Fiscal Deficit and Welfare Programs – Myth and Reality
A research by Umesh Babu (Sr. Economist), Sanjeev Kumar, Bhargawi
1st March 2013
Part One: Overall budget of the government.
The Present UPA government has prepared budget to execute State Policy with a budget size of Rs 1665297 Cr in the 2013-14 and estimated fiscal deficit is Rs 542499 Cr. In the year 2011-12 size of the fiscal deficit is more than the plan budget and this trend is continuing in the revised budget of 2012-13. In the current budget it is slightly less. It is definitely a serious concern for all of us because government needs money to plan for development and sustenance of the citizen’s growth.
Table – 1 : Central Government Budget at a Glance
All figures are in Rs. Cr
Particular
2011-12 (AE)
2012-13 (BE)
2012-13 (RE)
2013-14 (BE)
Total Budget
1304365
1490925
1430825
1665297
Plan Budget
412375
521025
429187
555322
Non Plan Budget
891990
969900
1001638
1109975
Fiscal Deficit
515990
513590
520925
542499
Source: Budget at a glance, Govt of India
But we must also consider other facts while looking into fiscal deficit. The projected revenue foregone during the year 2012-13 is Rs 573626.70 Cr which is higher than the Revised Plan Budget (Rs. 429187 Cr) and Fiscal Deficit (Rs 520925 Cr). It is important to note that the allocation for plan budget is for the entire population of India 124 Cr where as the revenue forgone is for the companies.
This is not exception but a trend followed every year. Revenue forgone for four consecutive years from 2009-10 is given in table 2. The average revenue exemption per company is approx Rs 1 Cr per year. Meaning government is paying them Rs. 1 Cr every year in one or other ways. This does not include the subsidized land and other resources.
Table -2 : Structure of Revenue Foregone
Exemption of tax and duties to Corporate Sector
Year
2009-10 (Actual)
20010-11 (Actual)
2011-12 (Actual)
2012-13 (BE)
No of companies
427811
459270
494545
494545
Amount
% to Total
Amount
% to Total
Amount
% to Total
Amount
% to Total
Personal Income Tax
45142.00
9.36
36826.00
8.01
39375.40
7.38
45464.10
7.93
Corporate Income Tax
72881.00
15.11
57912.00
12.60
61765.30
11.58
68007.60
11.86
Excise Duty
169121.00
35.06
192227.00
41.82
195590.00
36.66
206188.00
35.94
Custom Duty
195288.00
40.48
172740.00
37.58
236852.00
44.39
253967.00
44.27
Total
482432.00
100.00
459705.00
100.00
533582.70
100.00
573626.70
100.00
Revenue foregone per corporate
1.13
1.00
1.08
1.16
Page 2 of 8
Source: Figures are taken out from the Statement 12 - Revenue forgone under the Central Tax System for the year 213-14, 2012-13 and 2011-12
The parliamentary standing committee on finance has already recommended1 raising the tax bar for companies and phasing out exemptions given to them rather than burdening the salaried class and the smaller tax payers. But this recommendation has not been noticed by the Finance Minister. Perhaps the Finance Minister is more convinced by the companies and not by the citizens, honorable parliamentarians of the house and the standing committee. The intension of the government towards the companies and its’ citizens is clearly reflected in three columns Plan Budget, Fiscal Deficit and Revenue Forgone of the Budget.
Part Two - Disbursement of Budgeted Fund
To understand the kind of expenditure and disbursement to the citizens, we need to see the trend of expenditure which directly benefits the targeted social and vocational groups. We need to see that how many schemes are designed in manners which directly benefit them?
1. Budgetary allocation for Handloom Weavers
The Ministry of Textiles has allocated total Rs. 4631 Cr in the Plan Budget with a provision of Rs 425.50 Cr for Handloom Weavers. This allocation is continuation of the trend where major direct benefiting schemes are being discontinued and total plan sizes are turned down year after year. We can see the examples in table:
Table 3 : Ministry of Textiles (Handloom)
Ministry of Textiles, Demand no. 93
Sr. No.
