Budget Consolidated Revised

8/13/2019 Budget Consolidated Revised

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Learning Pundits

onBudget analysis

REPP class 9


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BUDGET REVIEW ON

What Does Budget 2007-08Offer Women?By- Yamini Mishra, Bhumika Jhamb

REEP, LEARNING GROUP 10


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FUNCTIONAL DETAILS OF THE GENDER

BUDGETING STATEMENT

Gender budgeting(GB) statement has beenstarted as a government exercise since the last 3years.

Government has made efforts in correctingmistakes as pointed out by a civil society.

Part Aof the statement contains schemes inwhich 100% allocations are for women. Eg: Indra

Awas Yojana, Rashtriya Mahila Kosh .

Part Bconstitutes schemes in which at least 30%of the allocation in for the women. Eg ICDS,PMRY



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BUDGET HIGHLIGHTS TOUCHING

GENDER ASPECTS

The total magnitude of the gender budget is Rs31,177 crore in 2007-08 that is an increase of 40per cent.

As a percentage of total union governmentexpenditure, this constitutes a rise from 3.8 percent to 4.8 per cent.

Gender budgeting cells have been set up by 50ministries/department.

General Budget Statement demand for grantshas increased from 10 in 2005-06 to 33 in 2007-08.



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CRITICAL ANALYSIS OF GB STATEMENT

Ambiguous and wrong allocation still remains

Under the department of health and familywelfare all the allocation on contraceptives has

been treated as exclusively for women. IAY has also been treated similarly although in

2004-05 , 18% of houses constructed but allottedto men and 29% jointly to husband and wife .

Similar discrepancies remain in various schemesunder Labour Ministry , Ministry of youth affairsand Sports etc.



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Percentage spending in the Gender Budgeting Statement



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Women Education: Allocations high at 31%

but still insufficient to control the high drop

out rate of 73%

Women Health: Allocation high at 24% but

much needs to be done to lower the high

maternal mortality rate.

Women food security and nutrition:Meagre

increase in allocation and no concrete steps.



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Women Livelihood: Significant budgetaryprogress by substantial and right allocation ofschemes and funds.

Women Housing: At 8% of the allocation itremains low considering the magnitude of the

problem.

Women in difficult circumstances: There is noallocation at all for provisions like these. For e.g

no provision for the efficient implementation ofthe Domestic Violence Act.



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GB Statement: The way forward

Although the GB statement is a wellintentioned initiative several more steps needto be taken.

Women face discrimination in many aspects.

They face discrimination on the basis of caste,class, disability, HIV status, rural-urban divide,

etc.

There is no mechanism to ensure that theallocations reach the most marginalizedsection of the women community



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Conclusion

A crucial flaw is that the GB statementassumes the women as a homogenous mass.

It does not account for the various power

dynamics and discrepancies that remain in the

society.

Also, women have long been discriminated

and marginalized and the GB statement needs

to take this into account.


Conclusion


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The Gender Budgeting exercise recognizes that

gender-neutral allocations are not enough and

the government needs to step up its allocations

for women-specific schemes.

The Gender Budgeting exercise cannot be done

in isolation from the political and socio-economic

scenario of the country and needs to incorporate

these aspects to make it cater truly to womenwelfare



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Black Economy,Underestimation

of Unemployment and Budget2005-06

by Prof.Arun KumarProfessor of Economics,JNU,

AuthorBlack money in India


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Contents

Introduction

Model of Black Income Generation in LegalActivities

Some Facts

Union Budget 2005-06, Employment and theBlack Economy

Conclusion

Some questions to ponder upon

Some other Links


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An Indian is affected at every step by the

black economy. The education of a child, a

visit to a doctor, policeman who extortmoney..electricity or water departments all

demands black economy

- Prof. Arun Kumar


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Black Economy - Introduction

A hidden sector of the economy where private cashtransactions go unreported. It is a sector of economicactivities involving illegal economic activities includingbuying and selling of drugs.

This definition excludes transfer incomes, like capitalgains and bribes. The definition also eliminates multiplecounting of incomes

That part of an economy that is hidden from thegovernment and on which taxes are not paid.


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Black EconomyIntroduction (cont.)

Most of the black economy is on the hand of top 3%population so that the disparity (between these peopleand the bottom 40 per cent) is considerably higher (fivetimes) than what the white economy data suggests.

Size of the black economy was 40 per cent in 1995-96,that implies an additional GDP due to the black economyof 40 per cent in that year.


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Model of Black Income Generation in

Legal Activities

Profit (P) = Revenue (R)Cost (C) (1)

Profit may be white (what is declared) or black (what is not declared).The declared profit appears in the income statement of the businessand is called the balance sheet profit. The undeclared profit or blackprofit is called off-balance sheet profit.It accrues directly to the

management of the business.

