The document presented in the OECD Public Governance workshop in Seoul, gives an overview of India's public expenditure trends and patterns with focus on its development expenditure.
2. Indian Economy
Impressive growth in last two decades
Recent slow down in response to global cues and internal strains (rising
inflation, declining investment, structural bottlenecks)
Latest reforms measures cover FDI, subsidies, tax reforms, innovation and
open government
Opportunities: Demographic dividend, innovative and entrepreneurial
business class
Key challenges: Making growth more inclusive, addressing widespread poverty
and rising inequality
Large share of population employed in informal sector affecting tax collection and in turn, public sending
Limited access to basic services
3. State of public finances
Substantial improvement till 2007-08
Fiscal deficit down to 4%
Expansion of Corporate sector and corporate tax receipts
New tax on services and high proceeds from personal income tax
Weakening of finances since 2010
High fiscal deficit from tax cuts, debt write offs, public sector wage
raise and high subsidies in energy sector
Regulatory environment characterised by state control, barriers to
entrepreneurship and obstacles to trade and investment
4. Public spending for Development : Reducing Poverty
and Inequality
Impressive progress in reducing absolute poverty offset by rising inequality since
1990s especially between rural and urban areas
India ranks 134 in HDI 2010-11 but has performed better than most (including
high and very high human development) countries in terms of average annual HDI
growth rate
Existing gap in health and education indicators indicates the need for much faster
and wider spread of basic health and education
2011-12
Item Areas Exp.
BE
Education 3.11
Expenditure on social
services as a proportion of 6.74% Health 1.3
GDP
Others 2.34
Expenditure on social Education 11.5
services as a proportion of
25% Health 4.8
total government
expenditure Others 8.7
5. Public expenditure trends and patterns
Total investment in infrastructure (roads, railways, ports, airports, electricity,
Infrastructure telecommunications, oil gas pipelines and irrigation) have increased from 5.7% of
GDP in base year of the 11th Plan to around 8.0% in the last year of the Plan
India’s public spending at 1.4 % of GDP is among the lowest in the world
India spends $43 per head, counterparts in Sri Lanka invest $87, China spends
Health $155 and Thailand over six times at $261
Out-of-pocket costs accounts for 67% of total expenditure on health in India
Education Public spending on education is about 3.1% of GDP
6. India’s expenditure on flagships programs for inclusiveness
Total 11th Plan
Programme Ministry/ Department
(Rs. In crores)
Mahatma Gandhi National Rural Employment Guarantee Act Rural Development 1,56,301
Indira Awas Yojana Rural Development 41,486
National Social Assistance Programme Rural Development 23,536
Pradhan Mantri Gram Sadak Yojana Rural Development 65,002
National Rural Health Mission Health & Family Welfare 69,214
Integrated Child Development Scheme Women & Child Development 38,980
Mid Day Meal School Education & Literacy 38,602
Sarva Siksha Abhiyan School Education & Literacy 77,576
Jawahar Lal Nehru National Urban Renewal Mission Urban Development 48,485
Accelerated Irrigation Benefit Programme and Other water
Water Resources 46,622
resources programme
Rajiv Gandhi Gramin Vidyuti Karan Yojana Power 25,913
Rajiv Gandhi Rural Drinking Water Mission and Total
Drinking Water Supply 46,722
Sanitation Campaign
Rashtriya Krishi Vikas Yojana Agriculture & Cooperation 18,550
Grand Total (Rupees seventy thousand crores approx.) 6,91,976
Eleventh Plan gave special impetus to several programmes aimed at building rural and urban
infrastructure and providing basic services for increasing inclusiveness and reducing poverty
7.
8.
9. Measures to increase efficiency of public expenditure
India’s emerging economy with large unmet minimum needs of the masses
require focus on equity issues and macroeconomic needs. Prudential limits
on deficits and debts and optimization public expenditure outcomes
essential
High-level committee constituted to go into the expenditure classification
and management in a comprehensive way. Main recommendations :
Fundamental shift in public expenditure management - budgeting linked to outputs
and outcomes
Portal to place information on flow of resources and their utilization on public
domain
All States to include information about investment outlays of State Public Sector
Enterprises and resources of rural and urban local bodies as part of State Plans
Provide regular updates on Project-wise, Ministry-wise and Sector-wise
information on Public Private Partnerships in Central and State Budgets
10. Measures to increase efficiency of public expenditure
Government’s has evolved a comprehensive strategy in 12 th FYP for
further lowering poverty and reversing the pattern of growing
inequality. Key elements:
Policies to improve health, nutrition and educational outcomes
Labour market reforms to reduce segmentation between formal
and informal employment
Tax reforms to increase redistributive effects of tax
Making social spending a more powerful tool to deal with rising
inequality. Social spending, which amounts to about 5% of GDP in
India, is low including in comparison to other large emerging economies
11. Key reform measures
Opening up key sectors to FDI
Reduction in energy subsidies
Adoption of open government policies to increase
transparency and reduce corruption
National data sharing and accessibility policy
Right to Public Services
Measures to promote innovation
National Innovation Council and National Innovation Strategy
Decade of Innovation 2010-2020
Indian Inclusive Innovation Fund
Structural reforms to open up the economy and make it more competitive Internal strains: India which emerged string from global recession 2008 was soon bogged down by the emergence of energy, infrastructure, human capital and institutional bottlenecks. The supply of energy and natural resources, transport infrastructure and skills the key engines of growth has not been able to keep pace. with increased demand. Institutions and public as well as private governance also need to adapt to the development of India and the progressive transformation of its economy.
In 2009-2010, 33.8% of the rural population and 20.9% of the urban population lived below the Government’s official absolute poverty line, down from 42% and 25.5%, respectively, in 2004-2005.