Heads
Actual 2011-12
Budget 2012-13
Revised 2012-13
Budget 2013-14
Plan Budget
Total Ministry
4207.80
7000.00
4500.00
4631.00
Total Handloom
607.62
2898.00
974.00
425.50
Village and Small Industries Handloom Industries
1
Comprehensive Handloom Dev Scheme
107.00
2
Integrated Handloom Development Scheme
219.34
170.00
131.00
3
Revival Reforms and Restructuring package for Handlooms
200.00
2205.00
550.00
157.00
4
Marketing and Export Promotion Scheme
53.44
48.00
40.00
5
Diversified Handloom Development Scheme
12.37
20.00
25.00
6
Handloom Weavers Comprehensive Welfare
68.21
105.00
105.00
65.00
7
Yarn Supply Scheme / Mill Gate Price Scheme
54.26
350.00
123.00
96.50
Non Plan Budget
8
Weaver Service Centre
28.67
32.50
32.31
35.00
9
Scheme for grant of special rebate at the rate of ten percent on sale of accumulated Handloom stock
0.01
10
Others
19.86
30.00
30.49
32.99
1 Business Line, March 2, 2012, New Delhi
Page 3 of 8
Textile industry contributes 2% to GDP2 at 1999-00 price. In Textile industry handloom is the largest sector providing employment and production. This sector gives employment to more than 43 lakh3 handloom weavers and allied workers and is second to the Agriculture sector in terms of providing employment. Handloom is the cultural heritage of our country and hence it is imperative to protect and promote the sector. This is the case where the trust on government data, the one which normally people believe, are presented to make the good report of the concerned responsible bureaucrat / political party / ministry and pubic interest and reality remains unattended and diminished.
It is not only 43 lakh handloom weavers but the families. In India number of members in a typical family is 6-8 persons4. This means that handloom sector provides livelihood for a population minimum 2.5 Cr.
But the sincerity of the government, reflected in the budget, tells a different tale. “Integrated Handloom Development Scheme” is turned down in previous year and in the current year the allocation is completely stopped. It is not a single case but there are many schemes as shown in the Table 2 above. Their representation, agitation, demands and all other efforts are null and void to the government.
2. Budgetary Allocation for Fish Workers
Under Ministry of Agriculture; the Department of Animal Husbandry, Dairy and Fishery has plan budget of Rs 2025 Cr and in this budget the allocation for fisheries is Rs. 317 Cr. The fishery sector contributes 0.7% to the GDP5. It means this sector is entitled for 0.7% of the Union budget i.e. Rs. 3887.25 Cr in Plan Budget and Rs 7769.82 in Non-Plan budget and hence, the allocation is clearly proved to be insufficient.
Table – 4 : Ministry of Agriculture (Fisheries)
Ministry of Agriculture, Demand 3 - Dept of Animal Husbandry, Dairy and Fisheries
Sr. No.
Heads
Actual 2011-12
Budget 2012-13
Revised 2012-13
Budget 2013-14
Plan Budget
Total Budget
1230.01
1910.00
1800.00
2025.00
Fisheries
305.60
299.70
273.25
317.30
1
Marine Fisheries
120.29
120.00
111.30
110.00
2
Inland Fisheries
34.12
30.80
21.35
35.80
3
National Institute of Fisheries Post Harvest Technology & Training (NIFPHT&T)
1.76
2.20
2.40
2.35
4
Fishery Survey of India
33.10
37.00
32.43
40.00
5
Central Institute for Fisheries Nautical Engg. & Training
8.33
15.00
14.26
15.15
6
National Fisheries Development Board
108.00
94.70
91.51
114.00
2 Press Information Bureau 5th May 2010 15.36 IST
3 "Handloom, A Rich Heritage of India" by Monika S.Garg (IAS), Manoj Jain, B.B. Paul, S. Ulaganathan Dated - 16.7.2012
4 Indian Express, News Paper dated Wed Mar 14 2012, 03:16 hrs (http://www.indianexpress.com/news/the-houses-that-india-lives-in/923311)
5 Economic Survey of India 2011-12, Page 193 Paragraph 8.57
Page 4 of 8
Non-Plan Budget
Sr. No.