P = White Profit (Pw) + Black Profit ( Pb) (2)

Further,

P = Actual RActual C (3)

Black Profit (Pb) is generated by declaring lower revenue and/or overstating costs.


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Some facts

The size of the black economy is estimated to be 40 per centof GDP for 1995-96 [Kumar 1999]. Of this 8 per cent comesfrom illegal activities and 32 per cent from legal activities.

Two Sources of Black income area. Overstated Costs

b. Under invoiced revenue

Then overstated costs would contribute half of the blackprofits (Pb) from legal activities or 16 per cent of GDP.


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Some facts (cont.)

According to the economist magazine it is estimated thatin 1998 the worlds black economy accounted for a

missing $9 trillion worth of outputa volume of outputalmost equivalent that of U.S.

Black income generation process, with the mostplausible available assumptions, results inoverestimation of employment and wages by 5 per cent.


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Union Budget 2005-06, Employment and

the Black Economy Introduction of two schemes in Union Budget 2005- 06

1. Banking Transaction Tax (BTT)2. Fringe benefit Tax (FBT)

The value added tax (VAT) has also been billed as ascheme to tackle black income generation in indirecttaxes. It is supposed to lead to better compliance.

Services tax collection has shown high buoyancy. Many

more services are progressively being brought under thenet of this tax.

In the union budget for 2005-06, additional funds areallotted to employment generation and to the social

sectors (education, health, etc).


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Conclusion

It is clear that without incorporating the black economy inthe analysis, there can be no clarity on the issue ofunemployment in India.

The 7 per cent rate of growth in the last three yearsraised the possibility of mobilizing more resources butthe steps taken are grossly inadequate to deal with theproblem of declared unemployment in India.

Not that the black economy does not generateemployment, but by lowering the value of the multiplierand the potential rate of growth of the economy, it lowersthe employment potential


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Some questions to ponder upon

How is the government going to tackle the twin andinterrelated problem of black economy andunemployment?

Is black economy really an evil?

Is there a way to estimate and curb the blackeconomy?

Are we as individuals also responsible incontributing in growth of parallel / black economy


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Some Other Links

http://www.financialexpress.com/news/story/126853/

http://in.biz.yahoo.com/050312/32/2k54q.html

http://www.atimes.com/atimes/South_Asia/IF

05Df02.html
http://www.financialexpress.com/news/story/126853/http://www.financialexpress.com/news/story/126853/http://in.biz.yahoo.com/050312/32/2k54q.htmlhttp://in.biz.yahoo.com/050312/32/2k54q.htmlhttp://www.financialexpress.com/news/story/126853/http://www.financialexpress.com/news/story/126853/


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Budgetary Policy in the Context of

Inflation

- PRABHAT PATNAIK

Source (Article): EPW April 7, 2007

REPP LG 3BUDGET REVIEW


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The Union Budget 2007-08

utterly fails to appropriately

respond to the social needs of asituation of profit inflation

- Prabhat Patnaik

25Budgetary Policy in the Context of Inflation


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Understanding Inflation

Inflation: The overall general upward price

movement of goods and services in an economy.

Income Inflation: Inflation in nominal wage unit,

with the price level in terms of the wage unitremaining unchanged. Purchasing Power

remains constant

Profit Inflation: Inflation of the price level interms of the wage unit. Fall in Purchasing

Power



27/126


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Overheating of the Economy: High

Growth Rates

Decline in profitability in the Agricultural Sector.

Rural development expenditure as a proportion of GDP hasdeclined to a level much lower than in the eighth planperiod.

Per capita foodgrain output has declined over a longperiod, and especially since the beginning of this century.

Public procurement operations have been wound down.

The procurement prices offered for foodgrains have simplynot been remunerative enough.


Since mid-2002, the dumping of huge amounts of foodgrains on the world

market and the whittling down of procurement operations, has now carried

the economy from an ex ante excess supply to an ex ante excess demand

situation.


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This requires an increase in fiscal transfers to the poor, financed,

ideally by an increase in taxes on the profit earners. And the basic

problem with the 2007-08 budget is that it is oblivious of these social

demands of a situation of profit inflation.

Dilemma- the basic feature of a profit inflation is thatit is self-limiting, in the sense that, leaving aside theelement of speculation, the forced savings that

such inflation generates, eventually eliminate the exante excess demand that causes it!

The end of profit inflation, however, may not meanthe end of inflation in nominal wages and prices.

Even if we assume it does, that will still leave thelevel of real wages below what it was before profitinflation began.

Budgetary Policy in the Context of Inflation 29


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Reduction in the revenue and fiscal deficitsrelative to GDP is necessary for curbing inflation.

It has to be achieved through a restriction ongovernment expenditure relative to GDP.Otherwise the animal spirits of entrepreneurswill get destroyed by higher taxes, and growthwill be curbed.

