Union Budget 2021–22: Is Capital Expenditure Enough for an Economic Recovery?

The Union Budget 2021–22 seems to be relying on capital investment-led growth for an economic recovery. But such an approach neglects those sections of the public that were the worst-hit by the COVID-19 pandemic.

The Union Budget 2021–22, the first to be presented in the aftermath of the COVID-19 pandemic that swept the world, was highly awaited. While Finance Minister Nirmala Sitharaman’s budget speech on 1 February 2021 outlined a number of significant proposals, it remains to be seen whether the budget will manage to address the unenviable task of recovery in the ailing Indian economy. 

In this reading list, we take a closer look at the Union Budget 2021–22 with articles from EPW’s special series on Budget 2021–22, as well as editorials and letters published in EPW that discuss the year’s budget.

State of the Indian Economy Prior to the COVID-19 Pandemic

To understand the macroecono­mic context of India’s first post-COVID-19 budget, it is also important to understand the evolution of India’s economy in the pre-COVID-19 years: the Indian economy was slowing down even before the pandemic struck.

M Govinda Rao (2021) noted:

The gross domestic product (GDP) growth has steadily decelerated from 8.1% in the last quarter of 2017–18 to 3.1% in the last quarter of 2019–20. 

The economic slowdown in the past years, even prior to the pandemic, was visible across sectors. Himanshu attributed these to policy-related factors: 

Despite normal monsoon and the agricultural sector doing better than the decadal average of the last two decades, the period between 2016–17 and 2019–20 witnes­sed an economic slowdown. Exogenous shocks did not cause the slowdown, but, a series of policy-induced shocks contributed. Demonetisation in 2016 disrupted the recovery in economic growth, while the hasty roll-out of the goods and services tax (GST) also contributed to the severity of the slowdown. The result was a broad-based decline in all sectors of the economy, excluding agriculture, with manufacturing growth rate collapsing to 0.03% per annum in 2019–20, the lowest in last three decades.

Himanshu also highlighted that the performance of the economy on “several indicators of well-being and social progress” was witnessing a stagnation or worsening. On employment and employment quality, he observed:

Despite government reluctance to release the employment–unemployment statistics, the data on employment and unemployment clearly shows that the period between 2011–12 and 2017–18 saw a decline in the absolute number of workers in the economy and a sharp rise in unemployment. With a decline in the number of workers by 15 million, the number of unemployed increased by three times from 11.3 million in 2011–12 to 30.1 million by 2017–18. The decline in employment availability was accompanied by the worsening quality of employment, with a decline in the percentage of workers having written contracts or other social security measures. This was also reflected in the earnings of workers with real wages of both casual and regular workers witnessing a decline.
Based on the National Sample Survey Office (NSSO) Employment–Unemployment Survey (EUS) and the Periodic Labour Force Survey (PLFS), regular wages declined for both rural and urban areas, with a faster decline in urban areas, between 2011–12 and 2017–18.

One consequence of the decline in incomes and rising unemployment has been the rise in poverty in the most recent period. 

While the poverty headcount ratio has continued to show a declining trend throughout the 1990s and the first decade since 2000, it increased marginally from 29.7% in 2011–12 to 30.7% in 2017–18 (Subramanian 2019). It was primarily a result of the decline in real consumption expenditure between 2011–12 and 2017–18, the first such incident since 1973–74 (Himanshu 2019). The decline in real consumption expenditure was also accompanied by a decline in real food expenditure, again a rare event in the last four decades.

Sajjid Chinoy and Toshi Jain (2021) also wrote about the deteriorating state of private consumption in the economy:

Private consumption averaged 7% in the six years pre-COVID-19, but much of this was financed by households taking on debt and running down savings, as they were increasingly able to tap formal credit channels, and therefore, sought to smooth lifetime consumption levels. Consequently, individual debt jumped from 19% to 28% of GDP between 2015 and 2019, though still not high by emerging market standards.
By 2019, however, with the economy in the midst of a three-year slowdown, risks were mounting that households would begin to perceive the slowdown as being more permanent and accordingly adjust consumption downwards. Indeed, in the pre-COVID-19 year, these fears combined with an increasingly impaired financial sector to pull private consumption growth down to 5.3%—the lowest since the global financial crisis (GFC).

