One Year of Modi

Deep cuts in schemes that help the poor

Surajit Mazumdar

In the year that has passed since the Modi government came to power the Indian economy has not witnessed the great turnaround that it had promised to deliver. But in this one year, the Modi government’s true intentions about who should benefit from what kind of policies have become crystal clear. Unsurprisingly, Modi has chosen corporates over the common people. That such a choice would have to be made was inevitable given that economic recovery meant one thing for those who financed the BJP’s high velocity campaign and something else for those whose votes were wooed. Satisfying the former’s insatiable greed for profits rather than addressing the real needs of the people –this is the pre-disposition of the Government. And, it is most starkly reflected in the attitude of Modi Sarkar towards what is referred to as the social sector.

Savage cuts have been made on government spending on the social sector – education, health, social security, employment guarantee etc. One set of cuts has already been administered in 2014-15 and a second round is taking place in the current financial year.

The Modi Government after coming to power made only marginal changes to the Interim Budget presented by P. Chidambaram just before the 2014 general elections. What it also did was to then follow the practice of cutting expenditures below budgeted levels if revenues fell short of estimates in order to achieve fiscal deficit targets. Thus in 2014-15, according to the revised estimates the total actual expenditures of the Central Government were 7 per cent below the Budget Estimates. The Provisional actual figures released recently show an even bigger cut – over 9 per cent. The major burden of this cut fell on plan expenditures which were slashed by 18.62 per cent as per the revised estimates and 24.24 per cent if we consider the provisional actual figure. As a result already low allocations under various heads like Agriculture, Rural Development and Social Services (Education, health etc.) suffered additional deep cuts. Schemes under the Scheduled Castes Sub Plan, the Tribal Sub Plan and for the Welfare of Children experienced cuts of 33.45, 36.59 and 13.8 per cent respectively according to the revised estimates. Schemes for the development of women also suffered a similar fate.

That the 2014-15 story is set to be carried further in 2015-16 has been somewhat obscured by implementation of the recommendations of the 14th Finance Commission. The Government has been claiming that lower allocations in 2015-16 under various heads is on account of the fact that greater resources are being transferred to the states which means they will also bear a greater responsibility for the expenditures.  Accordingly all schemes have been divided into three groups – those which will be delinked from central support, those which will continue to be fully supported by the Central Government and those that will be run with a changed sharing pattern between Central and State Governments. However, the real truth is revealed if one looks at the budgeted assistance to states for schemes which will remain as 100% Central Government funded. Such assistance in 2015-16 is budgeted to be Rs.118512.21 crores which is less than the Budgeted figure for 2014-15 (Rest. 118537.70 crores) and in real terms represents a significant squeeze.  Important fully centrally funded schemes like the Mid-Day Meal scheme, the Pradhan Mantri Gram Sadak Yojna, the  MGNREGS and the Social Security for Unorganized Workers Scheme have been hit. Major subsidies are also slated to be reduced by about 10 per cent and the following statement from an annexure to the Budget reveals clearly the mind of the Government:

In order to achieve the fiscal targets of fiscal consolidation it is essential that government follows the policy of progressively reducing the expenditure on subsidy through improved targeting of beneficiary.

Major subsidies are extremely critical from the viewpoint of fiscal consolidation and are the most important factor in determining the success of Government in meeting its fiscal targets.”(Union Budget 2015-16: Medium Term Fiscal Policy Statement, pp. 14-15).

The Budgetary allocations in 2014-15 for Schemes to be now run on a changed sharing pattern or delinked completely from central assistance was Rs. 144453.24 crores, much more than for Schemes remaining as fully centrally funded. The allocation for these in Budget 2015-16 is 45.8 per cent lower than the budget estimates of the previous year. In other words, even maintaining the expenditure levels in these schemes would require state governments to significantly step up expenditures on these heads while the real need is to increase. However, comparing the budget estimates of 2015-16 with those of the previous year shows that the increase in the share of states in tax receipts would be equivalent to just 0.7 per cent of GDP and the combined transfers to the states (revenue shared + other assistance) as a percentage of GDP would in fact be lower. Clearly in such circumstances States would find it hard to ensure social sector expenditure levels adequate to compensate for the cut in central funding which will hit a number of important schemes like the ICDS, Rashtriya Krishi Vikas Yojana, National Food Security Mission Pradhan Mantri Krishi Sinchai Yojana, National Health Mission, National Livelihoods Mission and the schemes for education and housing for all.

Meanwhile, to hoodwink people, the government has also announced several “social security” schemes purportedly for the benefit of the downtrodden. However, if one looks at these schemes there is a common element in their design – namely that they are attempts at creating large ‘announcement effects’ without involving any significant commitment of funds on the part of the government. Social security paid for not out of the government’s tax revenue but by the beneficiaries themselves, transferring unprofitable activities on to public sector institutions and offering private sector institutions more money to play with in financial markets – this is the character of the social security schemes of the Modi government which would obviously make corporate and financial interests happy.

Achhe din? Quite the opposite.