In short, what a situation of profit inflationrequires is both the ensuring of appropriate

supplies through imports, and a transfer ofpurchasing power from the profit earners to theworkers.



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Union Budget 2007-08

While the government has seen the need for

supply management, i.e, for importing

certain essential commodities to augment

domestic supplies, it has not seen the needfor transfers.

To check the fiscal deficit, there has been a

curtailment of expenditure, including transferpayments.


Percentage increase in items in the


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Percentage increase in items in the

budget between 2006-07 (RE) and 2007-

08 (BE)ITEM PERCENTAGE INCREASE

Gross tax revenue 17.2

Tax revenue net of states share 17.0

Total receipts and total expenditures 17.0

Plan expenditure 18.7

Non-plan expenditure 16.3

Budget support for the Central plan 22.5

Budget support for states and union territories 8.5


GDP is currently rising at over 9 per cent and prices at around 7

per cent, this 17 per cent increase in most budget items

matches the 16-17 per cent increase in the nominal GDP,

leaving their proportion to GDP unchanged.


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Transfers decline relative to

GDP Outlay on the National Rural Employment Guarantee

Scheme (NREGS) is supposed to rise from Rs 11,300crore to Rs 12,000 crore, i.e, by a mere 6.2 per cent innominal terms

Total expenditure on rural employment is supposed torise by only 3.5 per cent

Aggregate expenditure on NREGS, Sampoorna GraminRozgar Yojana (SGRY) and Swarnajayanti Gram

Swarozgar Yojana (SGSY) is supposed to increase byjust about 7 per cent

Food subsidy is supposed to rise by a mere 6.2 per cent


A i l


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Agriculture

The Budget does little to remove the basic cause

of the profit inflation itself, which consists in thesteady decline in per capita foodgrain output.

The Central Plan outlay on agriculture isbudgeted to increase only by 15.8 per cent, and

the outlays on rural development, and irrigationand flood control by 11.4 and 11 per centrespectively.

This modest increase, in the light of the factthat the Central Plan outlay itself is expected to

increase as much as 31 percent, suggests alack of emphasis



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Lack of mention of any price-support for the farmers.

When the talk is about productivity increases withinpeasant agriculture, it requires a certain amount of

investment. This seems difficult unless the remunerationimproves.

In the absence of a price support mechanism, tariff changesin either direction may work to the disadvantage of

farmers. The gains from increases in tariffs may be appropriated bymiddlemen (which may even be large multinationals), while theeffects of such tariff increases in the form of higher prices ofdownstream goods may even hurt the farmers as consumers.

The losses from tariff decreases on the other hand may wellget passed down by the middlemen to farmers, a possibilitythat arises in the context of this yearsbudget itself since dutieson several agricultural goods have been reduced apparently asa means of combating inflation.



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There is a case for increasing the tax-GDP ratio in aperiod of profit inflation.

This is because since a profit inflation increases thewealth of the capitalists while forcing the workers toreduce their consumption, i.e, it first squeezes theconsumption of the workers, then transfers theseamounts arising from the reduced consumption ofthe workers as savings to capitalists, whose wealthincreases as a result of this.

This wealth inequality can be removed only byincreasing the share of taxes in profits, which, since

the share of profits in total income is rising duringthe profit inflation, would necessarily meanincreasing the share of taxes in income.



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Tax GDP Ratio 11.4% in 2006-07 (RE)

Tax GDP Ratio 12.0% in 2006-07 (BE)

(http://www.abnamro.co.in/Research/pdf/budget-FY2007-08-comment.pdf)

The tax-GDP ratio and the ratio of transfers to the

workers to GDP should both have increased in thecontext of inflation, together with supply

management measures.

The budget for 2007-08 raises neither the tax-GDP ratio, nor the ratio of GDP being transferred

tothe poor and the working people.



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Budget Review

Topic- Budget and Growth

LG_2


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An overview of Budget 2006-07

GDP growth likely to be 8.1 per cent with the manufacturing sector at 9.4

per cent; agricultural growth bounced back to 2.3 per cent; inflation was

4.02 per cent.

Allocation for eight flagship programmes (Sarva Siksha Abhiyan, Mid day

meal, Drinking water and sanitation, National Rural Health mission, ICDP,

NREGS, JNNURM et.) to increase by 43.2 per cent from Rs.34,927 crore in

2005-06 to Rs.50,015 crore.

Government to provide equity support of Rs.16,901 crore and loans of

Rs.2,789 crore to Central PSEs (including Railways).

Farm Credit increased to Rs.175,000 crore in 2006-07 with addition of 50

lakh farmers; banks asked to open a separate window for self- help groups

or joint liability groups of tenant farmers.