Another sector that has seen a visible decline in indicators is health and nutrition. Himanshu wrote

The fact sheets released as part of the National Family Health Survey (NFHS) are the latest in the series of data that provide evidence of worsening social sector indicators (IIPS 2020). While results from all states have not been released, the data for 17 states and five union territories made available shows a deterioration in some of the malnutrition indicators in 2019–20 compared to NFHS-4 (2015–16). Not only do these show a slower improvement in several indicators, but also show a reversal of gains made in combating malnutrition between 2005–06 and 2015–16. Stunting among children increased in 13 out of 22 states, wasting increased in 12 out of 22 states and underweight cases increased in 16 out of 22 states. Deterioration in at least one anthropometric indicator for children was seen in 20 out of 22 states. Similar stagnation and reversal of gains made earlier are also seen for important indicators such as infant mortality rate (Drèze et al 2020).

Economic Impact of the Pandemic and Shape of a Potential Recovery

While the economy was already witnessing a slowdown prior to the pandemic, the pandemic and the lockdown restrictions deteriorated the situation further.

Rao (2021) observed:

The economy has shrunk by 15.7% in the first half of the year, and sectors with social distancing requirements continue to be under restrictions and some states are seeing an upsurge in new cases. The bank credit to commercial sector continues to be subdued and private investment continues to be low even after the phased relaxation of the restrictions.

Himanshu termed the unfolding impact of the pandemic “a humanitarian crisis,” especially in the aftermath of the sudden announcement of the lockdown in late March 2020.

The humanitarian crisis was visible in the form of thousands of migrant workers walking back on foot to their villages, both during the lockdown as well as after it was relaxed in May 2020. But a large part of the humanitarian crisis remains invisible in the form of increase in hunger, malnutrition, job losses and declining income, all of which would have pushed millions into poverty. It has affected education and access to health but has also contributed to increasing misery along with rising inequality in all dimensions.

For instance, Amit Basole (2021) delved into the impact of the pandemic on employment: 

Many surveys investigating the COVID-19 impact on vulnerable workers, including ours, have shown that around 60%–80% of workers (self-employed, casual as well as salaried workers without job security) lost employment during the lockdown in April and May 2020. The CMIE (Centre for Monitoring Indian Economy) data show that the lockdown affected around 43% of the national workforce. Even as late as December 2020, both CMIE data and our survey showed that 20% of those who lost work during the lockdown were unemployed (Abraham and Basole 2021; Nath et al 2021). Women and younger workers were much more likely to lose their jobs and less likely to recover (Abraham et al 2021). There was also an increase in informality during this period, with previously salaried workers returning to the labour market as self-employed or casual workers (Abraham and Basole 2021).

Highlighting “evidence of discernible labour market scarring,” Chinoy and Jain wrote:

Across December and January, for example, demand for Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA)—which proxies for India’s unemployment insurance in the rural economy—was still about 45% higher than a year ago. This suggests a paucity of opportunities in the labour market, especially since the fall in COVID-19 cases has likely reduced the hesitancy of labour to migrate back to the cities in search for jobs.

A commensurate impact could also be seen on incomes. Basole noted:

[T]he CMIE data show a collapse in earnings during the first six months of the pandemic (March 2020 to August 2020), with an average household having 17% lower income in nominal terms relative to the same months in 2019. In absolute terms, this amounts to an entire month of lost earnings. The situation at the bottom of the income distribution is much worse with average household incomes being practically zero in the two lockdown months. Overall, the bottom 10% of households lost full three months of income in the six-month period from March to August (Lahoti et al 2021).

