Modi – government’s budget for 2015-16 has been under attack from opposition parties especially Congress for alleged reduction in financial outlays for a variety of social welfare schemes and development programs. The latter also interpret this as a manifestation of former’s anti-poor policies.
The allegations are with reference to centrally sponsored schemes viz., Mahatma Gandhi National Rural Employment Guarantee Act [MGNREGA], Mid Day Meal, National Rural Health Mission [NRHM], Integrated Child Development Service [ICDS] etc. These are based on selective focus on lower allocation in Union budget under certain heads or less disbursement under others. To understand this better, let us look at some facts.
There are two types of schemes. (i) central sector schemes which are mainly formulated on subjects from the ‘Union List’. These are 100% funded by the Union government and implemented by the Central Government machinery. For some schemes, even as central ministries directly implement in states/union territories [UTs], resources are generally not transferred to States.
(ii) Centrally sponsored schemes [CSS] which are formulated in subjects from the ‘State List’ to encourage States to prioritise in areas that require more attention. Under these, a certain percentage of the funding is borne by the States and the implementation is by the State Governments. Funds are routed either through consolidated fund of States and or are transferred directly to state/ district Level autonomous bodies/implementing agencies.
Under the erstwhile UPA – dispensation, there were 147 CSSs many of them with overlapping objectives and scope. Based on recommendations of National Development Council [NDC] [2012], in the budget for 2013-14, these were merged in to 66. Modi – government added 6 more taking the total to 72.
The extant arrangements were riddled with problems of coordination, objectives and structure of schemes being out of sync with requirements of individual states, untimely availability of funds [instances of fund diversion for uses other than specified purposes in several states also came to light]. These led to ineffective implementation and poor outcomes.
In budget for 2015-16, Modi – government undertook a major restructuring exercise. Under this, the schemes were classified in three categories viz., (i) 31 Schemes to be fully supported by Union Government: these represent national priorities especially those targeted at poverty alleviation e.g. MGNREGA or for help to socially disadvantaged groups e.g. Multi-Sectoral Development Programme for Minorities (MSDP); (ii) 24 Schemes to be run with the changed sharing pattern e.g. Rashtriya Krishi Vikas Yojana [RKVY] and (iii) 8 Schemes which are to be funded 100% by states e.g. Rajiv Gandhi Panchayat Sashaktikaran Abhiyaan (RGPSA)
The schemes under (iii) which have been totally de-linked from support by Union government or those under (ii) where centre’s support has been reduced [the extent of reduction to be determined by concerned administrative ministry/department], would at first sight [viewed in isolation] give an impression as if Modi is less mindful of people’s welfare. But, a closer look would show that picture on ground zero is altogether different.
Based on the recommendation of the 14th Finance Commission, Modi – government has increased devolution of Union Taxes to states from existing 32% to 42%. This will result in transfer of an estimated Rs 520,000 crores during 2015-16 an increase of Rs 140,000 crores over transfer of R380,000 crores during 2014-15. The additional funds from this route will more than offset reduction in direct support under the schemes.
Apart from resource gain, states have also got additional flexibility in formulation and implementation of the schemes. This is in sharp contrast to the earlier dispensation wherein bulk of the funding was tied and states had little say in the matter. Indeed, they suffered from a top-down approach in every aspect with Planning Commission [erstwhile incarnation of NITI Aayog] calling the shots and chief ministers invariably at the receiving end.
In regard to the schemes that are 100% funded by the Union government such as MGNREGA, contrary to the impression given by critics, there is no reduction in allocation compared to previous year. However, Modi has done a major overhauling to ensure that release of funds are correlated with projects actually under implementation and that payments are made directly in to the account of beneficiaries using the PM Jan Dhan Yojna [PMJDY] platform.
An audit of MGNREGA had revealed large-scale irregularities viz., money not reaching out to intended beneficiaries; fictitious payments to non-existent persons; substantial under-payments and work for much fewer days as against guaranteed 100 days. There is evidence of irregularities in implementation of NRHM as well. Audit of other schemes would lead to similar revelations.
It is not un-common for politicians to quote former PM Rajiv Gandhi that only 15% of money under welfare schemes reaches intended beneficiaries. Apply this to Rs 200,000 crores spent under MGNREGA during 5 years until 2013-14; it follows that only Rs 30,000 crores reached them. The balance a humongous Rs 170,000 crores would have been appropriated by corrupt politicians and bureaucrats. The decision of present government to put the money in the bank account of recipients only is primarily to guard against pilferage and misuse of funds.
If, in the process of subjecting the scheme to rigorous scrutiny and ensure effective implementation, actual disbursement of funds turns out to be lower than allocation, that cannot be held against the government as being anti-poor. A scenario of less disbursement vis-a-vis allocation in budget [or reduced allocation itself] but with proper utilization and ‘zero’ leakage is far better than full disbursement [or higher allocation] but with huge leakage.
In the above illustration, even if the money actually spent was only Rs 150,000 crores but without any pilferage, the impact of this in terms of benefit to the poor would have been 5 times the mentioned scenario where spending was Rs 200,000 crores but with 85% leakage, only Rs 30,000 crores reached the beneficiaries.
Modi – government is endeavouring to restructure all other schemes on the same lines as MGNREGA irrespective of its financial contribution – total, partial or nil. That apart, a NITI Aayog panel of chief ministers headed by Madhya Pradesh CM Shivraj Singh Chouhan has recommended reduction in number of CSSs from 72 to 27 to further ease out overlaps and achieve enhanced efficacy.
By ensuring effective enforcement, the CSSs will not only be transformed in to a potent instrument for promoting inclusive development [with emphasis on improving the lot of poor and enhance quality of their life] but also help fiscal consolidation as it helps achieve more with less money primarily via eliminating leakages.