Will Expenditure Proposals of Budget 2020-21 Stimulate Growth and Improve Redistribution?

Budget 2020-21

Will It Stimulate Growth, Improve Redistribution and

Deliver Public Services Better?

What are Budgets meant to do?

At its core, budget making is an exercise in making an assessment of the taxes and debt which the Government of India can raise, maintaining macro-economic stability, to fund an expenditure programme, based on policy preferences of the Government, to stimulate growth, to deliver a redistribution programme for poor and needy and to provide public goods and services.

First part of the budget making exercise is to assess current expenditure programme and take a call to scale up, shed, downsize, restructure and re-focus existing expenditure programmes and to decide to take up new programme. This exercise should lead to determination, design and scale of financing needed for appropriate expenditure programme for (i) stimulating growth in the economy, (ii) delivering a programme to pull-out poor people out of poverty and hunger and to provide a suitable scale and mode of assistance to the people who are unable to earn their living for reasons of illness, old age, physical handicap or any other socio-physical reason like uneducated widows and (iii) undertaking public goods and services, as contrasted from private goods and services, which the Government only can provide like law and order, defence of borders, maintaining monetary stability, regulation of financial and other markets, regulation and delivery of environmental services like control of pollution and green- house gases, cleaning of rivers, infrastructure services to integrate the rural and backward areas and to provide primary health, education and skilling to raise standard of human capital.

The expenditure programming exercise needs to be grounded in a very careful assessment of the state of the human capital, including careful enumeration, with attributes of physical, social and economic disabilities of the people who are not in a position to earn adequate livelihood for themselves and therefore deserves state support.

Ideally, public goods and services only and not private goods and services, should be provided by the State. Private goods and services are more efficiently and qualitatively produced in private sector and contributes to generation of income and wealth for people. Private goods produced by the State or the public sector using scarce capital and human resources inefficiently and producing lower value added is a loss for the country. Unfortunately, lot of private goods and services are produced in the public sector and by the Government pulling down the growth and welfare in India.

Public goods and services, which includes merit goods, are best produced and provided by the State or its agencies. Unfortunately, with so much pre-emption of government resources in producing and providing private goods, provision of public goods and services is in a great state of neglect and under-provision.

Budget making should involve a careful assessment of private goods and services which the state and the public sector is providing and unveil a programme of privatisation of such private services. Careful assessment of the state of public goods and services provision at the time of budget making would lead to correcting this imbalance and focussing of fiscal resources to their provision.

Second part of the budget making exercise is what taxes and non-taxes revenues can and should be raised to fund the expenditure programme. The taxes are raised from the income (gross value added in the economy) and wealth (creation of new assets and valuation gains). As the income/value added also funds wages for all kinds of workers and the returns on capital employed, excessive taxation of income would lead to adverse macro-economic consequences. Depression of returns on capital discourages the entrepreneurial impulses/ animal spirits in the economy, which results in lower investment and production. Such an outcome also leads to collapse of taxation revenue. A careful and balanced assessment of the state of current taxation and policy context should lead to determination of appropriate level of taxation and appropriate policy mix to encourage entrepreneurial activities and raising right amount of taxes.

As part of the revenues to be raised, the Government also makes an assessment of the revenues it can generate from sustainable use of natural resources, like auction of petroleum and gas and also sale of spectrum. The Government also earns income from use of sovereign authority, like fines and penalties for violation of laws and rules, seigniorage on minting of coins and printing of currency, regulation of markets and so on. Dividends and interest receipts on investments (equity and debt) made in the public sector enterprises, most of which delivers private goods and services, should not be taken as non-tax revenues. Instead, the net cost to the fisc, which is the cost of funds invested in the public sector enterprises (interest on funds borrowed and losses made) minus the dividends and interest received should be taken on the budget, which would almost invariably appear on the expenditure side. 

Budget is not an appropriate occasion to take up tax administration issues as essentially these measures do not primarily determine the level of taxes which should be raised assuming an efficient tax administration. These are also matter of detail which should better be brought up as a separate exercise of tax administration revamping, whenever needed on technological or other administrative consideration. A large part of current budgetary exercise is unnecessarily devoted to tax administration issues. This not only dilutes the attention to the core of budget making but also leads to lots of clarifications and roll-back as, quite expectedly, these nuts and bolt issues do not get the kind of attention needed during the pressure cooker time of budget.

Finally, the budgeting exercise deals with how much the Government needs to borrow. This necessarily leads to a lot of toing and froing between the fiscal gap which the expenditure and revenue assessment throws up and what the markets can absorb, without adversely impacting macro-economic stability.

The practice of printing currency or the RBI creating credit to fund budget deficits has been rightly abandoned in India in line with the global best practice having realised the damaging consequences of such policies. As a result, the borrowing which the Government raises, comes from the pool of savings which the people generate from their incomes and the appropriate amount of credit which the Central Bank and the banking system create. The Government is not the only agency which needs debt for financing its expenditure requirements. Industry and other enterprises do need debt to fund their projects and investments. Households and individuals also need to borrow for financing creation of their durable assets and for consumption.

How much of the pool of savings and credit the Government appropriates has severe implications for the credit which the private sector, households and individuals get. Moreover, productivity of debt resources used by the Government in producing private goods and services, is quite low in comparison of the use thereof by the private sector and households. Larger the appropriation of the pool of savings by the Government, costlier the debt becomes in the economy (interest rates rise). Higher the proportion of debt used by the Government for production of private goods and services, more the indebtedness of the country and lesser the actual availability of resources for provision of public goods and services.

This exercise of raising debt resources, to be effective, productive and proportional, has to be grounded in a very careful assessment of the economy, state of the savings and credit creation in the country. Taxation policies also affect the pool of savings and peoples’ preference where to deploy these savings.

In this note, I propose to make an assessment of the expenditure proposals of the Budget 2020-21 building on above mentioned principles, objectives and process. 

1.  Size of the Expenditure Programme 2020-21

I had written two blogs[1] recently, one on the size and types of expenditure programme the Government of India runs. Using the principles and framework outlined there and the programme of expenditure reforms India needs, I have examined the expenditure programme, budget and proposals for 2020-21.

