Social Sector Woes


The Finance Minister declared in her Budget Speech that Budget 2021 was for the poor and disadvantaged. Doubling farmers’ income, strong infrastructure, healthy India, good governance, opportunities for youth, education for all, women empowerment, and inclusive development were the goals that the Budget was geared to achieve. Monetary allocations in the Budget, however, tell a different story.

“Education Suffers” and “Education Needs More Funds, Not Less” (The Statesman, 5 January) bring out how the allocation for education has been reduced from last year’s Rs 99,311 crore to Rs 93,224 crore this year, and how the cut would impact education. Suffice it to say that the educational reforms proposed under the National Education Policy 2020 (NEP) would be difficult to implement on a reduced budget; Central and State Governments are already spending less than 2.6 per cent of the GDP on education, as against a goal of 6 per cent visualised by NEP.

The Finance Minister announced that expenditure on ‘Health and Wellbeing’ was proposed to be hiked to Rs 2,23,846 crore in 2021-22 from the earlier year’s Budget Estimate (BE) of Rs 94,452 crores, an increase of 137 per cent. What the FM did not elaborate was that out of the incremental sum, Rs 38,512 crore was the increased allocation to the Water and Sanitation Department and Rs 36,022 crore was the Finance Commission grant to the Water and Sanitation Department. The FM has also included another grant of Rs 13,192 crore to States by the Finance Commission in the Health Budget. Clean water and good sanitation do add to the health of the nation but it would definitely be stretching things a bit if expenditure on water and sanitation is treated as expenditure on health. A redeeming feature of the Budget is that it provides Rs 35,000 crore separately for vaccination against Covid-19, which would be sufficient to vaccinate our entire vulnerable population.

Villages and agriculture have not fared well in Budget 2021. The subsidy on fertilisers, the lifeline of farmers, has been sharply cut from the Revised Estimates (RE) figure of Rs 1,33,947 crore to Rs 79,530 crore. Fund availability for Rural Development is down from the RE figure of Rs 2,16,342 crore to Rs1,94,633 crore. The provision for Agriculture and Allied Activities is Rs 1,48,301 crore against the BE of Rs 1,54,775 crore in 2020-21. The maximum number of times agriculture was mentioned in the Budget was by way of Agriculture Infrastructure and Development Cess, which has been imposed on a number of items. Also mentioned prominently in the Budget speech were the sums spent by the Government in purchasing agricultural produce in earlier years.

The FM mentioned that while the budgeted expenditure of FY 2020-21 was Rs 30.42 lakh crore but due to incremental expenditure to contain Covid-19, actual expenditure was set to cross Rs 34.83 crore. Taking a hard look at Budget Statistics, we find that the additional expenditure in the Budget is almost entirely made up of repayment of offbalance sheet borrowings of the Government from entities like National Small Savings Funds (NSSF), in earlier years. Similarly, the FM’s assertion that out of the total expenditure of Rs 30.42 lakh crore, Rs 27.1 lakh crore was earmarked for Atmanirbhar packages is a play with figures; the stimulus packages were provisions for credit by banks and other institutions, the actual financial outlay of the Centre did not exceed Rs 2 lakh crore.

Budget 2021 has reduced the allocation for MNREGA from the RE of Rs 1,11,500 crore to Rs 73,000 crore. After spending Rs 42,617 crore on social assistance programmes in FY 2020-21, the expenditure proposed on social assistance programmes in 2021- 22 is a paltry Rs 9,200 crore, seemingly the Government is withdrawing support for the poor and marginalised, in a big way. Reduced allocations for MNREGA and social assistance programmes would shrink the safety net for the poor, who may face a difficult time in the coming year.

Probably, the Government being a staunch believer in the power of markets, wishes to prioritise the revival of the financial sector, feeling that the revival of financial markets would lead to a revival of the entire economy. Various measures have been announced and resources have been allocated for the benefit of the financial sector like the establishment of a ‘bad bank’ (asset reconstruction company or ARC), another development finance institution (DFI), bank recapitalisation etc. Major incentives have been announced for investors located in GIFT City, Gandhinagar. Further, no new revenue raising measures have been proposed in the Budget, despite a projected shortfall of Rs 2.89 lakh crore in tax receipts.

On the other hand, the sum of Rs 64,180 crore allocated to Pradhan Mantri Aatmanirbhar Swasthya Bharat Yojana (PMASBY) for developing primary, secondary, and tertiary healthcare in addition to the National Health Mission is proposed to be spent in the next six years. Similarly, the allocation for the Jal Jeevan Mission is spread over the next five years and so is the allocation to Urban Swachh Bharat Mission 2.0.

Funds have been committed to the Production Linked Incentive Scheme (PLI) for the next five years, textile parks are to come up in the next three years. Similarly, a scheme to benefit discoms is to come up in the next five years, a scheme to fly the Indian flag on merchantmen would take five years. Such instances abound, lessening the clarity of Budget provisions and making one wonder if the Government is rethinking the abolition of the Five-Year Plans.

The FM estimated Rs 1,75,000 crore as receipts from disinvestment in BE 2021-22, which is an under-assessment, in view of the long list of Government enterprises to be privatised viz. BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam, an un-named insurance company and two un-named Public Sector Banks. Probably, the Government is not feeling confident, given its dismal record of privatisation in the last six years.The Indian economy, like all major economies, is experiencing a K-shaped recovery, with well-organised businesses on an upward trajectory while the unorganised sector is facing a downturn. According to the Centre for Monitoring the Indian Economy (CMIE), the 1017 listed companies studied by it showed PAT( profit after tax) at 10.6 per cent and an increase in net profit by 71 per cent. However, the corporate sector is not doing well uniformly; the share market is at an all-time high, sectors like pharmaceuticals are doing exceedingly well, but sectors like travel and tourism are in the dumps.

Oxfam’s “Virus Inequality Report” concludes that during the pandemic, the wealth of India’s top 100 billionaires increased by Rs 12 lakh crore while 1.3 crore workers lost their jobs. CMIE statistics also reveal that employment declined by 20 per cent in the first quarter and 3.5 per cent in the second, the unemployment rate in December 2020 was 6.2 per cent, up by .3 per cent over the same month in the previous year, which meant that 1.5 crore fewer workers were employed in December 2020, compared to the number employed in December 2019. According to a World Bank report 30 per cent of the Indian workforce has shifted from formal to informal employment, mostly selfemployment.

The rise in unemployment was both quantitative as well as qualitative; unemployment was more pronounced in urban regions, among women, among the relatively younger workers, graduates and post graduates and salaried employees.

Rich households, that derived income from interest and dividends, did not suffer any significant loss of income during the lockdown, rather with the ban on mall shopping, travel and outings such households saved money. On the other hand, poor households became poorer because of unemployment and closure of small businesses.

It did not help that the fiscal stimulus announced by the FM was more for businesses and less for poor households, beyond providing subsistence food items. According to advance estimates of the National Statistical Office, consumption is set to contract by 9.5 per cent, mostly in the poorer sections of society.

Covid-19 has transformed India from the world’s fastestgrowing large economy into the world’s fastest-contracting economy. This trend would probably be reversed soon, but at a huge cost.

The Indian economy would emerge from recession with a record fiscal deficit, record public debt, a new “twin-balance sheet problem,” not to mention some complex monetary challenges. Even more worrisome is the fact that Budget 2021 provisions are, in essence, a repeat of the provisions of Budget 2020.

An expectation that Budget 2021 would help the poor and disadvantaged is likely to be belied, as Einstein had said: “The definition of insanity is doing the same thing over and over again, but expecting different results.”