‘States unlikely to bridge gap in funding’

Greater share in taxes may not compensate for budget cuts in Central schemes.

Updated - May 23, 2016 04:12 pm IST

Published - May 21, 2015 04:02 am IST - NEW DELHI:

As the National Democratic Alliance government completes a year in office, an emerging area of concern has been the fallout of cuts for centrally sponsored social welfare schemes in Budget 2015-16.

The Centre, which accepted the recommendations of the 14th Finance Commission in February this year, has argued that the increased share of tax revenue allocation for States as per its recommendations, will compensate for the reduction in Central spending on social sector programmes. However, experts from the field of economics, NGOs monitoring social welfare spending and select think tanks have questioned this.

Steep fall

A preliminary analysis of budget allocations for food and nutrition programmes in 2015-16 in two States – Bihar and Himachal Pradesh – conducted by the Forum for Learning and Action with Innovation and Rigour (FLAIR), a Delhi-based NGO, has shown a steep fall in allocations.

 “As a proportion of the total Union Budget, allocation for schemes contributing to Food and Nutrition Security is only 10.9 per cent in 2015-16, much lower than last year’s share of 12.5 per cent,” Ajay Sinha, Executive Director, FLAIR and lead author of the report, told  The Hindu . “Our study of budgets in Bihar and Himachal Pradesh shows no corresponding increase in allocations at the State level,” he said.

In Bihar, the report shows that allocations for the schemes contributing to food and nutrition security came down from Rs. 8985.91 crore in 2014-15 RE (Revised Estimate) to Rs. 6054.447 crore in 2015-16 BE (Budget Estimate), a drop of 32.6 per cent. In Himachal Pradesh, there was an increase of 8.76 per cent in the allocations for schemes contributing to food and nutrition security from Rs. 2326.19 crore in 2014-15 RE to Rs.2425.69 crore in 2015-16. However, this does not adequately compensate for the decrease in allocation at the Union level, the report shows. The researchers for the Report compared previous years’ RE with this years’ BE as RE for this year is not available as yet.  

‘Misleading explanation’ Speaking at an event organised in the capital on Wednesday to review the performance of one year of Modi government, eminent economist Prabhat Patnaik said, “The substantial reduction in social sector spending by the NDA government over the past year made it clear that all the explanations about the increase in state share of taxation from 32 per cent to 42 per cent is misleading as the total transfer of Central budget to States had reduced from 6.1 per cent to 5.8 per cent of the Gross Domestic Product.”

 He said this reduction was ruinous especially for poorer States like Uttarakhand, Bihar and Odisha. With the introduction of the Goods and Services Tax, the autonomy of the States to raise their own resources and levy taxes would be further curtailed, thus preventing States from being able to compensate the lack of budgetary support.

‘Schemes of no use’

Social activist Aruna Roy, who was speaking on behalf of the civil society group Jan Awaaz said the poor and the marginalised will not benefit from any of the contributory insurance and pension schemes launched by the NDA government as the social sector spending cuts had hurt their ability to earn. “If there are no jobs under MNREGA due to budget cuts, how will the poor contribute money to avail of insurance schemes of the government?” she asked.

She further said the NDA government’s emphasis on a paperless office was a move towards an unaccountable system, making it difficult to track decisions taken within closed doors .

 Sona Mitra, Research Coordinator at the Centre for Budget and Governance Accountability has recently authored a paper ‘The Myth of Increased Resources for States’ published in Macroscan in which she has argued that though net spending abilities for States has increased under the 14th Finance Commission, in real terms that increase is not reflected in financing expenditures for the social sector.

She told The Hindu : “States have to increase their budgets for schemes such as ICDS by 50 per cent to cover for Central cuts, over and above other expenditures they incur. We spoke to the health department in Maharashtra who told us that they were waiting for the government to issue directives on spending. However, the NITI Aayog’s proposed white paper on this would not be ready until the end of June.”

As a result of this, States are now exploring the idea of a supplementary budget, in order to compensate for the lack of resources, but this process will not be over until August. Meanwhile, the uncertainties faced by State departments over funding have stalled social welfare projects, she said.

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