Budgeted Expenditures

The budgeted expenditure of the Central Government, for 2019-20, has been revised down from Rs. 27.86 Crore in BE to Rs. 26.99 Crore. Budgeted expenditure for 2020-21 is Rs. 30.42 Crore, which is Rs. 3.4 lakh Crore or 12.8% higher over the RE 2019-20. Budgeted expenditures of Rs. 16.03 lakh Crore (52.69%) of the total BE 2020-21 expenditure of Rs. 30.42 lakh Crore are not discretionary, effectively not in the control of the Central Government. Only the remaining budgeted expenditure of Rs. 14.39 lakh Crore actually represent expenditures where the Central Government has the discretion or choice whether such expenditure should be undertaken or not undertaken and also the quantum thereof. A detailed Note on Discretionary and Non-Discretionary Expenditures is at Annex-A. 

Off-Budget Expenditures

As explained comprehensively in my blog[2], the Government incurs some important expenditures (both revenue as well as capital) outside the Consolidated Fund of India- Off-Budget Expenditures. Additionally, some expenditures are neutralised in the Consolidated Fund by reducing the investments/ receipts from the expenditure made leaving no impact on the fiscal deficit.

Total Off-Budget and Outside the Budget expenditures of the Government for 2020-21, adding expenditure paid through NSSF loans of Rs. 73147 Crore, funded through Fully Service Bonds (FSBs) of Rs.49500 Crore and met by deducting investments from expenditures (‘Outside the Budget and Fiscal Deficit’) of Rs. 10000 Crore, are Rs. 1,32,647 Crore. This amount is lower than Rs. 2,19,034 Crore of the off-budget financing in 2019-20RE. A detailed Note on Off-Budget Expenditures of BE2020-21 is at Annex-B.

Other Fiscal Expenditures Outside the Budget (Additional Off-Budget)

Capital Expenditure by non-commercial entities like Food Corporation of India, Railways and now NHAI on public works is, in its true nature, fiscal expenditure. While some commentators include entire Public Sector Borrowing Requirement (PSBR) as public debt, In my judgement, expenditure supported by the borrowings of/ liability undertaken by non-commercial entities of Air India Asset Holding, BSNL and MTNL, FCI’s borrowings other than NSSF and Cash Credit, Railways and NHAI should be treated as Government expenditures. Such expenditures aggregate to Rs. 2,43,948 Crore in 2019-20 and Rs. 1,78,121 Crore in 2020-21. A Note on such ‘Outside the Budget’ expenditures is at Annex-C.

Total Government Expenditure in 2020-21   

Total expenditure likely to be incurred by the Government, counting all the budgeted, off-budget, including below the line expenditure and expenditure of non-commercial public enterprises and entities of the Government is Rs. 31,61,534 Crore (31.62 lakh Crore) for the year 2019-20 BE and Rs. 33,52,998 Crore (33.53 lakh Crore) for the year 2020-21. This amounts to 15.5% and 14.97% of the estimated GDP of Rs. 204 lakh Crore and Rs. 224 lakh Crore respectively.

With revenue receipts of the Government, including capital receipts, amounting to Rs. 22,45,893 Crore, the real fiscal deficit for 2020-21 is Rs. 11,07,105 Crore or 4.94% of estimated GDP of Rs. 224 lakh Crore for 2020-21.

Almost entire off-budget and public enterprises/ entities expenditure is discretionary in nature with Government being in a position to control these expenditures completely. With the budgeted non-discretionary expenditure of the Government for the financial year 2020-21 being Rs. 16.03 lakh Crore, total discretionary expenditure is estimated at Rs. 17.5 lakh Crore or 7.81% of GDP.

It would be fair to assess the influence of the Government on the economy using the transmission channel of the discretionary expenditure of Rs. 17.5 lakh Crore. 

The Government brings out an economic and functional classification analysis of the Central Government Budget. This economic classification analysis can be quite useful. However, even though the analysis is based on ‘budget estimates’ number, the annual publication from the Ministry of Finance is excessively delayed. Only recently (7^th November 2019), Chief Economic Advisor has released this classification for 2017-18. These budget numbers were presented on 1^st February 2017, more than two and a half years back. No wonder that this publication receives no attention and is not useful. This publication has become a formality and serves no economic or functional purpose.

In this paper, I will attempt to classify public expenditures into three broad themes-  growth- oriented programmes and expenditures for their effectiveness from growth perspective, major redistribution programmes and expenditures for their effectiveness in transferring resources to the poor and needy and the expenditure on delivery of public goods and services (expenditure incurred on provision of private goods will be attempted to contrast this). A Note on economic and functional classification of Budget is at Annex-D.

Budget Expenditures for Stimulating Growth

a.    Infrastructure

Largest class of Central Government expenditures from growth stimulation perspective, is the infrastructure spend on roads, railways, metros and other mostly physical infrastructure. The Government does not publish any one integrated statement on infrastructure expenditure. The Government does not publish one integrated statement on even capital expenditure. This information has to be taken out from the statement on Central Sector Schemes, Other Central Expenditures and Other Transfers. The Central Government provides grants as part of the Centrally Sponsored Schemes for infrastructure creation. While, these grants, when used for funding infrastructure facilities by the State Governments are accounted for as capital expenditure of the state government, for the purpose of this exercise on identifying growth stimulating expenditure of the Central Government, we would include such grants as well.

From the Budget, the Government provides three large infrastructure investments as Central Sector Schemes -in roads, railways and urban transport sector. These investments, combined with internal and extra-budgetary expenditures of the respective organisations, makes significant contribution in promoting infrastructure investments in these sectors. In addition, the Government has provided two lumpy provisions as Other Central Expenditures- in telecommunication sector and a lump sum provision in the name of Support for Infrastructure Pipeline.

Central Government’s total estimated expenditure on infrastructure adds up to Rs. 3,63,000 Crore (Roads Rs. 1,46,975 Crore, Railways Rs. 1,60,792 Crore, Metros and NCR Sub-urban Rs. 19,571 Crore and Rs. 22050 Crore Lumpsum for Infrastructure Pipeline, rest Other Smaller Infrastructure expenditure) or say Rs. 3.63 lakh Crore, which forms a hefty 20.7% of the total discretionary expenditure of Rs. 17.5 lakh Crore. A Note detailing the infrastructure budgeted and off-budgeted expenditure is at Annex-E.

b.    Agriculture

The Government of India runs several dozens of agriculture and food related programme with an approximate budgeted outlay of Rs. 3,50,000 Crore. In addition, Food Subsidy of Rs. 68,200 Crore and irrigation works of Rs. 5000 Crore are being funded through NSSF. Thus, total expenditure on agriculture related programme comes to Rs. 4,23, 200 Crore or roughly Rs. 4.23 lakh Crore. This forms 24.3% of the total discretionary expenditure of the Government of India.