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Global growth spree


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Contribution of Developing

& Developed nations in world economy

Developed Countries Developing countries

Contribution in world output 54% Contribution in world output 45.4%

Export 71% Export 28.2%

World population 15.4% World population 84.6%


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A

Mismatch

f


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What is exactly driving the growth of

Indian economy???

The production base

Or

The consumption base


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An illustration

Housing and retail credit registered higher

growth rate

This fostered the growth in construction

sector

But the Author envisages that the world wide

experience with regard to construction boon

driven growth raises doubts

Is this growth sustainable??


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Can we have growth without production ???

Government has reduced capital expenditure toreduce the fiscal deficit

Along with production, employment has taken aback seat

Our budget lacks coherence to approach savings

It goes like mathematical proportion that withthe increase in employment , income increasesand what is saved is expected to be invested


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Perils to Indian growth

Barrier in the world trade in spite of free and

fair talks.

Inadequate measures/provisions to foster

saving and investment in 2006-2007 budget.


49/126


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Overview of Challenges

Infrastructure andEnvironment

Economy RelatedRegulatory/Governance

Poor Physical

Infrastructure(road, sea,

airports etc.)

Weak Rural

Infrastructure

High Cost and

unreliable power

Bureaucracy

Investment has

fallen short of savingsIn three consecutiveyears from 2001-02to 2003-04Low level of domesticInvestment absorption

CapacityConsumption creditExpansion lead growthLack of labour marketreforms due to declinein capital expenditure

Politicization of

investment decisions

Poor performance

Of Public sector

Poor regulatory

Support to the

Unorganized sector


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MDGsMillenium DevelopmentGoals or Moving Development

Goals?

An article by Vinish Kathuria


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Government says.

After education, health is second sector withmajor govt. spending.

Increase of 22%?? In effect, after inflation,works out to 16.5%.

Increased outlay vis--vis MDGs.

Health component distribution (PHC,Disease control programme, healtheducation, reproductive and child health)

f


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At a first glance

Country 1990 (IMR) 2003 (IMR) % changeover 13

years

China 38 30 21.05

Pakistan 96 81 15.63

India 80 63 21.25

Bangladesh 96 46 52.08Among the South Asian Countries, India has the2ndhighest MMR (540 per 100,000 births)


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MDG Goals

Related to health are primarily the 4th,5thand 6thgoals.

4thGoalTo reduce IMR. 5thGoalTo improve maternal health.

6thGoalTo combat HIV/AIDS,

malaria and other diseases.


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Target 2015 IMR42 deaths per 1000 live births. MMR109 per 100,000 live births.

HIV/ AIDS comabting is on a low. Whereas TB

and malaria statistics are gradually improving.

Bottlenecks

Inefficiency in the use of resources. Lack of funds towards various schemes of

these goals.

Institutional changes in few states.

H lth S t O tl b th


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Health Sector Outlay by theGovt.

Total Outlay in Crores

0

2000

4000

6000

8000

10000

12000

14000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Total Outlay in Crores


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Discrepancies in the health sector.

Budget allocations, increased outlay to be takenwith caution.

Progress made in combating leprosy and polio,but yet to be eradicated.

Resource requirement (Rs. 19,995 crores) notmatching the actual outlay (Rs 12,100 crores).

Is the allocation sufficient to support ASHA

volunteers? Support NHRM. Other indirect schemes like ICDS.


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Conclusion

More focus on PHCs

Increase expenditure to PHCs

Insurance of poor against healthuncertainties.


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Why Do the States Not Spend?

By T M Thomas Isaac, R Ramakumar

Article Review


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Current Situation

Public expenditure by states on social &economic services is a crucial necessity.

It is low in India by any standard & need

urgent attention. In 1990s & 2000s, the ratio of revenue

expenditure by all states to the GDP hasstagnated, if not declined.

Investment outstanding by all states- Rs64,000 crore.


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The growing importance of state finances inthe macro-economy is evident from the fact

that the total expenditures of state

governments (Rs 3,25,634 or 16.6% of GDP)have even overtaken those of the centre (Rs

313,258 crore or 16% of GDP) in the year

1999-2000.

http://www.epwrf.res.in/Archives1.asp?CatId=4


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FRBM Act

The main elements of the FRBM acts passed by the states werethe following:

(a) 2 to 3 per cent target for fiscal deficit to be achieved by2005-06 to 2010-11;

(b) elimination of revenue deficit by aroundthe same time;

(c) limits to state government guarantees on debt;

(d) limits to overall liabilities that could be incurred

(e) formulation of a medium-term fiscal plan to reach

these targets &(f) institution of a complaint redressal mechanism.


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Remedial measures

Expenditure compression such ascurtailment of benefits to employees

Reduction in social subsidies, includingwelfare pensions

Closure of sick PSUs

All-round increases in user charges.