Heads
Actual 2011-12
Budget 2012-13
Revised 2012-13
Budget 2013-14
7
Central Institute of Coastal Engineering for Fisheries
2.17
3.75
3.4
3.75
8
National Institute of Fisheries Post Harvest Technology & Training (NIFPHT&T)
4.71
5.76
5.21
5.55
9
Fishery Survey of India
8.64
10
9.7
10.03
10
Central Institute for Fisheries Nautical Engg. & Training
8.69
9.5
9.91
10.7
11
Other Fisheries Program
4.38
4.41
4.16
5.05
12
National Fisheries Development Board
13
Package for Replacement of Fishing Vessels seized by Pakistan
3.5
1
1
3.5
To the understanding of fish workers the entire allocation under plan is dedicated to institutional mechanism. The questions of institutional performance in supporting fish workers are not the subject matter of research in this paper. Even if we presume that these institutions perform well and their efficiencies are beyond the question, the budgetary support reflected in the budget gives a real picture that how much they are able to convince the government to allocate justified amount.
Keeping all critics aside it is presumed that perhaps there are two schemes namely “Other Fisheries Program” and “Package for Replacement of Fishing Vessels seized by Pakistan” targeted for direct benefit to the fish workers under Non Plan Budget. But in these two schemes total fund allocated is Rs. 8.85 Cr. The “Package for Replacement of Fishing Vessels seized by Pakistan” scheme is performing worst. Rs. 3.5 Cr was spent in the year 2011-12 and it was reduced to the level of 1 Cr in 2012-13. Again it is increased to Rs. 3.5 Cr. Fish workers are of the opinion that this amount is only for the administrative expense of the bureaucrats and nothing in actual is directly spent for replacement. And also ‘Budget’ only includes replacement of fishing vessels seized by Pakistan where as the replacement of vessels seized by Srilanka, Bangladesh and other Countries in the borders of Tamilnadu and West Bengal are not taken in to consideration in the so called ‘Central Budget’.
Fish workers feels that government is considering neither GDP nor the livelihood of fish workers, at least in terms of support system reflected in the budgetary allocation. The budget presented by the Finance Minister is made only for the benefit of big companies and the country is on sale for companies.
3. Budgetary allocations for Scheduled Castes and Scheduled Tribes
For SC/ST budget is allocated under the component plans called Special Component Plan (SCP) for Scheduled Castes and Tribal Sub Plan (TSP) for Scheduled Tribes. The first lapse is - funds are not allocated as per the population. As per the decision taken by the National Development Council (NDC) dated 27th June 2005, the allocation under SCP/TSP is non-divertible and non-lapsable and should be at least in proportion of SC/ST population and has to be used to bridge the
Page 5 of 8
Social and Economic Gap between SC/ST and General in a period of 10 years. This is in consistent to the value of constitution India Article 38, 39 and 46.
The Honb’le Finance Minister stated in his statement on 31st Aug 2010 that “……….I can confess to you that I spent a considerable amount of time trying to understand what went on. I think, we must first understand as to what had happened. And, then, we can make a judgement. After all, we are the supreme legislative body we can make a judgement whether what had happened was right or wrong. If it is right, the matter ends there. But, if it is wrong, we will take corrective action. I had expected a hard criticism. ……….” It seems that he has already spent a considerable time and he need not spent his ‘considerable time’ any more on this topic. Perhaps because of this reason the allocations under SCP/TSP could not match to the population of SC/ST (16.2 + 8.2 = 24.4%). The amount denied to SCs and STs are Rs 48401.03 Cr and Rs 20938.01 Cr respectively.