A large part of this expenditure: Rs. 75000 Crore of PM-Kisan, Rs. 1,83,770 Crore of Food Subsidy and small outlays of Rs. 500 Crore and Rs. 200 Crore under PM Annadata Sanrakshan and Farmers’ Pension scheme, totalling to Rs. 3.29 lakh Crore are of redistribution nature.

Remaining expenditure of Rs. 94000 Crore is intended/ designed to be of growth stimulating nature. This expenditure is incurred through numerous production and productivity enhancing programme, which are largely inputs (seed, fertiliser, loan, insurance, pesticides etc.) driven. There are over 50 such small and large programme currently under operation for which outlays have been provided for in the Budget 2020-21. A Note listing all these programmes is at Annex-F.

c.    Promotion of Industries and Services

The Central Government undertakes over 100 different programmes to promote industry and business, over 75 of these have budget provision exceeding Rs. 100 Crore for FY 2020-21. These programmes target a large spectrum of industries and services. The estimated cost of the programme costing Rs. 100 Crore or more for FY 2020-21 works out to approximately Rs. 55,000 Crore or 3.2% of total discretionary spent of the Government of India.

A list of major industry and services promotion expenditure programmes (not less than Rs. 100 Crore of budget provision) for which funds have been budgeted for FY 2020-21 is at Annex-G.

d.    Investment in public enterprises

Equity and loan support from the Budget and Off-Budget resources to public sector commercial enterprises of the Government of India are also intended to promote growth in the economy. Support to Railways and NHAI for infrastructure construction is provided in the form of equity in form. As these expenditures have been considered as part of the infrastructure support Investment above, the same are now being accounted for here. In this section, only the equity and loans provided to the commercial enterprises of the Government of India are being taken as expenditure likely to impact growth in the economy.

These equity investments add up to a little more than Rs. 45000 Crore or 2.57% of total discretionary expenditure. Loan of Rs. 3237 Crore is also proposed to be given to Nuclear Power Corporation.

These investments are captured in the Statement on Investment in Public Enterprises and are listed (costing approximately Rs. 100 Crore or more) at Annex-H.

e.    Backward and Rural Area Development Expenditure

Development of road, telecom and other infrastructure in rural areas and other economically and socially backward regions of the country promotes growth of the economy besides providing impetus to human and social development. A number of programmes have been taken up by the Central Government, mostly as Centrally Sponsored Schemes, to achieve this objective.

Expenditure provision for these programmes for 2020-21 is Rs. 48,677 Crore or 2.68% is at Annex-I.

f.     Total Expenditure Provision directed at Growth

Total growth-oriented expenditure of the Central Government for 2020-21, taking all the five major heads of infrastructure, agriculture promotion, industries and services provision, investment in equity of public enterprises and development of backward and rural areas of the country, is Rs. 6.06 lakh Crore, which is approximately 35% of the entire discretionary expenditure of Rs. 17.5 lakh Crore for 2020-21.

Budget Expenditures for achieving Redistribution

A larger part of the discretionary expenditure is of redistributional nature. The Government reaches several sections of society- old, infirm and handicapped who are not in a position to earn their livelihood, economically weaker sections like farmers and labour, socially weaker sections like SCs, STs and OBCs and other support deserving sections of society like poor, student etc.

These supports are delivered through either the Centrally Sponsored Schemes (CSS) or the Central Sector Schemes. There are several dozens of such schemes. An attempt is made to organise the outlays of these numerous schemes using the object of such schemes.

a.    Old, infirm and other Incapacitated people

The largest programme of the Central Government to help old, infirm, physically handicapped people and divorcee women without the capacity to earn living is the National Social Assistance Programme which has an outlay of Rs. 9197 Crore for the year 2020-21. There is another small scheme- Annadata Aay Sanrakshan- meant to provide cereals to the indigent in emergent situations has an outlay of Rs. 500 Crore.

The Department of Financial Services runs a Scheme- Interest Subsidy to LIC for Pension Plan for Senior Citizens- with an outlay of Rs. 115 Crore for FY 2020-21. Another scheme is Pradhan Mantri Vaya Vandan Yojna with an outlay of Rs. 180 Crore. The Freedom Fighters (pension and other benefits) scheme with an outlay of Rs. 775 Crore also virtually falls in this category.

Together, the pure transfers for the people who are not in a position to earn their livelihood for physical reasons and are entirely dependent on state support is around Rs. 10, 767 Crore.

b.    Farmers

Farmers are the largest beneficiaries of Government’s redistribution/ transfer programmes. Total sums proposed for expenditure for 2020-21 (both budgeted and outside the Budget) on agriculture related programme is whopping Rs. 4,23, 200 Crore or roughly Rs. 4.23 lakh Crore, which is almost one fourth (24.3%) of the total discretionary expenditure of the Government of India (Annex-E).

Most of the agriculture related expenditure is of redistributional nature. Rs. 75000 Crore provided under the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) is direct cash transfers. Food subsidy expenditure of Rs. 1,83,770 Crore and Fertiliser subsidy expenditure of Rs. 71309 Crore are the programmes essentially are meant to provide farmers good returns for their produce and are fiscal transfers to them, although a good part is lost on account of inefficiency of the system of procurement and that of FCI. Another Rs. 200 Crore have been provided for under Farmers’ Pension scheme. In all, fiscal expenditures of about Rs. 3.30 lakh Crore are meant to be fiscal transfers to the farmers.

c.    Labour

A large number of central programmes are targeted at providing employment and ameliorating the condition of labour. The expenditure budgeted for these programmes add up to minimum Rs. 70,406 Crore (Annex J). Most prominent programme is Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) which has an outlay of Rs. 61,500 Crore.

d.    Human capital expenditure

Numerous programmes, health, education, literacy, skills, women empowerment and touching other aspects of human capital are funded by the Government. A list of 25 major programme run by the Government, which has an outlay of Rs. 1,51,204 Crore for FY 2020-21, is at Annex-K.

e.    Poor and other vulnerable sections

The Government runs quite a few programmes targeted at poverty elimination. A list of 14 major poverty alleviation programme with an outlay of Rs. 65465 Crore is at Annex-L.

f.     Expenditure on major distributional progamme

The re-distributional programmes targeted at people unable to earn their livelihood, labour and farmers and also those aimed at building human capital and providing means for improving the incomes of the poor described above alone are expected to cost the Government approximately Rs. 6.20 lakh Crore. This is more than 1/3^rd of total discretionary expenditure of the Government (17.5 lakh Crore).