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States like Haryana, Karnataka, Gujarat and TamilNadu, which have been characterised as fiscallybetter managed have shown declining ratio ofrevenue expenditure to GSDP of state govts.

a common factor to all state govts is thecompulsion set by the FRBM Acts to eliminaterevenue deficits by 2008-09.

C l l i Fi l i b l


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Central role in Fiscal imbalance

RoI on borrowings of states were sharplyincreased after the mid-1980s.

Coupon rates of state govts. securities were

raised sharply by the RBI from 11.5% in 1990-91 to 14% in 1995-96.

Similarly, the interest rates on small saving

borrowings by states also increased from 13%1990-91 to 14.5% in 1992-93.

Revenue deficit of states more than doubledfrom 1.1% in 1997-98 to 2.5% in 1998-99.


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Central Govt. Stand

Union Finance Minster- much more needsto be invested in education, healthcare,mid-day meal schemes, rural roads &

urban development. States are unable to spend because they do

not have absorptive capacity.


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Reverse transfer from state to centre

Investments by state in 14 day intermediarytreasury bill of centre earn them a return of 5%per annum

But the average cost of mobilization of fundsby state is much higher.

In 2005-06 the interest rate on borrowing ofstates against small savings was 9.5% per

annum ( the costliest debt in the market) The average interest rate on market borrowing

was 7.4% per annum.


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Reverse transfer from state to centre

The total transfer of NSSF loans from the centre tostates was Rs 90,000 Cr in 2005-06.

At the end of the same period, the total reverseinvestment by states in treasury bills was Rs 61,886Cr- about 1/3rdof its NSSF borrowing.

This has enabled the centre to make profit and thecentre is blaming states for the surpluses.


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Author Stand Author claimed this as false and misleading argument. States do not spend because of legal constraints. Finance Ministry has forced states to pass fiscal

responsibility in their legislative assemblies.

Revenue & fiscal deficit target- 3% of GSDP by 2008-09 In tune with target, revenue & fiscal deficit declined

sharply in 2000s by keeping revenue expenditure toGSDP ratio stagnant despite increase in revenue receiptto GSDP.

States could have raised revenue expenditure by makinguse of increased receipt & kept revenue deficit constant. Cash surplus phenomenon is a perverse outcome of

FRBM Acts.


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Case Study of Kerala

Adverse implications of mechanically designed fiscaladjustment programmes in context of long termcommitments to social spending & exogenous changeslike pay revisions.

As per provisions of FRBM Act. Kerala had to sharplycut plan expenditures- reduce social spending & curtaildevolution to local self-governments.

Planning Commission demanded flexibility in FRBMAct provisions.

International experience with fiscal responsibilitylegislations also endorse flexibility.

The author advocated drastic amendment of FRBM Act.

Why Kerala?


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Why Kerala? It is characterized by fiscal imbalance: high revenue deficit,

fiscal deficit and public debt, as ratios to GSDP.

Its expenditure pattern- high commitment to social servicesexpenditure, as high priority to social sector historically.

Focus on social sector has led to better health and longevity

to its people, resulting in a high burden of pension paymentson the exchequer. In 2005-06, pension payments in Keralaconstituted about 51 per cent of the total salary expenditure.

According to RBI- Karnataka, West Bengal, Uttar Pradesh,Tamil Nadu, Maharashtra, Haryana, Gujarat and Bihar havesurpluses of around Rs 3,000 crore each


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http://www.cseindia.org/programme/nrml/infocus-feb07.htm

Situation in Kerala is an indicative of the situation in

other states, majority of the states are facing the similarsituation and has been caught in the catch-22 situation.

High level of public spending are needed in many


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g p p g yareas but they should and they must be achievedthrough improvements in revenue mobilisation andgreater efficiency in expenditure.

Prime Minister, Dr Manmohan Singh

Due to the precarious fiscal position, we will not meetthe target set under FRBMA. The Centre needs support

for carrying on with social sector initiatives.-Thomas Isaac, Finance Minister, Kerala

FRBM targets shouldnt come in between povertyalleviation grants. The Centre must make concessions to

backward states like Orissa and provide more centralfunds. We will oppose any such move to curtail funds.

--Prafulla Chandra Ghadei, Finance Minister, Orissa.

In the long term, social sector spending creates social andi i l S i i di i


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economic capital. So terming it revenue expenditure is notsensible.

-C P Chandrashekhar, Economic Research Foundation,

New Delhi

Reducing deficit may well have depressing effects oneconomic activity. The large-scale fiscal deficits do notnecessarily lead to higher inflation as inflation is caused by

excess demand against supply.Prof. Jayati Ghosh, JNU, New Delhi

There is nothing wrong in maintaining large-scale fiscaldeficits if resorting to public debt is done only to meetinvestment requirements as long as their social rate of returnis higher than the rate of interest.

