Flab in Central budget - an obvious corrective strategy

By S. Swaminathan

Is expenditure containment a hopeless task for the Centre? Even with a think-tank in attendance - the Expenditure Commission? While the case for addressing corpulence of the Union Government is insistent, the search seems to be unceasing for ``politically saleable'' strategies for holding the level of expenditure such that the fiscal deficit is brought down as a percentage of the GDP.

The paucity of ideas here is truly pathetic because there is a diehard assumption that practically every rupee spent by the Centre serves as an indispensable contribution to national welfare. In an atmosphere of almost total scepticism on the possibilities of prudent expenditure control, the Planning Commission has now mooted the long-overdue suggestion that the proliferating paraphernalia called ``Centrally sponsored schemes'' be reviewed with a rational candour.

It is not only because these schemes consume large public funds. The tremendous duplication and redundancy which they involve besides well-known seepages of funds and the virtual suspension of accountability call for a new order of rationalisation in terms of redefining the pattern of Centre-State economic relations to subserve better the larger causes of the poor trapped in deprivation of various forms.

Hullabaloo about non-Plan expenditure

Efforts over the last ten years to contain non-Plan expenditure have largely come unstuck. To a great extent, the principal constituents of this category of expenditure, namely, subsidies, interest payments and defence - which together account for around 54 per cent of the total expenditure - do not lend themselves to pragmatic much less drastic correction. Interest payments have been ballooning over the years mainly because growing fiscal deficits have crystallised into huge mountains of public debt. In 2000-01, for instance, interest payments claimed Rs. 101,266 crores of total resources, that is, 30 per cent of the total receipts of the Government, including borrowings.

The experience since the liberalisation process started in 1991 has been that subsidies do not subside. Nor do establishment expenditure and defence spending abate as percentages of non-Plan expenditure regardless of the constraints of resources or the changing perceptions of the external security environment. Rather than chase the mirage of the so-called ``strong political will'' needed to reprioritise public expenditure, would it not be more practical for the policymakers to do away with the fallacious dichotomy as between development expenditure and the so-called non-development component of expenditure? And to look at the whole gamut of Central expenditure which is dubiously glorified as ``Plan expenditure''?

Where introspection has been delayed

In the ``Command and Control'' economy of the past, a lot of unjustifiable aura surrounded the category called ``Plan expenditure,'' under the mistaken notion that any expenditure which related to the Annual Plan was ipso facto ``strategic'' merely because it had passed scrutiny at the hands of an omniscient Planning Commission! It has indeed been an enduring myth that if only the Finance Minister would provide for larger budgetary support for the Plan outlay, the public interest would be better served and the cause of fiscal prudence as well! Granting that Plan expenditure has been hovering around 25 per cent of the total expenditure of the Centre (with the lion's share being taken by non-Plan expenditure), there are many areas where economies in expenditure appear to be feasible perhaps with enhanced effectiveness of expenditure.

Consider the situation in 2000-01. Plan expenditure amounted to Rs. 88,100 crores (26 per cent of total expenditure). Of this, Rs. 34,623 crores represented Central assistance for States and Union Territories for their annual Plans. The larger portion, Rs. 48,269 crores, of Plan expenditure went towards financing the Central Plan.

The anatomy of Central Plan expenditure reveals that sectors such as Energy and Transport (covering Roads, Railways and Civil Aviation) besides Communications loomed large. These sectors, by their very nature, engage the constant attention of the Centre which perforce must accept responsibility for implementation of the various projects included in the Central Plan. But then there are sectors such as Agriculture, Rural Development and Social Services (covering education, health, family welfare and so forth) which also are included in the ambit of the Central Plan even though these subjects fall within the purview of the States as adumbrated in the Constitution.

The ``Concurrent List'' has often been leveraged by the Centre to force the States into a pattern of national conformity regardless of regional diversity. The crux of the issue is that a broad component of the Centre's Plan expenditure relating to ``State subjects'' has been a ``grey area'' - expenditure which is sourced from Central funds but incurred mostly on schemes designed by the policymakers at the Centre for ``uniform implementation'' by all the State governments.

The Centre formulates the schemes with or without consultation with the States and undertakes implementation through the State governments and funding them through special assistance even apart from other forms of devolution of funds.

In theory, the Centre is accountable to Parliament for Plan expenditure in its entirety. In reality, a large part of the expenditure routed through State governments, zilla parishads and even gram sabhas, for securing ``performance'' of a plethora of Central schemes and ``Centrally sponsored schemes'' (CSS), goes virtually unaccounted for.

The wonder is that with all these all-too-well-known slippages and leakages, Plan expenditure continues to command expert veneration!

A broadside on CSS

The Planing Commission, in its recent ``Approach Paper to The Tenth Five Year Plan (2002-2007)'', has offered a detailed, if unsparing, critique on the whole range of Centrally-sponsored schemes (CSS) which number 210 at present.

For one thing, the Commission draws upon the report of the Comptroller and Auditor-General (CAG) of India for 1999, on the implementation of a few CSS. The CAG report brings out the common shortcomings in the execution of CSS.

Some of the terms of disapproval used by the CAG in this context are ``uncontrolled and open-ended'' execution ``without quantitative and qualitative evaluation of delivery'', ``overstatement'' of physical and financial performance by the State governments, the ministries at the Centre ``more concerned with expenditure rather than the attainment of the objectives,'' misuse of funds and lack of accountability.

The litany is not new-fangled. But as the Planning Commission puts it, ``There are far too many schemes to be monitored'', ``a number of schemes have similar objectives targeting the same population,'' there is ``unwillingness'' on the part of the Central ministries ``to accept poor performance, for fear of being questioned by Parliament or adverse press publicity.''

How mechanical imposition of CSS on States (which are lured by fungible funds floating around) has put paid to many such schemes is well summed up by the Commission. ``Uniformity of schemes all over the country from Mizoram to Kerala, without sufficient delegation to States to change the schemes to suit local conditions, leads to a situation where the States even knowing that the scheme is not doing well become indifferent to its implementation.''

Could the CSS be phased out in the next three years, not so much for avoiding government intervention through socio-economic processes as for ensuring cost-effective public spending attuned to local needs rather than to political populism?

Send this article to Friends by E-Mail

Section  : Business
Previous : Monitor