Budget Expenditures for delivering Public Services

It is quite difficult in the first instance to compile the discretionary Central Government expenditure on delivery of ‘public goods and services’- the goods and services which satisfy the classical definition of public good i.e. goods which are non-excludible and non-rivalrous. However, when you scrutinise the major heads of discretionary expenditures, other than growth stimulating or transfers, like the expenditure on defence, scientific research etc. one comes across a number of expenditures which are of public goods and services. A list of such expenditures of public goods nature is at Annex-M.

Such discretionary expenditures of public goods nature for 2020-21 exceed Rs. 2,50,000 Crore. In addition, a good part of the establishment expenditure, like on salaries of defence personnel, is also meant for delivering public goods.

Functional Division of Total Discretionary Expenditures

In this kind of unique exercise ever attempted of the nature and objective of the Central Government expenditure- broadly classified into growth stimulating expenditures, redistribution/ transfer expenditures and public goods expenditures, it transpires that, of about 17.5 lakh Crore of discretionary expenditure (other than establishment, interest, GST compensation transfer and Finance Commission mandated transfers), the Central Government is budgeting Rs. 6.06 lakh Crore of expenditure on major growth promoting programmes (infrastructure, industries, agriculture, investment in public enterprises and area development programmes), Rs. 6.20 lakh Crore on major redistributional/ transfers (incapacitated people, farmers, labour, human capital development and poor/ other vulnerable people) and Rs. 2.50 lakh Crore on ‘public goods’. This accounts for 14.76 lakh Crore of the Rs. 17.50 lakh Crore of discretionary expenditure of the Central Government. The rest  of discretionary expenditure is budgeted for transfers to the States for their share of externally aided projects, investments in international institutions, grants to various kinds of institutions, petroleum products subsidies, minor programmes for growth and redistribution and other miscellaneous expenditures.

Whether Growth Expenditures will stimulate Growth in 2020-21?

As noted above, the Central Government would be spending over Rs. 6 lakh Crore which is meant to make an impact or difference to the GDP growth. This is about 3% of GDP. These are the expenditures which impact supply side of the economy. These expenditures also affect the investment, most strikingly the infrastructure investment in the economy. Let us evaluate.

a.    Infrastructure

A striking feature of the Central Government’s infrastructure expenditure is the preponderance of expenditure on physical transport infrastructure, which also constitute the largest supply side expenditure as well. The Government has proposed to spend Rs. 1.61 lakh Crore on railways transportation infra, Rs. 1.47 lakh Crore on construction of roads infra and Rs. .20 lakh Crore on metro and suburban transport infrastructure, in all Rs. 3.28 lakh Crore on transport infrastructure.

First of all, there is no increase in these expenditures, even on nominal terms, in 2020-21 over BE 2019-20.

Railways capital expenditures were budgeted at Rs. 1.60 lakh Crore in 2019-20. In 2020-21, these expenditures are budgeted at Rs. 1.61 lakh Crore, almost static. NHAI’s internal and extra budgetary capital expenditures were budgeted at Rs. 75000 Crore in 2019-20. In 2020-21, these have been scaled down to Rs. 65,000 Crore, a reduction of Rs. 10000 Crore or over 15%. There is an increase from Rs. 36,691 Crore to Rs. 42,500 Crore in NHAI’s budgeted expenditures, which does not compensate for the lesser IEBR. Together, NHAI’s capital expenditure will come down from Rs. 1,11,691 Crore budgeted in 2019-20 to Rs. 1,07,500 Crore, a net reduction of abour Rs. 4, 200 Crore. Non-NHAI roadworks expenditure are slated to moderately go up from Rs. 45, 880 Crore in BE 2019-20 to Rs. 48,759 Crore in BE 2020-21. All-together, the capital expenditure on road works are also almost static, seeing no growth even in nominal terms. Expenditure on Metro projects is also quite static in nominal terms falling from Rs. 17,714 Crore in BE 2019-20 to Rs. 17,482 Crore in BE 2020-21.

More than 50% of the growth stimulating expenditure (and almost entire infrastructure expenditure) of the Central Government is on transport infrastructure- railways, roads and metros- Rs. 3.28 lakh Crore out of total expenditure of Rs.6.06 lakh Crore. This is seeing no increase at all. In fact, this is marginally less, even in nominal terms, in 2020-21 compared to BE 2020-21.

Second, productivity of these expenditures is quite poor and there is nothing in the budget proposals to make it appear that this is going to improve.

Despite spending so much on railways infrastructure (over Rs. 1.5 lakh Crore a year), the railways are not able to complete projects. There are at least ten times larger unfinished projects. The railways competitive advantage is in freight. But, the policies of cross-subsidising passenger fares by freight is killing railways freight businesses. Major freight infrastructure projects like Delhi-Mumbai Industrial Corridor and Eastern Freight are limping along for years. Railways have also seen its share of passengers’ transport fall drastically. Railways have doggedly refused to privatise its operations. Consequently, there is no real investment in railways infrastructure by either foreign or domestic investors. Quality of railway services- trains, rail-ports etc. needs massive upgradation. Yet, it chugs along in its own inefficient ways and the country awaits availability of faster, cleaner, better IT friendly railway services.

The Government should not be spending so much on construction of road infrastructure. Again, the private sector is practically absent from investing in road infrastructure though not long ago, the private sector used to invest quite majorly in road sector. However, policies followed with respect to land acquisition, including its pricing, has made the private sector run away from road infrastructure sector. India has enormous need of quality and better service road infrastructure. We have not even scratched the surface of the expressways’ construction we need in the country for faster movement of goods and people. Last mile infrastructure connectivity still remains quite chaotic.

Central Government takes a minority (20%) stake in metro construction SPV and provides small subordinate loan. Most of the investment in metro projects is borne by the state governments. As no metro has become profitable, the equity investment made has not yielded a single rupee of return. It is quite questionable to dub this grant kind of investments as equity. If the Government intends to incentivise construction of metros, it makes a better sense to provide this scale of assistance as capital grant.

Third, there are no definite proposals and allocations for the troubled infrastructure sectors of the economy.

Real estate, especially residential real estate sector is suffering its worst slump- new projects are not being launched; older projects under construction for quite some years now are stalled. This sector is extremely important from employment (surplus agriculture labour gets absorbed in construction work) and spin off impact on several industries (cement, steel etc.). The Budget has not a single proposal for addressing the residential real estate sector. There is no specific provision for even Rs. 10,000 Crore to be provided to the Real Estate AIF announced by the Government (that proposal is still-borne in my understanding as it was designed to provide more debt to already overleveraged entities). There is also no provision for the partial risk guarantee loss on Rs. 1 lakh crore pooled partial risk guarantee scheme announced in July 2019 (that facility is also not moving and its expiry date is being repeatedly extended).