And, expectedly, loss of employment and income would have also had an impact on social indicators, such as nutrition, health and education, even though these remain inadequately analysed. Increased debt would be another consequence. Basole wrote:

[S]everal surveys have pointed to persistent food insecurity. For example, in our survey, as of November 2020, a worrying 20% of households reported no improvement in food intake since the lockdown. The Hunger Watch survey conducted by the Right to Food Campaign survey (4,000 households in 11 states) had one in three respondents reporting members having to skip meals “sometimes” or “often” (Sinha and Narayanan 2020). One-fifth of the respondents in our survey also reported having to sell or pawn an asset to finance consumption. The bottom 25% of households (with a median income of ₹4,000 per month pre-COVID-19) reported debts amounting to three times this amount. Finally, a January 2021 survey on educational outcomes by Azim Premji University also shows significant learning deficits developing during the pandemic. In a sample of 16,000 children in 1,137 public schools across five states, the vast majority of children showed loss of language or mathematical abilities acquired previously.

These findings are important to keep in mind while analysing the direction a potential economic recovery could take. Contextualising India’s recovery, Chinoy and Jain wrote

Despite expected double-digit growth in FY22, the economic recovery is expected to be incomplete. By the first quarter of 2022 (calendar year) the level of output would still be more than 6% below the level forecasted pre-pandemic.

The labour market woes unleashed in the past year are likely to contribute to a “bifurcated recovery.” Chinoy and Jain contended:

Households at the top of the pyramid are likely to have seen their incomes protected, and savings rates forced up during the lockdown, increasing “fuel in the tank” to drive future consumption. Meanwhile, households at the bottom are likely to have witnessed permanent hits to jobs and incomes, which will hurt their consumption. These cleavages are already visible. Passenger vehicle registrations (proxying upper-end consumption) grew 8% between October and January while those for two-wheelers contracted 10%.

The divergent recovery bodes poorly not only for the disadvantaged sections and the sections that are already encumbered by the impact of the pandemic, but also for the economy as a whole.

With the top 10% of India’s households responsible for 25%–30% of total consumption, near-term consumption is getting a boost as this pent-up demand expresses itself. To be sure, upper-income households have benefited from higher savings for two quarters but this is a one-time effect. To the extent that households at the bottom have experienced a permanent loss of jobs and incomes, that could constitute a recurring drag on demand if the labour market does not heal faster. More generally, to the extent that COVID-19 has triggered an effective income transfer from the poor to the rich, this will be demand-impeding in the steady state, because the marginal propensity to consume at the bottom is higher than that at the top, just as the marginal propensity to import at the top is higher than at the bottom. Signs of this are already visible in the Reserve Bank of India’s (RBI) February consumer confidence survey, where households have already signalled a lower propensity to consumption in the future.

So, how does the Union Budget 2021–22 address these challenges of a likely bifurcated and incomplete recovery?

Budget Estimates and Fiscal Deficit

The impact of the pandemic on central government revenues has also been severe since revenue receipts were lower while expenditures had to be increased. 

Referring to the budget’s figures, Rao (2021) wrote:

Interestingly, as a ratio of GDP, the tax revenues in 2020–21 (RE) actually increased from 6.6% in 2019–20 to 6.9% in 2020–21 (RE) mainly due to the severe contraction in the GDP as well as additional revenues from special excise duties on petroleum products levied by the union government. Both non-tax revenues and disinvestment receipts were substantially lower than the previous year and therefore, decline in revenue was lower by 0.33% of the GDP. However, the government had to incur much higher expenditures, that is, by more than 4.6%. 

Accordingly, in 2020–21, the fiscal deficit rose from 3.5% in the budget estimate to 9.5% in the revised estimate. Lekha Chakraborty remarked:

The anatomy of the high fiscal deficit number announced in the Union Budget 2021 is relevant here. It is a combination of revenue shortfall, and new expenditure priorities. Strengthening of “budget transparency” by incorporating prior off-budget borrowings has also led to the rise in deficit number. The Food Corporation of India’s (FCI) borrowing from the National Small Savings Fund (NSSF) is stopped, to bring in budget transparency.