-Siba Sankar Mohanty, Centre for Budget and Accountability,New Delhi

B d t A l i B LG 7


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Budget Analysis By LG:7

No New Deal for

Farm Revival

By

S. Mahendra Dev

Economic & Political Weekly

April 7, 2007

A i lt A


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Agricultures Agony

Beset with many problemsTenth Plan(2002-07) growth rate 2.3%

Last decade growth rate


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Beware of the fury of patient man- John Dryden

Good economics works for everyone but not at

the same time for everyone. This budget has a

large package for agriculture

- P. Chidambaram

Beware of the fury of Indian farmer

- S. Mahendra DevLG-7 77

P Chidambarams Musings


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P. Chidambaram s Musings

Old Wine in new bottle

Items on credit,

Accelerated irrigation benefit programme

(AIBP)Fertiliser subsidies, agricultural insurance,

the rural infrastructure development fund

(RIDF)Restoration of water bodies

LG-7 78

P Chidambarams Musings


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P. Chidambaram s Musings

New wine

Committee on indebtedness

A mission for pulses,

Special purpose funds for the plantation

Training of farmers

Revitalising the extension system

Groundwater rechargeSocial security for rural landless

householdsLG-7 79

Whither Agriculture Focus?


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Whither Agriculture Focus?

No New Deal

Expenditure on agriculture, rural development

and irrigation increased by 15.8%, 11.45% and

9.7% respectively

Share of agriculture dropped in central plan

outlays from 3.03% to 2.67%, and in central

plan expenditure from 4.28% to 4.17%

LG-7 80

No Water But Drops


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No Water, But Drops

Irrigation woes

Public expenditure is stagnant

Target of achieving 10 million hectares

under Bharat Nirman appears remoteOutlay for irrigation Rs 4500 cr in the year

(2005-2006) & Rs

restoration of water bodies and recharge ofgroundwater: no allocations

LG-7 81


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LG-7 82

0

2000

4000

6000

8000

10000

12000

2005-06 2006-07 2007-08

InRs(cr.)

year

Allocation in Budget under AIBP

Series1

Centres Expenditure on Agriculture, 1990-91 and 2005-06, in Current Rupees and


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Constant (1993-94) Rupees

1990-91 2004-05 RE 2005-06 BE

Agriculture

(current Rs bn)27.71 55.90 72.43

Agriculture (in

1993-94 Rs

bn*)

37.59 30.10 37.23

Irrigation &

Flood Control

(current Rs bn)

3.19 6.84 8.75

Irrigation &

Flood Control(in 1993-94 Rs

bn*)

4.32 3.68 4.50

LG-7 83

C t E dit A i lt d


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Centres Expenditures on Agriculture and

Irrigation as % of GDP

Agriculture & Allied Activities

1990-91- 0.49%

2005-06 BE - 0.21%

LG-7 84

A i lt l C dit


85/126

Agricultural Credit

Farm Credit: Quantitative targets vs.

Distributional aspects

Credit plus services, farm advisory services:

Integration

LG-7 85


86/126

LG-7 86

L d M t


87/126

Land Management

Land degradation: Water logging, imbalances

in fertilizer use and pesticides, extension

services

Involvement of local communities

LG-7 87

Research & Extension/ Risk


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Management & Insurance

India: only 0.5 per cent of GDP on agricultural

research

NCF: knowledge gap between the yields in

research stations and actual yields in farmersfields

Risk mitigation: Weather based crop insurance

(NAIS)

LG-7 88

Inputs, Prices, Marketing &


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p , , g

Diversification

Proper supply of inputs and remunerative

prices for their output: Immediate need

Output price fluctuations & Diversification

into high value crops and

Allied activities??

LG-7 89

Oth I


90/126

Other Issues

PDS strengthening: no strategy!

Social security for unorganized workers:

peanuts!

LG-7 90

S


91/126

Summary

No new deal: incremental notcomprehensive/ holistic strategy

More of promises AND Short on allocations

and implementation

Argument- large leakages- therefore no

allocation? Whether this should be the

approach??

LG-7 91


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Budget AnalysisImplementation of

Employment Guarantee :

A Preliminary AppraisalBy

Pinaki Chakraborty

Economic & Political Weekly

February 17, 2007


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What is NREGA?An Introduction Enacted in 2005

To provide minimum guaranteed wage

employment of 100 days in everyfinancial year

To rural households with unemployed

adult members prepared to do unskilled

manual work


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How it is different?Unique as Never before such mammoth scheme

It goes beyond poverty alleviation Recognises employment as legal right

Provide opportunity to rural households

To an extent livelihood security

Budgetary Allocation


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Key Budgetary Indicators to GDP Ratio (percent)