Budget proposals relating to surface transport, given the state of affairs explained above, are unlikely to give a boost to infrastructure creation, stimulate private sector investment in such infrastructure or improve the quality of service in any significant manner.

Road sector is the infrastructure sector which had played very supportive role in generating economic growth during 2015-2019 albeit using unsustainable financing models. This sector can get revived only after the issues pertaining to its excessive cost of construction is addressed. Private sector would come only after that. There is no likelihood of private sector showing any interest in making investment in road projects as the Budget has no such reform proposal. As noted above, the public sector investment, through NHAI and other Government outfits, for the year 2020-21 is at a slightly lower level, even in nominal terms.

As a good part of the borrowing is now required to be used for servicing debt already accumulated by NHAI, it is quite likely that actual central government expenditure on roads in 2020-21 will be about 25% less than in 2019-20.

There are no proposals in the Budget for other struggling infrastructure sectors- like telecommunications and power either. For power, there is only an announcement regarding smart metering being pushed. The fundamental problem of the power sector is the gap between cost of power to the state distribution companies and the revenues they collect. The gap is too large- over Rs. 2 lakh crore a year. This gap has emasculated state government finances as they provide over a lakh crore of subsidies every year. This gap is responsible for the distribution companies not paying to the power generators regularly (large outstanding of over 80,000 Crore have accumulated on this account). Smart metering addresses a small part of the gap. For smart metering also there is no additional provision in the Budget.

Infrastructure related budget provisions and policy announcements of Budget 2020-21 are not likely to kick-start any growth momentum.

b.    Agriculture

Budget 2020-21 provides for approximately Rs. 94,000 Crore for production and productivity programmes of the agriculture and allied sector. All the programmes are basically designed to push inputs- seed, fertiliser, insecticides, water, electricity, loan and so on.  There is no change in the programme.

Agriculture growth volatility has substantially reduced in India. 1979 was the last year when India saw a negative growth of its Gross National Income. GNI declined by 5.1% in FY 1979-80 thanks to agriculture growth volatility, which saw massive degrowth of -11.9% GVA that year. The last year when India witnessed 5% degrowth of agriculture was 1979-80. It came very close to -4.9% in 2002-03, which was also the last year when agriculture declined in India. For last 16 years, India has not seen any negative growth in agriculture. The agriculture production and productivity programme of the Government of India has no impact on agriculture growth now.

Growth stimulating agriculture sector measures of the Government of India are programmed to be delivered in 2020-21, as for many decades now, through at least 50 programmes being implemented through four umbrella schemes of Green Revolution, White Revolution, Blue Revolution and Krishi Sinchai Yojana, with combined outlay of less than Rs. 25000 Crore. Almost all of these growth stimulating programme were designed in 1970s and 1980s (these have been re-packaged with different names over last fifty years) to popularise use of agriculture inputs and training and visit technologies of green revolution era. This job is finished long back. In fact, there is now problem of over-use of inputs, as of nitrogenous fertiliser Urea. There is really no impact on agriculture productivity and production increase of these programmes now. The States also run several programmes or provide additional/ complementary outlays for the Central agriculture programme. The States also provide large subsidies for water use via subsidising electricity use. There is no good impact on the agriculture growth of these programmes.

The Government must make a serious course correction by reforming these input and old technology subsidisation programme and close these over next 3-4 years period completely. Savings of these programme can be deployed for farmers’ transition to non-farm, manufacturing or services sector by providing direct cash transfers to small and marginal farmers to help them make this transition.

The budget proposals for agriculture are also unlikely to make any difference to the slowing growth in Indian economy.

c.    Programmes for industrial growth

The Government undertakes a wide variety of programmes to promote industries and services. These programmes are largely based on infant industry logic. Weaker but large employment generating industries like MSMEs are also supported by the Government to help promote job creating industries and services enterprises. These programmes are numerous though individually any single programme might not be costing a large sum of money. Total budgetary outlay on over 70 major programmes is about Rs. 55000 Crore for 2020-21. These outlays have also not seen any notable increase in 2020-21 over 2019-20.

A perusal of Annex-G which has the list of these programmes along with their outlays would suggest that the Government is focussing most on some kind of subsidisation to small businesses and exporters for reducing cost of debt and to incentivise employment. Indian industry faces triple cost dis-advantage- interest, tax and power tariff. Interest rates have to fall in general. Some minor interest cost subsidisation is neither efficient not very well administrable. Tax regime for service enterprises and existing manufacturing industries continue to be disadvantageous. There is no attempt to provide power to industries at competitive rates. Too many small programmes trying to put some grants in the hands of inefficient and sick enterprises is not going to make any significant difference for Indian industries and services enterprises or growth.

There does not appear to be any grand strategy to pick up the horse(s) which could be the growth engines of future. There are a few programmes to support sun-rise sectors like start-ups but these are too small and too few. There is recognition that services enterprises will be champions of future. There are small allocations (usually token Rs. 5 Crore) in several Ministries, which seems more of a lip service than a real effort to be provide a launching pad for champion services.

d.    Investment in Public Enterprises

The Government is still investing in public enterprises. Notable nature of equity investment proposals in public enterprises (Annex H) is that financial enterprises of the Government (IIFCL, EXIM Bank, Insurance Companies), sick services enterprises (BSNL and MTNL) and assistance disbursing organisations like SC, ST corporation now dominate as recipients of equity investments from Government. While there is no provision for equity investment in Public Sector Banks for 2020-21, more than Rs. 23500 Crore has been proposed to be invested in the equity of public sector financial enterprises, more than 50% of proposed equity investment of Rs. 45000. In last three years, the Government has invested over Rs. 2,00,000 Crore in the equity of PSBs.

All the financial enterprises of the Government, be it Banks, General Insurance Companies, Infrastructure financing bodies like IIFCL, export promoting organisations like EXIM Bank are performing quite poorly. Sinking such enormous equity in these financial companies, which are increasingly losing share of the market and are not able to compete with private enterprises, is likely to amount of throwing good money after bad. This also reflects the preference of the Government to continue to retain these financial enterprises in the public sector.

Government’s proposal to provide equity funding to BSNL and MTNL to pay for the cost of 4G licence is another instance of debasement of equity as a risk capital investment. There is no likelihood of BSNL and MTNL to make any money ever. This equity will go down under without it ever coming back to the Government. It makes no sense for BSNL and MTNL to go for 4G licence and create a network at this stage in a super competitive field. If the Government intended to keep these two companies mortally sick but on ventilator, more transparent way would have been to pay this as grant and not as capital expenditure.