Arguing for a rethinking of the logic of fiscal consolidation, especially during an economic downturn, Chakraborty wrote:

Globally, there is a fundamental rethin­king about the efficacy of “fiscal rules”—whether adhering to numeric threshold ratios of deficit is growth-enhancing. If the path to fiscal consolidation is thr­ough expenditure compression rather than increased tax buoyancy, the quality of fiscal consolidation gets affected. Chapter 2 of the Economic Survey 2021 on public debt sustainability, highlights the perspective of the eminent macroeconomist Olivier Blanchard (2019: 1198) that “if the interest rate paid by the government is less than the growth rate, then the intertemporal budget constraint facing the government no longer binds.” From this perspective, as announced in the Union Budget 2021, allowing a high fiscal deficit to GDP ratio to 9.5% of GDP in RE 2020–21 is welcome.

She summed up:

High deficit has no fiscal costs if it can be substantiated with increased public investment or “output gap” reduction. When the monetary policy stance has limitations in triggering growth through liquidity infusion and the status quo policy rates, “fiscal dominance” is crucial for sustained growth recovery.

Coming to the estimates for 2021–22, Rao wrote:

For 2021–22, with nominal growth of GDP assumed to increase at 14%, the tax–GDP ratio has been budgeted to remain broadly at the same level and expenditure–GDP ratio is budgeted lower at 15.6% as compared to 17.7% in 2020–21 (RE). The revenue deficit is budgeted at 5.1% and the fiscal deficit at 6.8%.

While Chinoy and Jain believed that the budget had “admirably attempted to consolidate without generating a large, contractionary impulse in FY22,” they also paid consideration to debt sustainability since the budget “also laid out a more relaxed fiscal path than was expected.”

The centre’s fiscal deficit is pegged to narrow to 4.5% of GDP by FY26, suggesting about a 0.5% a year consolidation for every year after FY22. 

They argued that the trajectory of debt is likely to be more important than its level in the post-COVID-19 years as a barometer of fiscal sustainability. 

[D]ebt/GDP is expected to approach 90% at the end of FY21 but then reduce to 85% of GDP at the end of FY22 if India experiences strong nominal GDP growth next year. What happens next depends squarely on growth dynamics. 

Warning against the “relaxed” fiscal road map of the government for the medium term, Rao wrote:

[W]ith this relaxed approach to fiscal consolidation, the ghost of fiscal deficit and debt will continue to haunt the economy and the future generation, with increased interest payments, pressure on higher cost of bor­rowing for the corporates, continued financial repression and direct and indirect monetisation of deficits to put pressure on prices.

Budget’s Thrust For Capital Expenditure

The expansionary fiscal policy and increase in budgeted government expenditure was perhaps a given considering the period of unprecedented slowdown. But what does the Union Budget 2021–22 spend on?

M Parameswaran (2021) highlighted:

The proposed capital expenditure in the budget is ₹5.54 lakh crore, which, as per the finance minister’s budget speech, is 34.5% higher than the capital expenditure proposed in the previous budget. The budget proposes to invest in national highways and roads, railways, urban infrastructure, port, shipping and waterways and petroleum and natural gas.

According to Rao (2021),

The budget for 2021–22 makes a significant additional allocation to capital expenditures amounting to ₹1.15 lakh crore. In fact, at 2.5% of GDP, capital expenditure at the central level is budgeted to be the highest in recent times.

Yet, breaking down the claimed figure, Rao explained:

[A] closer examination shows ₹20,000 crore from this is for the creation of Development Finance Institution (DFI), ₹12,250 crore for recapitalisation of National Bank for Agriculture and Rural Development (NABARD), and ₹39,000 crore is meant for water supply.

