BUDGET BRIEF

UNION BUDGET 2011: A RELIEF OR A PAIN?

2011

Union Budget 2011: A relief or a pain? Rahul Suresh Sapkal1

Union Budget 2011 has shown a remarkable picture of Indias deficit financing in major sectors. No wonder a The Union Government wants to reduce the scope of its budget (as measured by Total Expenditure from the Union Budget) as compared to the size of Indias economy

twisting of incremental expenditure on major social sector have had a marginal impact. During Union budget speech Mr. Pranab Mukharjee tried to balance the deficit finance agenda with Indias growth story. In some sense he has

succeeded too. While highlighting the social sector spending he has used last years (2010-11) Budget Estimated figures i.e. 20% hike on health sector from last year about Rs.30, 456 Crs (both plan and nonplan 2011). But when he referred to the economically prioritized sector he used Revised Estimate figures. In this twisting exercise Mr. Pranab has played dual role first while taking into account Budget Estimate his portfolio has shown supply driven fund flow i.e. not considering demand from frontline delivery institutions and secondly for economically prioritized sector he has taken into account Revised Estimate for demand driven fund flow. It is evident from our analysis2 is that Union Government wants to reduce the scope of its budget as compared to the size of Indias economy which is elicited in Economic Survey 2011. For the year 200910 government has spent only 97% of its revenue expenditure and 37% of its capital expenditure on department of health and family welfare. In same year it has spent only 96% of its revenue expenditure and no provision was made for capital expenditure in health research department. Department of Ayush has shown 93% of spending on revenue accounts and 5% spending on capital expenditure. This trend
1

Sr. Research Associate, CEHAT (Centre for Enquiry into Health and Allied Themes) Tel:91-22-26673571/ 26673154 Fax: 91-22-26673156 Cell: +91-9769928533 Email: rahul@cehat.org, rahul.sapkal86@gmail.com Web: http://www.cehat.org/go/ 2 Refer Annexure 1

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UNION BUDGET 2011: A RELIEF OR A PAIN?

2011

shows that government is reluctant to spend 100% amount on the proposed budget estimate. It also shows that drastic reduction in capital expenditure in routine health department that has really worsened the government health infrastructure capacity. By significantly increasing the amount and reliance on programme like NRHM has proved that government is retreating its health care responsibility towards its peoples. The fundamental reason is that the Union Government wants to reduce the scope of its budget as compared to the size of Indias economy as enshrine in Economic survey 2011. When the countrys GDP is projected to increase noticeably from Rs. 78.8 lakh crore in 2010-11 to Rs. 89.8 lakh crore in 2011-12, the Total Expenditure from Union Budget is going to register a much smaller increase from Rs. 12.17 lakh crore to Rs. 12.58 lakh crore. Thus, the Total Expenditure from the Union Budget would shrink from 15.4 % of GDP in 2010-11 (Revised Estimates) to 14 % of GDP in 2011-12 (Budget Estimates). One of the factors underlying such expenditure compression is the inability of the Union Government to revive the magnitude of its tax revenue after sharp declined during the economic recession. The Union Governments Gross Tax Revenue had reached the level of 12 % of GDP in 2007-08; it fell to 10.9 % of GDP in 2008-09 and further to 9.5 % of GDP in 2009-10 under the impact of the economic recession. However, even after the recession, Centres Gross Tax Revenue has shown a very slow increase to 10 % of GDP in 2010-11 (Revised Estimates) and up to 10.4 % of GDP. This year union budget (2011-12) has proposed Rs.733558.83 Crs as non-plan revenue expenditure and Rs.82623.25 Crs as a non-plan capital expenditure whereas revised estimate (2010-11) of the non-plan

One of the factors underlying such expenditure compression is the inability of the Union Government to revive the magnitude of its tax revenue after sharp declined during the economic recession It also shows that drastic reduction in capital expenditure in routine health department that has really worsened the government health infrastructure capacity

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UNION BUDGET 2011: A RELIEF OR A PAIN?

2011

outlay for the revenue and capital expenditure was Rs.726749.07 Crs and Rs. 94802.46 Crs respectively. It is evident that non-plan revenue expenditure has been increased at less than one percentage (Rs.6808.93 Crs) wherein non-plan capital expenditure is reduced by Rs.6808.93 Crs. With this act union government has not only curtailed the expenditure that is recurring in nature but also it has also impinged upon a new investment in capital expenditure. In the plan expenditure Rs.363603.41crs is proposed for revenue expenditure and Rs.77943.34 Crs is proposed for capital expenditure whereas the revised expenditure for 201011 was Rs. 326927.72crs for revenue and Rs 68096.48crs for capital expenditure. It can be seen that in the plan outlay, capital expenditure is abysmal as compared to revenue. It shows the union government responsibility towards creating infrastructure. In the budget document the union government is striving to bring pace into to the development process but without giving adequate attention to the infrastructure development through capital expenditure. With respect to the social sector budget in the non-plan outlay, health sector which are included in social sector has received lesser amount than the previous year. Revised estimate of the year 2010-11 was Rs. 35085 Crs for which Rs.20862 Crs has been proposed in the current budget. It shows us a 41% reduction in non-plan outlay for social sector. A glance at the central plan outlay for social service sector in general and health sector in particular will reveal a marginal increment in social and health sector. In 2011, central outlay for Social sector is Rs153812.15 Crs which is increased from the revised estimate of Rs. 136490.96 Crs of year 2010-11. In tantamount to health sector, the revised estimate has been under spent over the budget estimate. Here we are refereeing to this figure because nature of revision in not explicitly mentioned in the budget document. Last years budget document gives estimated figures of around Rs. One of the factors underlying such expenditure compression is the inability of the Union Government to revive the magnitude of its tax revenue after sharp declined during the economic recession

BUDGET BRIEF

UNION BUDGET 2011: A RELIEF OR A PAIN?

2011

7270.59 Crs which is being revised/reduce to Rs. 6939.67 Crs, however, a sum of Rs. 330.92 Crs. net fund for health (2210 Major Head) was quoted to be undervalued in revised estimate3. In summing up a downsizing of capital expenditure in plan outlay of health sector could not bring real effect in development process. Because institutions have to be strengthen to provide better services to the people. If take a case of health sector which is completely relied upon infrastructure for service delivery, without it the entire health sector would become defunct. By compressing the total expenditure share for plan and non-plan union government is retreating the state from its social commitment towards its subject. Here is the clue resides whether we want to celebrate economic liberation in social sector or cherishing fiscal conservatism. With this persistent under spending backlog The union government has not only curtailed the expenditure that is recurring in nature but also it has also impinged upon a new investment in capital expenditure. It shows us a 41% reduction in non-plan outlay for social sector. Last year a sum of Rs. 330.92 Crs. net fund for health (2210 Major Head) was quoted to be undervalued in revised estimate.

how government would, achieves their social and equitable goals in near futures. Whether social subject matters to the union government or not? Acknowledgement:

I wish to express my thanks to Mr.Ravi Duggal (Programme Manager IBP), Mr. Prashant Raymus (Cehat), Mr. Pranit Patil (Cehat) and Ms. Shruti for their valuable comments on earlier drafts. Rests of the error are mine.

Refer, pg no 47 Expenditure Budget Volume 1 2011-12)

BUDGET BRIEF

UNION BUDGET 2011: A RELIEF OR A PAIN?

2011

Annexure

Source: Calculated from various Budget Documents, access from: http://indiabudget.nic.in/index.asp