Table 5 : Allocations made under SCP / TSP for SCs and STs
Census 2001 SC Population 16.2% ST Population 8.2%
Particular
2011-12 (AE)
2012-13 (BE)
2012-13 (RE)
2013-14 (BE)
Allocation under SCP
28535.10
37113.03
33085.04
41561.13
SCP in Percentage
6.92
7.12
7.71
7.48
Due SCP
66804.75
84406.05
69528.29
89962.16
Denial under SCP
38269.65
47293.02
36443.25
48401.03
Allocation under TSP
17453.61
21710.11
18721.33
24598.39
TSP in Percentage
4.23
4.17
4.36
4.43
Due TSP
33814.75
42724.05
35193.33
45536.40
Denial under TSP
16361.14
21013.94
16472.00
20938.01
It requires no more proof that allocations are not in the proportion of the population of SC/ST. With regard to GDP, the Work Participation Ratio (WPR) of ST in rural area is 576 and highest in the country and WPR of SC is lowest 54%. In urban sector the WPR of SC is highest 56 % and that of ST is lowest 51. Traditionally the WPR of SC and ST has always been highest. This is evidence of their commitment and investment for the national development. Their time and lobour to the country is highest. But in contradiction to investment, allocation for their welfare and development is largely diversion. The Hon’le Finance Minister has not made any exemption for this community, instead he diverted fund for the general programs.
To substantiate the fact we need to look into the details of allocations and expenditures reflected in Statement 21. The Department of Health and Family Welfare has allocated Rs 2579.66 Cr in a scheme NRHM-RCH Flexible Pool and Rs. 995.70 Cr for Infrastructure maintenance scheme in the year 2013-14. It is not exceptional case in this year. But in previous year also government has done it without hesitation in schemes like Flexible Pool for State PIPs, National AIDS Control
6 NSS Report No. 531: Employment and Unemployment Situation in India: July, 2007-June, 2008 NSS Report No. 531: Employment and Unemployment Situation in India: July, 2007-June, 2008 (http://mospi.nic.in/mospi_new/upload/nsso/531_533_Highlights.pdf)
Page 6 of 8
Programme, etc. All other ministries like Ministry of Human Resource & Development, Ministry of Agriculture, Ministry of Textiles, Ministry of Youth & Sports, etc are doing so. Similar is the case of Statement 21A which for Scheduled Tribes. If we add the figures of these two statements then above figures will more. Few selected schemes are given in Table -6 and Table – 7 to give the idea about the kind of allocation made for SC/ST Welfare and Development.
Table – 6: Selected Schemes of Statement 21
STATEMENT 21 - Special Component Plan for SCs
Demand
Item
Head / Department
2011-2012
2012-2013
2012-2013
2013-2014
Actual
Budget
Revised
Budget
1
16
National Horticulture Mission
210.00
350.00
244.40
300.00
31
7
National Afforestation Programme
20.00
20.00
13.00
20.00
47
2
National Programme for Prevention & Control of Diabetese, CVD & Strokes
15.07
45.60
26.60
73.75
47
7
Infrastructure Maintenance
713.57
978.11
1012.04
995.70
47
22
NRHM-RCH Flexible Pool
0.00
0.00
0.00
2579.66
47
24
Flexible Pool for Communicable Diseases
0.00
0.00
0.00
282.08
47
25
Flexible Pool for Non-Communcable Diseases,Injury &Trauma
0.00
0.00
0.00
173.75
47
26
Human Resources for Health
0.00
0.00
0.00
232.68
50
1
National AIDS Control Programme
0.00
258.40
267.45
271.32
59
3
Strengthening of Teacher Training Institutions
68.42
100.00
58.40
100.00
59
4
Mahila Samakhya
10.00
12.00
12.00
12.00
59
5
Support to NGOs/Institutions/SRCs for Adult Education & Skill Development (Merged schemes of NGOs/JSS/SRCs)
19.16
21.00
16.09
20.00
59
6
Adult Education & Skill Development Scheme
94.16
118.40
84.30
114.40
59
11
Navodaya Vidyalayas Samiti
240.00
250.00