Specific allocations aside, Chakroborty (2021) welcomed the thrust towards greater capital expenditure in the budget.

In the Union Budget 2021, the fiscal stimulus was announced as “targeted” economic packages, especially in capital infrastructure investment. There is an increasing recognition of the fact that public investment has suffered from fiscal consolidation when the national and subnational governments have over-adjusted to the fiscal rules by capital exp­enditure compression. Empirical evidence suggest that public investment is one of the crucial determinants in strengthening private corporate investment in the context of emerging economies (Vinod et al 2020). Intertemporally, there is no financial crowding out through real interest rate mechanisms, as well (Chakraborty 2016).

The principal approach that seemed to have been taken in the budget is to increase capital expenditure in order to spur growth.

The availability of better infrastructure is expected to “enhance the rate of return in the industry,” which in turn can stimulate investment and growth. While it is expected that infrastructure investment can have second-round effects by boosting the growth of other industries through multiplier effect and by easing infrastructure constraint, Parameswaran explained how such supply-side measures need not be all that effective in boosting growth, especially in the manufacturing sector:

The budget, by focusing on infrastructure and other reform measures, aims to revive growth by stimulating supply side and almost completely neglecting the demand side of the problem. If the perceived demand is weak, entrepreneurs would not invest to expand capacity. A boost in demand is essential for the immediate recovery of sectors like micro, small and medium enterprises (MSMEs), as they cannot wait for the increased profitability due to spillovers arising from the infrastructure investment. Besides, infrastructure investment is not uniformly spread across the regions of the country, further reducing its potential to revive the growth of the manufacturing sector.

He also highlighted specific challenges of infrastructure investment in India.

[T]he potential of infrastructure investment to revive the growth rate of manufacturing can be limited, first by the fact that these are projects requiring a long time span for completion, even if there are no impediments. Second, project implementation in India usually gets delayed due to reasons like delay in the acquisition of required land, delay in getting necessary clearances from various departments, and litigation.

He added:

Further, the second-round effects on private investment depends partly on the availability of credit. Here, the increased non-performing assets of the Indian banks, particularly of public sector banks, is constraining their ability to expand credit … the current allocation in the budget is quite inadequate to generate a substantial increase in the credit creating ability of public sector banks.

Further, the thrust towards more capital expenditure as a strategy to further growth may not be the most equitable. Basole (2021) contended:

[A] shift away from current to capital expenditures is usually desirable because it improves the economy’s productive capacity and generates employment directly as well as indirectly. But going beyond this general statement, two important caveats are needed. First, the type of capital expenditure matters greatly for how many jobs are created and which section of society benefits most from it. Second, while in an accounting sense all expenditure on wages or salaries is current expenditure, not all such expenditures are the same when it comes to improving productivity capacity and strengthening livelihoods. 

Explaining the first caveat further, Basole wrote:

[O]ver the past few years, the need for good local infrastructure has been recognised in programmes such as the Pradhan Mantri Gram Sadak Yojana. Hence, it is disappointing to see that the increased capital outlay has not found its way into the Gram Sadak budget which is unchanged from last year. Similarly, the rural electrification scheme, DDU Gram Jyoti Yojana, has seen a cut in allocation from ₹4,500 crore to ₹3,600 crore. Even the flagship urban programmes such as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Smart Cities Mission have not gained much with allocations for both programmes remaining roughly unchanged at ₹7,300 crore and ₹6,000 crore, respectively. And the Central Public Works Department (CPWD) under the Ministry of Housing and Urban Affairs has also seen a small cut from ₹3,033 crore to ₹2,977 crore.

Overall, he concluded, it seems that the budget tilts in favour of capital spending that will benefit larger businesses and upper deciles compared to underserved areas, rural regions and small businesses.

