | Jul 20, 2019 2:52:29 PM | https://www.thehindu.com/business/Economy/budget-sets-priorities-for-government-spending/article8414505.ece

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