Expenditure on education, health hit due to slowdown

Expenditure on education, health hit due to slowdown
Business Standard, November 17, 2009, Page 6

Devika Banerji / New Delhi

Govt focuses on infrastructure, urban development

The economic downturn has had an unusual casualty. The UPA government’s stated agenda to increase expenditure on education and health during the Eleventh Plan Period (2007-12) has gone awry.

With the global economic downturn forcing the government to reprioritise its focus areas and increase its spending on infrastructure and urban development, the education and health sectors will see only around 35 per cent of the envisaged expenditure in the first three years of the Plan period.

Including 2009 budget estimates, only around 35 per cent of the envisaged plan expenditure has taken place in health and education, while sectors like urban and rural development — including infrastructure — have witnessed excess spending.

Revised estimates of 2008-09 budget also show that stated key sectors, like agriculture, health and education, witnessed lesser than anticipated expenditure during the year, while expenditure exceeded in other sectors. Expenditure in education and health fell short by 9 per cent and 0.36 per cent ,respectively, while expenditure exceeded by 83.10 per cent and 3.3 per cent in urban development and transport infrastructure, respectively.

When the Eleventh Plan was formulated, the education and health sectors were identified as focus areas. This was reaffirmed when the UPA government contested elections with an agenda along similar lines.

Now, due to the economic downturn, the government is likely to face substantial financial shortfalls in the next two years, which is likely to jeopardise the government’s stated agenda of increasing expenditure on these two sectors.

“We had expected at the beginning of the Plan that our fiscal deficit situation would be good by the middle of the Plan period, which would facilitate more spending during the last two years. However, the slowdown led to increased spending in sectors like infrastructure and rural development. Therefore, we might end up spending less in some other sectors,” Planning Commission member Abhijit Sen said.

Prime Minister Manmohan Singh had recently said that spending on education should be 6 per cent of the GDP (Gross Domestic Product), while that on health should be 2-2.5 per cent of the GDP.

Expenditure in another key sector, agriculture, fell short by 2.5 per cent in 2008-09. This was, however, balanced out by expenditure in rural development, which exceeded the original estimate by 58.4 per cent. Such expenditure will have to be continued for some time for sustainable economic recovery to take place. This, in turn, will create hurdles to achieve increased spending in health and education in the final years of the Plan period.

According to officials in the Planning Commission, the downturn has made it difficult to realise the entire vision for the Eleventh Plan. The Plan had envisaged that the first two years of the period will have relatively lesser spending and, by the mid-term appraisal, the government will be looking at a fiscal deficit in the 2-3 per cent range.

With the government facing a fiscal deficit of 6.8 per cent this year, the big spending in health and education is not likely to happen, especially since there is a shortfall in Plan resources for the rest of the Plan period.

Planning Commission estimates show there might be a decline of 17.58 per cent in the estimated gross budgetary support (GBS) for 2010-11 and an estimated decline of 37.8 per cent for the last Plan year (2011-12). In the wake of the slowdown, GBS for the years 2008-09 and 2009-10 exceeded estimates by 19.74 per cent and 8.85 per cent, respectively, to Rs 2,12,099 crore and Rs 2,55,353 crore.

The Planning Commission, however, is coming up with recommendations to put the plan vision on track. It recommends strong steps to curtail non-Plan expenditures, especially on subsidies. Moreover, disinvestment proceeds, which are slated to be used in social welfare programmes, will also provide a way to keep the plan on track.