Similarly, explaining the second caveat, Basole argued:

While capital expenditure is generally seen as being more desirable than spending on salaries for improving productivity and growth, it is worth stating what may be obvious: public expenditure on labour is crucial to creating assets and delivering vital services (transport, sanitation, water, electricity, education, health), which act as inputs into the building of both physical and human capital. These are current expenditures. But without them, capital expenditures are useless. One has only to recall inadequately staffed hospitals and schools to mind, to see the importance of this point.

Emphasising the need for government spending in this regard, as opposed to private investment, Basole added:

[G]enerating such employment via public spending also tightens the labour market, especially for uneducated workers, thereby improving the bargaining power and raising wages at the bottom of the labour market. Thus, a well-run MGNREGA programme, for example, acts as a safety net, raises rural wages and also creates valuable local infrastructure in the form of roads, ponds, canals, etc. This in turn can have multiplier effects on productivity at the local level.
… A change in mindset is needed to recognise that MGNREGA and its urban equivalents are not “doles.” Rather they are investments in improving local infrastructure that can have multiplier effects on MSMEs and private employment.

What Does the Budget Not Spend Enough On?

[W]hile overall government expenditure is set to rise marginally by 1% to ₹348.3 lakh crore in 2021–22 and capital spending by 26.2% to ₹5.5 lakh crore, the revenue expenditure is set to fall by ₹82,142 crore or -2.7% affecting almost two dozen major government schemes whose allocations have been cut. This would include the nutritional social assistance programme, school midday meal programme, price stabilisation fund scheme, LPG (liquefied petroleum gas) direct benefit transfer, jobs and skill development scheme, Pradhan Mantri Awas Yojana and also schemes which particularly affect farmers like interest subsidy on short-term credit, fertiliser subsidy, procurement of foodgrains and assistance to sugar mills.

observed an EPW editorial (2021). With the constrained fiscal space and the expansion of expenditure on capital investment, what has suffered in the Union Budget 2021–22 is the government’s expenditure on welfare and the social sector.

The editorial added:

[E]ven as the pandemic pushes millions back below the poverty line, the budget only makes haste in cutting down even the little subsidies and social security available. 

It noted that the overall budget subsidies in the budget had been “pared down by 48% to ₹3.7 lakh crore.”

(i) Social Security

Emphasising the crucial role played by the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as a safety net, Basole (2021) highlighted the budget’s reduction in expenditure towards the programme:

The allocation for MGNREGA is ₹73,000 crore—34% less than the revised estimates of ₹1,11,500 crore for 2020–21. Further, it is only 2% more than what was actually spent in 2019–20, a normal year (₹71,600 crore). That is, spending in real terms has gone down from what it was in a normal pre-COVID-19 year, even when the effects on COVID-19 on the labour market are likely to persist for some months to come. Further, there is evidence to show that even the additional allocation of ₹40,000 crore last year was insufficient to meet the increased demand. For example, our survey showed that 45% of MGNREGA job card holders could not get work despite wanting work. Further, of those who got work, almost all (98%) reported that they would have liked to work more days. The Gaon Connection survey similarly noted a large unmet demand for work as of September 2020 (Mishra 2020).

MGNREGA is not the only welfare programme whose allocations have been cut. Basole further explained:

[M]ost other smaller social protection schemes for unorganised sector workers, such as Shram Yogi Man Dhan, Kisan Man Dhan and even the flagship PM-KISAN have seen a reduction in allocation for the coming financial year (the latter from 75,000 crore for 2020–21 to 65,000 crore).
For formal sector workers, the new Atmanirbhar Bharat Rozgar Yojana, a provident fund based wage subsidy scheme, has been allocated a budget of ₹3,130 crore (up from ₹1,000 crore spent in 2020 when the scheme was launched). However, there is a concomitant cut in the Pradhan Mantri Rozgar Protsahan Yojana (also a provident fund-linked employment wage subsidy scheme) from ₹2,550 crore in financial year 2020–21 to ₹900 crore in the coming year. So, the net spending on these wage subsidy schemes has not gone up much.