Equity Investment of about Rs. 20000 Crore in BSNL, MTNL and ITI literally amounts to wasting precious public resource. There is absolutely no likelihood of these enterprises being able to acquire the customers who have already bolted from their stable (their share is only around 10% and declining).

It is time, the Government expeditiously exits completely from the areas where the private sector has acquired more than 75% market share (airline, telecom), plan a phased out exit (may be spread over next 5-7 years) in businesses where private sector has reached or steadily moving towards crossing 50% market share (general insurance, Banks) and stop investing fresh capital in any such enterprise.

The budget proposals of investing Rs. 45000 Crore in the equity of these enterprises is unlikely to give any boost to the growth potential.

e.      Development of Backward and Rural areas

Budget proposes to invest about Rs. 50000 Crore in programmes to build rural roads, toilets, power and other infrastructure to integrate these areas with the rest of the countries. While there is not much increase in outlays of these programme, these programmes have played enormously positive role in generating growth impulses. These investments have enabled rural population to be more literate, connected and productive. These have also helped in improving labour mobility and opened up some diversification of labour from agriculture.

These programmes would continue to play its positive role in generating growth stimuli, but its impact is unlikely to be any dramatic. Moreover, as the reach of most of these programmes saturate (100% toilets constructed, 100% houses electrified and so on), their positive impact on the margin will get increasingly smaller.

Whether Redistribution expenditures lead to consumption demand growth?

a.    Farmers

A number of programmes with large outlays are intended to help farmers. About Rs. 3.30 lakh Crore (1.5% of GDP) are fiscal transfers (PM-Kisan Rs. 75000 Crore, Food Subsidy Rs. 1,84, 000 Crore, Rs. 71000 Fertiliser Subsidy) in different forms to help farmers get better margin out of their agriculture produce.

The PM-Kisan programme was initiated in the FY 2018-19 to address acute farmers’ distress, caused by severe fall in the prices of most agriculture commodities leading to farmers’ incomes declining substantially. This cannot be a permanent programme and should continue only as long as the farm prices remain depressed. In the current year 2019-20, the prices of agriculture commodities have risen well. Given the state of production of agriculture commodities, the trend of strengthening agriculture prices is likely to continue in the FY 2020-21. The Government can develop an index of farmers’ distress based on agriculture prices and production loss. If the Index is not in the depression zone in the previous year, the PM-Kisan should not be operationalised. There is good reason to discontinue PM-Kisan from second half of 2020-21.

The largest redistribution programme is food-subsidy programme. The programme is implemented through a very convoluted system of essentially cereals- wheat and rice- procurement through the system of above the market, ironically called, minimum support prices (MSPs), managed through an inefficient and costly system run by Food Corporation of India (FCI) almost doubling the prices paid to farmers by incurring excessive cost of procurement, storage and transportation. Farmers’ gains are very limited (only to wheat and rice farmers of select states that too at best the difference between internal prices and what the farmers get as MSP) but consumers gain nothing. Total value of wheat and rice produced in the country in 2018-19 was approximately Rs. 4.75 lakh Crore. Food subsidy cost at Rs. 1.83 lakh Crore was as high as 40% of the value of total crop of wheat and rice. There is no point in managing cereals economy in this wasteful manner. A much better system would be to give farmers’ a certain direct cash transfer with the choice to grow whatever crop they wish to grow. Vulnerable sections of people can be given food coupons which they use to buy cereals of their choice or any other food supplements out of the list of permissible food items, if the Government still wishes to ensure that this support should only be spent on food consumption.

The Government has, after many years of drift, announced this year, as part of the 16-point programme, to encourage the States to adopt model land leasing, contract farming and agriculture marketing laws. It was the Central Government which was not clearing States’ proposals for land leasing etc. These reforms are very much called for. The flexibility in leasing agriculture land and contract farming is very much essential for Indian farmers to move to the production of next level of qualitative and value-added produce.

In agriculture, the expenditure programmes of the Government for farmers’ welfare are quite dysfunctional and not delivering any real value for the expenditures being incurred. Agriculture in India needs diversification, better consumer-oriented produce and packaging, market orientation, displacement of excessively large labour from agriculture to non-agriculture work and better and sustainable use of natural and manmade inputs. There is also need for supporting farmers to come out of poverty and move into newer occupations. A fundamental shift is needed in agriculture policies and development programme. A programme of direct transfer to farmers will serve these objectives better.

b.    Labour

The largest programme for transferring fiscal resources to labour is the MGNREGA programme with an outlay of Rs. 61500 Crore. This programme serves a very useful purpose- providing a minimum wage work when there is no other work available. This is primarily no asset construction programme. Asset construction is incidental. The programme should also be totally demand driven. Amongst other programmes, the largest is Government contribution to the National Pension Scheme. The Government is also building programme to inculcate long term saving practices in the informal sector- PM Shram Yogi Mandhan is intended for the same. The contributions made by the Government in these pension programme serves very useful purpose, which is not, for obvious reasons, going to have any short-term impact on impacting economic slowdown.

c.    Other Transfer programme (Poverty alleviation, assistance to old, infirm and other sections unable to earn their living and human capital formation expenditure)

These programmes are fairly well-designed and quite well implemented. Health, education, livelihood mission and the like programmes are serving quite useful purpose. Their implementation has got better in last few years. The outlays provided for these programmes for 2020-21 are more or less at the same levels as 2019-20. The Government has not proposed to scale these up for pushing any extra consumption demand.

The Government did well to avoid the temptation of going for any consumption stimulus programme. The state of public finances is quite tight. With real fiscal deficit touching 5% of GDP, the Government would have found it difficult to provide any stimulus. A stimulus of 1% of GDP would have massively disrupted the bond markets and would have possibly unleased an inflationary cycle, which is quite fragile in Indian context. Temporary disruption in vegetables supply in last three-four months has led to retail inflation touching 8% in December 2019.

Proposal relating to public goods and services

There is really no significant proposal in the budget to introduce supply of any new public goods and services or scale up notably any existing public service or discontinue any existing service. There is great need to expand public expenditure on environmental clean-up. Cities need to be cleaned up of pollution. Rivers need to be cleaned up. Yet, there is no new proposal in the Budget to expand these public expenditures. The Budget 2020-21 is effectively continuation of the programmes and policies of previous years in this respect- stability but no new push for expanding expenditures on public goods and services.

