The article primarily discusses the declining trend of government spending on welfare schemes in India, with a focus on the Union Budget of the current year. (Source-The Hindu, 13th May 2023)
What is the context?
The Union Budget of this year faced criticism from experts for its reduced budget allocations for welfare schemes in real terms. Despite the need for prioritizing welfare spending for post-pandemic recovery, similar to last year’s budget, this year’s budget prioritized capital expenditure over social spending.
What is the trend of government spending on welfare schemes in India?
The trend of declining central government spending on critical social schemes in India is not new and has been ongoing since 2014 when the National Democratic Alliance (NDA) government came to power. Central allocations for welfare schemes and sectors that ensure basic rights have declined as a proportion of GDP.
What are some examples of welfare schemes that have seen a decline in allocation?
Saksham Anganwadi and Poshan 2.0, which aims to address child malnutrition and hunger, saw a decrease in allocation from 0.13% of GDP in 2014-15 to 0.07% in 2023-24. The mid-day meal (MDM) scheme, covering almost 12 crore children, saw a decrease in allocation by 50% as a share of GDP, from 0.08% in 2014-15 to 0.04% in 2023-2024. The PM Matru Vandana Yojana (PMMVY), which provides maternity benefits as a conditional cash transfer of ₹5,000 to women in the unorganised sector, has not crossed ₹3,000 crore despite needing around ₹14,000 crore to cover all women and births as per the National Food Security Act (NFSA) mandate.
Why is the decrease in allocation for welfare schemes concerning?
The decrease in allocation for welfare schemes is concerning because it comes at a time of post-COVID-19 recovery when welfare spending should have been a priority. Furthermore, India has among the worst rates of anaemic, underweight, and stunted children in the world, and funds meant to address malnutrition are being slashed. The mid-day meal scheme has been shown to improve attendance, learning, and nutritional outcomes and reduce stunting in children. Maternity benefits through the PMMVY are crucial for supporting women in the unorganised sector. The decrease in allocation for these schemes could lead to adverse outcomes for vulnerable populations.
What is the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)?
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a scheme that guarantees 100 days of employment to every rural household.
What is the National Food Security Act (NFSA)?
The National Food Security Act (NFSA) is a scheme that provides subsidized grains to over 80 crore people.
How have MGNREGA and NFSA allocations changed since 2014?
MGNREGA expenditure as a share of GDP decreased from 0.26% in 2014-15 to 0.20% in 2023-24. For NFSA, it decreased from 0.94% in 2014-15 to 0.65% in 2023-24.
What is the National Social Assistance Programme (NSAP)?
The National Social Assistance Programme (NSAP) is a scheme that provides pensions to the elderly, widows, and disabled individuals below the poverty line and monetary assistance to families that have lost a breadwinner.
The NSAP allocations as a share of GDP have declined from 0.06% in 2014-15 to 0.03% in 2023-24.
What is the state of health care in India?
Health-care expenditure has risen under the NDA government, with the share of central health expenditure in GDP going up from 0.25% in 2014-15 to 0.30% this year. However, India has the lowest vaccination rates in South Asia and the out-of-pocket expenditure on health remains much higher than the global average, pushing millions into poverty each year.
What is the state of education in India?
As a share of GDP, central expenditure on school education (primary and secondary) has steadily declined from 0.37% in 2014-15 to 0.23% in 2023-24, despite the catastrophic effects of the pandemic, including a surge in primary dropout rates due to over 70 weeks of school closures.
What is the New Welfarism of the Right?
The New Welfarism of the Right is a policy paradigm that focuses on delivering tangible goods, such as cooking fuel, electricity, and financial inclusion of women, and has been relatively successful under the NDA government. This policy is easier to deliver, monitor, and attribute to the central government than traditional government services such as primary education and child nutrition.
What is the issue with India’s social expenditure as a share of GDP?
India’s social expenditure as a share of GDP has been declining over time. While the government allocated 4.3% of GDP for social welfare programs during the pandemic year, it has now gone back to just 1.5%. This is concerning, as international experience shows that social expenditure should be rising over time in proportion to GDP growth. According to the World Social Protection Report by the International Labour Organization, only 24.8% of Indians are covered by at least one social security scheme, compared to the Asia-Pacific average of 44%. This has resulted in India’s stagnant Human Development Index rank at 132 and rising malnutrition levels, which could hinder India’s development as a superpower.
What is the government’s stance on social security programs?
The government acknowledged the vital importance of social security programs when it raised the Budget allocation for all the aforementioned schemes during the pandemic year to 4.3% of GDP. However, the allocation has now decreased back to just 1.5% of GDP, which is not sufficient to address the country’s social welfare needs.
What is the suggested solution to address the issue of social expenditure?
If fiscal prudence is a concern, the government could recover the ₹4.3 lakh crore of revenue foregone due to tax concessions during NDA-1 and another ₹1.85 lakh crore foregone between 2019-21 after lowering corporate tax rates in 2019. This could provide the necessary funds to increase social expenditure and improve the country’s social welfare programs.
Concluding remarks
The declining trend of government spending on welfare schemes in India, as highlighted in the analysis, raises concerns about the country’s ability to prioritize social welfare during the post-pandemic recovery period. Despite the critical need for increased welfare spending, the Union Budget of this year, similar to previous years, focused more on capital expenditure at the expense of social spending. This trend is worrisome, considering India’s high rates of malnutrition, poor health care infrastructure, and inadequate education system. It is essential to recognize the importance of social security programs in fostering inclusive growth and ensuring the well-being of vulnerable populations.
Way ahead:
To address the issue of declining social expenditure, the government needs to reevaluate its budgetary priorities and allocate more funds towards welfare schemes. One possible solution could involve recovering the revenue foregone due to tax concessions and corporate tax rate reductions, which amount to a substantial sum. By utilizing these recovered funds, the government can increase social expenditure and strengthen the country’s social welfare programs.
Moreover, it is crucial for the government to prioritize the implementation of comprehensive social security schemes that cover a larger portion of the population. Increasing the coverage and effectiveness of schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the National Food Security Act (NFSA), and the National Social Assistance Programme (NSAP) can have a positive impact on poverty alleviation, health care access, and education outcomes.
Furthermore, the government should consider adopting a long-term approach to social expenditure by aligning it with GDP growth. International experience demonstrates that social expenditure should increase in proportion to economic growth to ensure the well-being and development of the population. By strengthening social security programs and prioritizing social welfare, India can work towards achieving its goal of becoming a global superpower while addressing the pressing needs of its citizens.