Despite a few small changes, the picture that is painted is that of a return to business as usual, or perhaps even a contraction on the welfare spending front.

Similarly, when it comes to food security, Basole observed:

The allocation for PDS has increased substantially from 75,000 crore in 2019–20 to over 2 lakh crore for the coming year. But, as noted earlier, this is not a result of expanding food rations. Rather, it is because the government has finally brought payments made to the FCI on to its books instead of keeping it off to show lower fiscal deficit numbers. This is a good thing from the point of view of transparent accounting, but it does not address the food security crisis.

(ii) Health

Another sector that has seen claims of increased expenditure, which are nothing but clever accounting adjustments, is health. D Narayana (2021) quoted the finance minister’s budget speech as saying, “The Budget outlay for Health and Wellbeing is ₹2,23,846 crore in BE 2021–22 as against this year’s BE of ₹94,452 crore an increase of 137 percentage” (GoI 2021: para 39). Instead, upon closer consideration, Narayana’s calculations reveal “a mere 10% inc­rease.”

How was the “137%” figure arrived at? Mukesh Kumar and Pratap C Mohanty (2021) explained:

Before getting caught in the rhetoric of a trailblazing 137% increase in health expenditure, a careful investigation shows that the money (₹2,23,846 crore) is actually allocated to “Health and Well-being and Allied Sectors” instead of only to “Health and Well-being.” But the allocation of money in the aforementioned budget also includes drinking water and sanitation (₹60,030 crore) and nutrition (₹2,700 crore)—although both are important— they shall not be taken directly as items of expenditure on health. Similarly, the announcement of ₹35,000 crore on COVID-19 vaccination also seems to be a one-time expenditure because such expenses are not a part of the regular budget. The spending on Central Road and Infrastructure Fund is also incorporated in the Health and Family Welfare budget of ₹3,000 crore. The experts also make apprehensions in considering the finance commission grants (₹49,214 crore on water and sanitation and health) in central government’s health expenditure because as per constitutional provisions (Article 275[1]), such expenditures are a part of state government’s expenses.

Instead, if the allocations are to be calculated comparably, a different picture would emerge. Kumar and Mohanty noted:

After these reasonable considerations and comparing apples with apples, the 2021–22 estimated budget allocation to the health sector is ₹76,902 crore, which is only ₹7,668 crore more than the 2020–21 budget estimates (BE) of ₹69,234 crore.
Overall, the Ministry of Health and Family Welfare (MoHFW) is allotted ₹73,931.77 crore, which is 10.16% larger than that of 2020–21 (BE ₹67,111.80 crore) but below 10.84% from the revised estimate of 2020–21 for the current financial year.

Narayana further observed:

Once the boast of the magnificent hike in allocation for health is out of our way, let us focus on the allocations for the Department of Health and Family Welfare and compare the 2019–20 actuals with 2021–22 BE. It is an increase of about ₹9,000 crore (around 14%). Establishment expenditure showed an increase of ₹1,100 crore, allocation to central sector schemes increased by ₹2,300 crore, and centrally sponsored schemes gained by ₹5,000 crore. The last was largely on account of the Pradhan Mantri Jan Arogya Yojana (PMJAY), the allocation to which went up by ₹3,200 crore. 

Himanshu added:

The government did announce the Pradhan Mantri Atma Nirbhar Swasth Bharat Yojana with the stated objective of developing capacities at the primary, secondary and tertiary levels of healthcare. However, the budget allocation for this is a mere ₹64,180 crore to be spent over six years, and with no details in the budgetary allocation for the Ministry of Health and Family Welfare. 

(iii) Agriculture

A saving grace of the pandemic in India is 3.4% growth for agriculture and allied activities income in 2020–21, which is remarkable because the budget apportioned for the year for the sector, as per revised estimate, had decreased by -6.1%.

wrote Srijit Mishra (2021).