CONCLUSION

2020-21 would be the second year of the Government. First two years are extremely important to initiate programme of policy reforms and expenditure reforms for any Government. Budgets are the vehicles to signal those reforms and undertake those expenditure corrections. The Budget 2020-21 was particularly most important in the context of the Government’s announced ambition of making India a $10 trillion economy by early 2030s and $5 trillion economy by 2024-25. This was also quite significant in the given context of serious slowdown in the economy witnessed in the FY 2019-20.

In the broadest sense, the expenditure proposals of Budget 2020-21 present more of consolidation in the face of deteriorating economic and fiscal situation. A number of good public welfare programme like rural roads, rural housing, toilets, household electricity connections, household LPG connections and now tap water are continuing with their much-needed outlays protected. Distress relieving programme like MGNREGA and PM-Kisan are also continuing with their outlays preserved.

The objective of kick-starting growth and building growth momentum which does not seem to have been addressed effectively in the Budget. Infrastructure investments in roads, railways and metros have been the major planks of infrastructure investment by the Government. The outlays of these programmes have not seen any nominal growth in 2020-21 (in real terms, these would be 8-10% lower). Likewise, outlays for promoting industrial and services growth have seen no change in character. The old subsidisation programme largely aimed at MSMEs and exports (these programmes are not enough to even neutralise the cost disadvantage, which Indian industry and services suffer on account of tax, interest and power cost disadvantages, which are largely policy induced. Major equity investments in public sector entities continue, with the equity flows now going into financial sector enterprises and sick enterprises. All these expenditures are unlikely to be imparting any fresh growth stimulus to the Indian economy.

A large chunk of redistribution expenditures are directed towards farmers. Farming is the weakest business these days, most particularly for the small and marginal farmers, which form more than 90% of the farming community. The support to the farmers is however delivered through a web of poorly designed and very inefficiently implemented programmes. Almost nothing of over 3.4 lakh crore of such expenditures in the name of farmers actually reach the farmers. There is an urgent need for transforming the entire bouquet of these programmes. This can be done by converting these expenditures into direct cash transfers to the farmers. The Budget 2020-21, however, gives a pass to this extremely important agenda.

SUBHASH CHANDRA GARG

NEW DELHI 15/02/2020

Annex-A

A Note on Discretionary and Non-Discretionary Expenditures of the Central Government (2020-21)

Central Government budgets its expenditure under two broad groups- (i) Central Expenditure, which the Central Government and its agencies incurs, comprising  establishment expenditure, central sector schemes and other central expenditure, and (ii) Transfers which the Central Government makes comprising Centrally Sponsored Schemes (CSSs), Finance Commission recommended transfers (not including the share in taxes) and Other Transfers, the Central Government makes to various organisations. 

The budgeted expenditure for 2019-20 has been revised down from Rs. 27.86 Crore in BE to Rs. 26.99 Crore, a reduction of .87 lakh Crore or 3.1%. Budgeted expenditure for 2020-21 is Rs. 30.42 Crore, which Rs. 3.4 lakh Crore or 12.8% higher over the RE 2019-20. Central Government’s own expenditure is slated to rise from Rs. 28.8 lakh Crore in BE to Rs. 23.3 lakh Crore in RE 2019-20, representing an increase of 11.9%. Transfers are rising at slightly higher rate from Rs. 6.2 lakh Crore to Rs. 7.1 lakh Crore, an increase of 15.6%. The Central Government also informs about the extent of Internal and Extra Budgetary Resources (IEBR) of the public enterprises being used for investment (which is getting diluted these days), which are slated to decline from Rs. 7.1 lakh Crore in RE2019-20 to Rs. 6.7 lakh Crore in BE2020-21, a reduction of 5.3%.

The expenditures which are not really under the control of the Central Government, being of the nature of committed (e.g. establishment and interest), non-discretionary (Finance Commission transfers) or mandatory expenditures (non-voted expenditures), which have to be budgeted in any case, for 2020-21 are:

i.              Establishment expenditure Rs. 6.10 lakh Crore (an increase of 7.5% over RE 2019-20 of Rs. 5.67 lakh Crore),

ii.            Interest payments at Rs. 7.08 lakh Crore (an increase of 13.3% over RE 2019-20 of Rs. 6.25 lakh Crore),

iii.           Finance Commission mandated grant transfers at Rs. 1.50 lakh Crore (an increase of 20.96% over RE 2019-20 of Rs. 1.24 lakh Crore), and

iv.           GST Compensation at Rs. 1.35 lakh Crore (an increase of 11.6% over RE 2019-20 of Rs. 1.21 lakh Crore).

Therefore, total budgeted expenditures of Rs. 16.03 lakh Crore which make up as much as 52.69% of the total BE 2020-21 expenditure of Rs. 30.42 lakh Crore are effectively not in the control of the Central Government.

This leaves remaining budgeted expenditure of Rs. 14.39 lakh Crore which actually represent expenditures where the Central Government has the discretion or choice whether such expenditure should be undertaken or not undertaken and also the quantum thereof. These discretionary expenditures are budgeted under four broad heads.

i.              Central Sector Schemes have total outlay of Rs. 8.31 lakh Crore as against outlay of Rs. 8.71 lakh Crore in BE2019-20 and Rs. 7.73 lakh Crore in RE 2019-20 (Statement 4B, Expenditure Profile).

ii.            Centrally Sponsored Schemes has outlay of Rs. 3.40 lakh Crore.

iii.           Other Central Sector Expenditure has discretionary outlay of Rs. 1.80 lakh Crore, out of total outlay of Rs.8.88 lakh Crore; the rest accounted for by interest payments budget of Rs. 6.60 lakh Crore (Statement 4c, expenditure Profile).

iv.           Other Transfers has discretionary outlay of Rs. .88 lakh Crore, out of the total budgeted expenditure of Rs. 2.23 lakh Crore, the rest being accounted for by the GST Compensation payments of Rs.1.35 lakh Crore (Statement 4d, Expenditure Profile).

