ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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State-Adjusted Public Expenditure on Social Sector and Poverty Alleviation Programmes

This paper presents trends in public expenditures on social sector and poverty alleviation programmes from 1990-91. A considerable proportion of these expenditures is undertaken by the states but the central share seems to be increasing over time. This paper analyses trends in state expenditure, expenditure by the central government and central and state adjusted combined expenditures. Overall, expenditure on social sector schemes is increasing in real terms but mainly through increased expenditure of the central government. The state governments seem to be easing out of their constitutional commitment to sustain programmes in the social sectors, which is a matter of concern. Secondly, there are large inter-sectoral reallocations of funds in the poverty alleviation sectors. One major development has been that large funds that were allocated to employment generation have now been diverted to the rural road construction programme. This reallocation may have serious implications for employment generation.

Fiscal Responsibility and Budget Management Bill

India's fiscal scenario at the moment is about as bad as it was in 1991-92, the beginning of the economic reforms process. For a variety of reasons, many of them in the realm of political economy, the government has been unable to reduce its expenditures and increase revenues. A fiscal responsibility bill, of the kind being discussed currently, is meant to offer a credible commitment that the government is serious about fiscal consolidation. By tying its own hands the government signals that it is serious about reducing deficits. While one may disagree with the details of the bill, the broad overall thrust and the philosophy underlying it deserve to be welcomed. Unfortunately, as this note is being written, the government is seen to be completely diluting the provisions of the bill so as to render it completely ineffective.

A Confounding Exercise

There could hardly have been a more convoluted budgetary exercise than that represented by the Budget 2001-2002 which ignores the poor and pleases the rich and is certain to end up creating conditions for employment to go down without growth picking up.

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