0

5

10

15

20

1996-9

7

1998-9

9

2000-0

1

2002-0

3

2004-0

5

2006-0

7

Year

%o

fGDP

Revenue Receipts

Revenue Expenditure

Expenditure : MORD

Rural Employment

Total Expenditure

Selection Criteria


96/126

Per Capita Income and Distribution of NREGS

5606

9963 10164 11139 11500

12244 12641

18494 19087

26858

23 22 19 20 18 11 6 10 13 12

0

5000

10000

15000

20000

25000

30000

Bihar

Uttar

Pradesh

Orissa

Jharkha

nd

Madhya

Pradesh

Chha

ttisgarh

Rajasth

an

WestBeng

al

Andh

raPrade

sh

Maharash

tra

State

PerCapitaIncome(inRs.),

No

.

ofDistrictsCovered

About NREGS Districts


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% Distribution of Rural BPL Households in NREGS

20.73

13.49

11.119.087.94

4.53

1.07

13.58

4.48

5.32

8.67

Bihar

Uttar Pradesh

Orissa

Jharkhand

Madhya Pradesh

Chhattisgarh

Rajasthan

West Bengal

Andhra Pradesh

Maharashtra

Others

About NREGS Districts


98/126

% Distribution of Rural Households in NREGS

14.36

13.26

7.1

6.296.573.75

2.4

13.08

12.43

6.87

13.89

Bihar

Uttar Pradesh

Orissa

Jharkhand

Madhya Pradesh

Chhattisgarh

Rajasthan

West Bengal

Andhra Pradesh

Maharashtra

Others

Rural Development


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ProgrammesExpenditure Distribution across various RD Prog.

0

10

20

3040

50

60

70

1999-0

0

2000-0

1

2001-0

2

2002-0

3

2003-0

4

2004-0

5

2005-0

6

2006-0

7

Year

%Contribu

tionto

Schem

es

SGSY

SGRY

NFWP

NREGS

Other Exp.

IMPLEMENTATION ISSUES


100/126

Multi tier StructureThe agencies involved are:

Central EmploymentGuarantee Council

State EmploymentGuarantee Council

District Programme

Coordinator

Programme Officer



101/126

The responsibility of the gram panchayat is theidentification, execution and supervision of projects as perthe recommendations of gram sabha (village assembly)

The gram sabhas are given the power to conduct a regular

social audit of individual schemes for accountability andtransparency

For the purpose of funding and the implementation of the

NREGA, the central government will set up a NationalEmployment Guarantee Fund. State governments willalso set up their Employment Guarantee Fund to makematching contribution


102/126

It has been specified in the Act that if an applicantunder this act is not provided such employment within15 days of his application seeking employment, s/heshall be entitled to a daily unemployment allowancewhich will be paid by the state government.

This implies an inbuilt structure of incentive forperformance and disincentive for non-performance forthe state government.

Individual states will have to evolve a well coordinatedapproach to equate supply of employment inaccordance to the demand.



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It requires an in-depth understanding of region-

specific labour demand and its seasonality so

that a demand-based scheme of projects can be

implemented at a frequency matching the

demand for work

Thus, there is a need to design a monitoring

mechanism by strengthening the institutionalstructure at the local level so that resources can

be used optimally.


Spatial Dimension


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Panchayat is the principal authority to implement and monitoring(social audit) the Act of individual schemes

Mostly the districts deprived of rural connectivity, spread of banking,nature of rural power supply and quality of governance are taken intoconsideration through this Act

Identification of Indicator for performance of NREG scheme

The demand performance(i) EG enrolment as percentage of total number of rural households.(ii) EG enrolment as a percentage of rural BPL households

(iii) EG enrolment as a percentage of application for enrolment

The supply performance(i) EG provisioning as a percentage of rural households(ii) EG provisioning as a percentage of rural BPL households.

(iii) EG provisioning as a percentage of number of households enrolled

NREG fund Utilization Ratio


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An interstate Competition

Observations


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NREG enrolment as a percentage of the number of

applicants, it is abysmally low in Maharashtra, followed

by Karnataka, Bihar and Jharkhand

For Andhra Pradesh and Gujarat the supply of

employment has met the demand, for most other states

enrolment falls far short of the demand.

The fund utilisation ratio it is again low in poorer states

in the country

A positive slope implying that the states with higher per

capita income could manage to spend more.

Making the Indian Budget


107/126

LG9

Making the Indian Budget .How Open and Participatory?

Vinod BhanuEconomic and political weekly .

Issue : March 31, 2007.

Making the Indian Budget .


108/126

LG9

Making the Indian Budget .How Open and Participatory?

Vinod BhanuEconomic and political weekly .

Issue : March 31, 2007.


109/126

LG - 9

Making of Indian Budget..

Discuss about the lack of Public Participation in

Budget Making Process in India.