This growth figure does not adequately reflect the distress in the rural economy and the agricultural sector, though. Himanshu (2021) contended:

It is now clear that the slowdown of the economy is primarily driven by a decline in demand. Much of this has been a result of distress in the rural economy driven by crisis in the agricultural sector. Shift in the terms of trade against agriculture and the rise in input costs have contributed to declining incomes for farmers. 

Connecting the agrarian distress to the new farm laws and highlighting the reduced government spending for the sector, Himanshu explained:

With declining crop prices, the reforms introduced by the three farm acts passed in September have added to the fear of declining farm incomes. The demand for protection of prices through the Agricultural Produce Marketing Committee (APMC) mandis has now been added to the pending ­demand of guarantee for MSP. While the finance minister was quick to remind the large procurements as part of MSP-led procurement, the budget proposals have seen an actual decline in budget allocations for agriculture for 2021–22, but also lower expenditure in revised estimates compared to budgeted estimates for 2020–21. As against the budgeted estimate of ₹1,34,400 crore for 2020–21, the revised expenditure for Ministry of Agriculture is only ₹1,16,758 crore. At a time when the agricultural sector has been reeling through distress for the last five years, the reduction in expenditure does not help. While the budgeted expenditure for next year at ₹1,23,018 crore is higher than the revised expenditure of the current year, it is even lower than the budgeted expenditure of last year.

The decline is across most schemes of the Ministry of Agriculture and Farmers' Welfare, wrote Himanshu: 

[T]he largest decline is in the flagship scheme of the government, the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan), which seeks to transfer ₹6,000 per year to farmers. The cash transfer scheme for farmers households, with a budgeted expenditure of ₹75,000 crore, was announced just before the 2019 parliamentary elections. Immediately after the election results were declared and the new government took over, this scheme was expanded with a budget outlay of ₹87,217 crore. The actual expenditure on the scheme in 2019–20 is only 56% of the budgeted amount at ₹48,714 crore. While it increased to ₹65,000 crore in the revised estimates for 2020–21 as against budgeted estimates of ₹75,000 crore, the budget allocation for 2021–22 is only ₹65,000 crore.
The interest subvention scheme has been allocated ₹19,468 crore, ₹1,707 crore lower than the budget estimates of last year and also lower than the revised estimates of ₹19,832 crore for 2020–21. Similarly, while the revised estimates of expenditure on Market Intervention Scheme and Price Support Scheme (MIS-PSS) is almost half of the budgeted ₹2,000 crore in 2020–21, the budget allocation for next year has been slashed to ₹1,500 crore at a time when there is an urgent need for market intervention and price support scheme. Similar reduction in revised expenditure is seen for majority of the agriculture sector schemes with revised expenditure on Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) at ₹2,563 crore as against an allocation of ₹4,000 crore. 

(iv) Education

In a continued trend of reduced social sector expenditure, education also saw spending cuts across multiple schemes.

The Right to Education Forum (2021) wrote:

It is strange that the budget allocated for Samagra Shiksha Abhiyan for 2021–22 is only ₹31,050 crore, far less than the budget allocated for 2019–20, which was ₹36,400 crore, and also less than the actual expenditure of 2019–20, which was ₹32,376.52 crore.

The government has failed to take in cognisance that investment in education will boost the economic growth of the country, it added.

Read More 

Budget as a Ritual | From the Editor’s Desk, 2021

Development Banking in the Budget | K U Mada, 2021

Decoding the 2020-21 Union Budget: Bombastic Speeches and a Plummeting Economy | EPW Engage, 2020

Must Read

Do water policies recognise the differential requirements and usages of water by women and the importance of adequate availability and accessibility?
Personal Laws in India present a situation where abolishing them in the interest of gender justice also inadvertently benefits the reactionary side.   
Concerns have been raised about criminalising triple talaq now that the Muslim Women (Protection of Rights on Marriage) Bill, 2017 has been passed as an ordinance. This reading list is to help...
Back to Top