250.00
250.00
59
12
Kendriya Vidyalayas Sangathan
70.00
70.00
70.00
70.00
59
16
Rashtriya Madhyamik Shiksha Abhiyan (RMSA)
512.26
624.80
625.80
796.60
59
17
Scheme for setting up of 6000 Model Schools at Block level as Benchmark of Excellence
216.34
216.00
161.36
200.00
60
3
IITs
180.60
180.00
199.80
360.00
60
7
NITs
144.00
150.00
199.80
195.00
84
1
Integrated Watershed Management Programme (IWMP)
259.99
494.10
470.37
872.69
Page 7 of 8
Table -7 : Selected Schemes of Statement 21A
STATEMENT 21A - Tribal Sub Plan for ST
Demand
Item
MINISTRY/DEPARTMENT / Head
2011-2012
2012-2013
2012-2013
2013-2014
Actuals
Budget
Revised
Budget
1
9
Support to State Extension Services
24.92
50.00
44.94
40.00
1
12
Horticulture Mission for North-East and Himalayan States
70.17
100.00
105.14
200.00
1
15
National Horticulture Mission
75.00
160.00
100.00
150.00
10
2
Detailed Drilling Ministry of Coal
9.95
12.30
12.30
14.40
14
1
E-Governance - Tele communication
54.45
92.42
48.92
84.64
47
2
National Programme for Prevention & Control of Diabetese, CVD & Strokes
9.91
24.60
14.35
39.78
47
7
Infrastructure Maintenance (Ministry of Health)
395.36
527.64
536.30
537.13
47
21
NRHM-RCH Flexible Pool
0.00
0.00
0.00
1391.68
48
8
National Mission on Medical Plants
0.76
1.00
1.00
2.00
50
1
National AIDS Control Programme
0.00
139.40
144.28
146.37
59
11
Navodaya Vidyalayas Samiti
128.40
133.75
133.75
133.75
59
12
Kendriya Vidyalaya Sangathan
37.45
37.45
37.45
37.45
59
17
Rashtriya Madhyamik Shiksha Abhiyan (RMSA)
273.73
334.27
342.81
426.18
59
18
Scheme for setting up of 6000 Model Schools at Block level as Benchmark of Excellence
109.11
115.56
80.25
107.00
60
1
UGC
434.00
504.58
462.10
439.03
60
3
IITs (incl.OSC)
90.30
90.00
99.90
180.00
60
7
NITs
72.00
75.00
64.72
97.50
60
63
Rashtriya Uchcha Shiksha Abhiyan RUSA)
0.00
0.00
0.00
41.50
60
72
Support to IISc and IISER
0.00
0.00
0.00
64.46
60
80
Support for The Polytechnics in The States
0.00
0.00
0.00
52.50
82
1
Special Programme for Development of Road Connectivity in Naxalite Affected Areas
374.00
500.00
500.00
800.00
84
1
Integrated Watershed Management Programme (IWMP)
230.82
305.00
290.35
538.70
106
6
Sports Authority of India
20.00
25.00
20.00
31.00
These are few examples which serve as evidences to prove that welfare and development funds of SC/ST are allocated to the institutions mainly. There are almost 80% of such allocations. This is in contrary to the mandate of SCP / TSP. The government is very specific and efficient in exempting taxes and supporting larger companies but not its’ own citizens. This is the economics defined in the budget of Honb’le Finance Minister.
Page 8 of 8
The purpose of currency is to bridge between commodity exchanges. But slowly and steadily Government has prioritized currency over everything through the corporatization. Be it the understanding (education), breathing (carbon credit), water (privatization of rivers), retrenching food supply (cash for PDS) or any other issue; currency has been put in priority against human needs. Grains and ration can be poured in sea but can’t be distributed among the poor because they don’t have currency to give as corruption. Land can be acquired and sold to the corporate sector but can’t be given to the landless. Money for carbon credit can be given to TATAs and others but not to the people. No doubt the SC/ST, Handloom Weavers, fish workers are victimized and massively hit by the Union budget 2013 and larger companies are rewarded for the reasons well known to the Honb’le Finance Minister. Government is talking about the Fiscal Deficit but not about the Revenue Forgone.
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