IBP( International Budget Project) and Open Budget

Indexan indicator of peoples participation in

Budget Making.

India ranks very low as the level of participation has

been found to be dismal.


110/126

Compared with countries like UK, USA, South Africa

and New Zealand, Indian Government provides very

little pre budget information to common citizens.

Budget is passed by the parliament, ideally, it is

approved by the general public. But very few MPsunderstand the complexities of the Budget.

Even political parties are not capable of training theirMPs in this regard.


111/126

Standing Committees of the Parliament review the

drafts demands of different departments. They areopen to public but few members of general public

make representations before them.

The whole process of involvement of parliament in

Budget Preparation( which is practically non existent)

and its approval needs to be restructured.

Industrial and Corporate houses have free access to

the finance ministry, there by they have significant

influence on Budget Proposal.

CSO s have very little influence on the other hand they


112/126

CSO s have very little influence on the other hand, they

can not obtain a lot of pre budget information using the

RII Act.

The article calls for making the process of budget making

more participatory and open to the general public (&CSOs)

A clear-cut legal framework for establishing the practice

of participation and transparency is urgently required

Our Parliament lacks the institutional capacity to do

budget research and provide sound analytical briefings

Some Issues:


113/126

Cut motions or No confidence motions

Roles of finance related committees of the Parliament

Practices of transparency and participation in budget making

winter session and pre-budget business

Myth of closed budget process

Why finance minister had a pre budget consultation with the

parliamentarians belonging to his party only ?

The pre budget discussions and political parties


114/126

The International Budget Project:

IBP was established as part of the centre on Budgetand

Policy priorities(a Washington DC based non profit

research organization) in 1997.

To support civil society organizations around theworld interested in strengthening public budgetprocesses, institutions and outcomes.

Source: www.openbudgetindex.org

O B d I i i i 2006


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Open Budget Initiative 2006

First-Ever Budget Transparency Country Rankings

civil society organizations from 59 countries around

the world participated

India scores 52% out of a possible 100% on the open

Budget index 2006


Public Availability of key Budget


116/126

Public Availability of key Budget

Documents

1. Pre Budget Statement

2. Executives Budget Proposal

3. Citizens Budget

4. In Year Reports

5. Mid Year Review

6. Year End Report

7. Auditors Report



117/126

NDA & UPA Budget

2/3/2014

117

LG-5

Continuity or Change?

Central Theme


118/126

Comparison of NDA & UPA governments fiscalperformance on the basis of revenue generationthrough tax collection & Capital expenditure on vitalsocial sectors like health & education.

2/3/2014

118

LG-5

Three Phases


119/126

Phase I (non-NDA and UPA): 1991-92 to 1997-98.

Phase II (NDA): 1998-99 to 2003-04.

Phase III (UPA): 2004-05 to 2005-06 (RE)

2/3/2014

119

LG-5

Y = + T + TD1+ TD2+


120/126

1 2

Fiscal Performance (Y) Depends on the followingIndependent variables:

1. Liabilities of the Central Government

2. Fiscal Deficit3. Revenue Deficit4. Tax Revenue5. Total Expenditure6. Revenue Expenditure7. Capital Expenditure

2/3/2014

120

LG-5

State of Variables Used


121/126

Non-NDA Non-UPA phase Only Total expenditure is significant

Others are insignificant

UPA phase

Out of 7, five variables are significant i.e., Fiscaldeficit, Revenue deficit, Tax revenue, Total

expenditure, Revenue expenditure

2/3/2014

121

LG-5


122/126

2/3/2014

122

LG-5

Comparison of the two Regimes


123/126

Attribute UPA Government NDA Government

Social Service as CE 0.04% 0.08%

CE on Health of TE 0.01% 0.01%

CE Allocation to Economic Services 4.03% 4.06%

Administration 3.27% 3%

Subsidies 9.23% 9.17%

2/3/2014

123

LG-5

UPA Govt. Highlights


124/126

The present UPA Govt. has tried to cut the fiscal andrevenue deficits.

The Educational Expenditure as in terms of CapitalExp remained constant.

2006-07 budget plans to hike the Expenditure onhealth to 0.02% of Total Exp.

Allocation for Agri & Allied activities is lower by

0.01% than the NDA Average. Allocation to Rural Development is constant but has

shifted from CE to RE.

2/3/2014

124

LG-5

UPA Govt. Highlights


125/126

Rural Development initiatives appear more underflagship programmes.

Food subsidies reduced by 0.01% points in the first 2years but increased in the 2006-07 budget.

Tax per GDP ratio increased during UPA regime. NDA fared in non-tax per GDP ratio.

Interests receipts have fallen but the dividendreceipts have increased significantly for the UPA.

Corporation, Service & Income tax has fared betterthan NDA.

2/3/2014

125

LG-5


126/126

LG-5

Thank You126

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