Nayana RenuKumarCENTRE FOR GOOD GOVERNANCE
Public Expenditure Trends and Patterns - India
Indian Economy
Impressive growth in last two decades
Recent slow down in response to global cues and internal strains (rising inflation, declining investment, structural bottlenecks)
Latest reforms measures cover FDI, subsidies, tax reforms, innovation and open government
Opportunities: Demographic dividend, innovative and entrepreneurial business class
Key challenges: Making growth more inclusive, addressing widespread poverty and rising inequality
Large share of population employed in informal sector affecting tax collection
and in turn, public sending
Limited access to basic services
State of public finances
Substantial improvement till 2007-08
Fiscal deficit down to 4%
Expansion of Corporate sector and corporate tax receipts
New tax on services and high proceeds from personal income
tax
Weakening of finances since 2010
High fiscal deficit from tax cuts, debt write offs, public sector
wage raise and high subsidies in energy sector
Regulatory environment characterised by state control, barriers
to entrepreneurship and obstacles to trade and investment
Public spending for Development : Reducing Poverty and Inequality
Impressive progress in reducing absolute poverty offset by rising inequality since 1990s especially between rural and urban areas
India ranks 134 in HDI 2010-11 but has performed better than most (including high and very high human development) countries in terms of average annual HDI growth rate
Existing gap in health and education indicators indicates the need for much faster and wider spread of basic health and education
Item2011-12 BE
Areas Exp.
Expenditure on social services as a proportion of GDP
6.74%
Education 3.11
Health 1.3
Others 2.34
Expenditure on social services as a proportion of total government expenditure
25%
Education 11.5
Health 4.8
Others 8.7
Public expenditure trends and patterns
Health
India’s public spending at 1.4 % of GDP is among the lowest in the world
India spends $43 per head, counterparts in Sri Lanka invest $87, China spends $155 and Thailand over six times at $261
Out-of-pocket costs accounts for 67% of total expenditure on health in India
Education Public spending on education is about 3.1% of GDP
Infrastructure
Total investment in infrastructure (roads, railways, ports, airports, electricity, telecommunications, oil gas pipelines and irrigation) have increased from 5.7% of GDP in base year of the 11th Plan to around 8.0% in the last year of the Plan
India’s expenditure on flagships programs for inclusivenessProgramme Ministry/ Department
Total 11th Plan (Rs. In crores)
Mahatma Gandhi National Rural Employment Guarantee Act
Rural Development 1,56,301
Indira Awas Yojana Rural Development 41,486
National Social Assistance Programme Rural Development 23,536
Pradhan Mantri Gram Sadak Yojana Rural Development 65,002
National Rural Health Mission Health & Family Welfare 69,214
Integrated Child Development Scheme Women & Child Development 38,980
Mid Day Meal School Education & Literacy 38,602
Sarva Siksha Abhiyan School Education & Literacy 77,576
Jawahar Lal Nehru National Urban Renewal Mission
Urban Development 48,485
Accelerated Irrigation Benefit Programme and Other water resources programme
Water Resources 46,622
Rajiv Gandhi Gramin Vidyuti Karan Yojana Power 25,913
Rajiv Gandhi Rural Drinking Water Mission and Total Sanitation Campaign
Drinking Water Supply 46,722
Rashtriya Krishi Vikas Yojana Agriculture & Cooperation 18,550
Grand Total (Rupees seventy thousand crores approx.) 6,91,976
Eleventh Plan gave special impetus to several programmes aimed at building rural and urban infrastructure and providing basic services for increasing inclusiveness and reducing poverty
Measures to increase efficiency of public expenditure
India’s emerging economy with large unmet minimum needs of the masses require focus on equity issues and macroeconomic needs. Prudential limits on deficits and debts and optimization public expenditure outcomes essential
High-level committee constituted to go into the expenditure classification and management in a comprehensive way. Main recommendations : Fundamental shift in public expenditure management - budgeting
linked to outputs and outcomes Portal to place information on flow of resources and their utilization on
public domain All States to include information about investment outlays of State
Public Sector Enterprises and resources of rural and urban local bodies as part of State Plans
Provide regular updates on Project-wise, Ministry-wise and Sector-wise information on Public Private Partnerships in Central and State Budgets
Measures to increase efficiency of public expenditure
Government’s has evolved a comprehensive strategy in 12th FYP for further lowering poverty and reversing the pattern of growing inequality. Key elements:
Policies to improve health, nutrition and educational outcomes
Labour market reforms to reduce segmentation between formal and informal employment
Tax reforms to increase redistributive effects of tax
Making social spending a more powerful tool to deal with rising inequality. Social spending, which amounts to about 5% of GDP in India, is low including in comparison to other large emerging economies
Key reform measures
Opening up key sectors to FDI
Reduction in energy subsidies Adoption of open government policies to increase
transparency and reduce corruption
National data sharing and accessibility policy
Right to Public Services Measures to promote innovation
National Innovation Council and National Innovation
Strategy
Decade of Innovation 2010-2020
Indian Inclusive Innovation Fund
Thank you