Annex B

A Note on Off-Budget Expenditures in the Budget 2020-21

A.   Expenditure made through National Small Savings Fund (NSSF): 

a.    Food Subsidy: Food subsidy expenditure, comprising of two line-items i. Food Subsidy to Food Corporation of India under National Food Security Act and ii. Food Subsidy for Decentralised Procurement of Foodgrains under NFSA, is normally budgeted as a Central Sector Scheme expenditure (Demand no. 15 under the Department of Food and Public Distribution). From 2016-17, the Government started underutilising the budgeted provision by making a part payment of food subsidy bill to FCI by giving loan from the NSSF. The under-utilised portion was surrendered. From the year 2019-20, the revised estimates provide only the part of the food subsidy which is be paid from the budget and part to be paid from NSSF has been made part of NSSF budget. RE 2019-20 has reduced the food subsidy payment to FCI provision from Rs. 151000 Crore to Rs. 75000 Crore, a reduction of Rs. 76000 Crore. This has been more or less shifted to the NSSF Account. RE of NSSF has provision of making investment of Rs. 110000 Crore and repayment out of previous loans of Rs. 46400 Crore. Thus, net payment of subsidy from NSSF to FCI is Rs. 73600 Crore. For the year 2020-21, NSSF budget provides for payment of Rs. 136600 Crore and receipts of Rs. 68400 Crore. On net basis, NSSF will be used to fund Rs. 68200 Crore of food subsidy in the year 2020-21. 

b.    Other revenue expenditures: RE 2019-20 makes provision for Rs. 15000 Crore to be raised through Building Materials & Technology Promotion Council (BMTPC) for financing housing subsidy under Prime Minister’s Awas Yojana and Rs. 1403 Crore to other non-commercial public agencies, in all funding Rs. 16403 Crore of government expenditure. BE 2020-21 makes only a small provision of Rs. 4947 Crore for funding government expenditure.

c.    Government capital expenditure: National Highways Authority of India (NHAI) has become financially unsustainable. NSSF has proposed to provide Rs. 10000 Crore in BE 2019-20 for providing loan to NHAI. There is no provision made for providing resources to NHAI for 2020-21.

d.    Total Off-budget provision for 2020-21 through use of NSSF resources is Rs. 73147 Crore.

B.   Fully Serviced Bonds (FSBs)

FSBs innovation was started in 2016-17 and continues to be used for funding government expenditure, both of revenue and capital nature. The Government included a Statement of Extra Budgetary Resources (Govt. fully serviced bonds) (Statement 27) in the Expenditure Profile during 2019-20. This year, the Government has also provided a statement of off-budget borrowings as an Annex to the Budget Speech of the Finance Minister. According to this Statement, the Government of India, proposes to use FSBs of Rs. 49500 Crore to fund Rs. 3000 Crore of expenditure of the Department of Health & Family Welfare (construction of AIIMS buildings etc.), Rs. 10000 Crore for housing programme subsidy programme of Ministry of Housing and Urban Affairs, Rs. 3000 Crore for funding construction of buildings of IITs and other educational institutions under the Department of Higher Education, Rs. 5000 Crore for funding irrigation works under the Department of Water Resources, Rs. 12000 Crore for funding Jal Jeevan Mission and other drinking water programme, Rs. 1000 Crore to fund assistance under Pradhan Mantri- Kisan Urja Sanrakshan Evam Uttan Abhiyan of the Ministry of New and Renewable Energy, Rs. 5000 Crore for funding subsidy under Deen Dayal Upadhyay Gram Jyoti and Saubhgya Schemes of the Ministry of Power and Rs. 10000 Crore for funding assistance under Pradhan Mantri Awas Yojana (PMAY). FSBs are proposed to be raised to fund a part of the same programme which also has budget provisions. The nature of expenditure funded by FSBs is purely government expenditure. In 2020-21, total off-budget expenditure provision through FSBs is Rs. 49500 Crore. Corresponding amount for FY 2019-20 is Rs. 44,584 Crore.

C.   Bank recapitalisation and other financial sector investments: Annex-V to the Budget Speech includes government expenditure funded through the NSSF and FSBs. But, one kind of expenditure the Government includes some of its expenditure statements and also in the liabilities statement, but does not include in the budgeted expenditures, is the equity investment made in financial institutions, majorly in Banks, though the budget head of Department of Financial Services. The Statement 26 detailing “Investment in Public Enterprises” reports that the Government has provision of Rs. 65443 Crore for Recapitalisation of Public Sector Banks, Rs. 5800 Crore for Equity investment in the India Infrastructure Finance Company Limited (IIFCL), Rs. 4557 Crore for Recapitalisation of IDBI Bank, Rs. 2500 Crore for Recapitalisation of Insurance Companies, Rs. 1500 Crore for Recapitalisation of EXIM Bank, another Rs. 1500 Crore for equity to NABARD, Rs. 705 Crore for Recapitalisation of Regional Rural Banks and some other smaller provisions in the RE 2019-20. Most of the larger equity expenditure are by being made by neutralising expenditures with receipts of special securities issued. These items are Recapitalisation of Banks (Rs. 65443 Crore), Recapitalisation of IDBI Bank (Rs. 4557 Crore), Recapitalisation of EXIM Bank (Rs. 550 Crore) Recapitalisation of budgeted as expenditure in the demands of DFS and Equity support to IIFCL. In all, Rs. 75850 Crore of investments are being funded in this effectively “outside the budget and fiscal deficit” mode in 2019-20 RE. Believing that there would not be any requirement to fund equity infusion in Banks in 2020-21, the Government has provided funding of only Rs. 10000 Crore for IIFCL in 2020-21 in this “outside the budget and fiscal deficit” mode.

Annex-C

Note on Fiscal Expenditure Other than Budget and Off-Budget

The Government enterprises and authorities are broadly of two types- Commercial and non-Commercial entities. Commercial entities like NTPC ltd., Indian Oil Corporation, BHEL and so on produce private goods and services, funds their capital expenditure programme generally (sometimes the Government provides equity support) from their own internal resources and borrowings, without any explicit guarantee for their debt and usually make a financial profit. Non-Commercial entities like FCI, Railways, Invest India and so on mostly deliver public goods and services, are not in a position to raises capital from the market and largely depends on the Government to fund their capital expenditures and also gap in their revenues and expenditures. Some entities like NHAI are also non-commercial as their revenues are far lower than their operational expenditures, including depreciation and maintenance.

The Government informs about the Internal and Extra Budgetary Resources (IEBR) used and to be used by the public corporation and entities for ‘investment’ purposes in the budget documents. An effort has been made to identify the IEBR resources of non-commercial entities. Such resources, largely borrowings made on the explicit or implicit Government guarantee, are then proposed to be added to the budget and off-budget expenditures to determine the real extent of public expenditures. 

A quick perusal of the Statement 25 in the Expenditure Profile- Resources of Public Enterprises indicate that following borrowings will be made by the non-commercial enterprises, which will have to be serviced by the Government.

i.              Rs. 29464 Crore by Air India Asset Holding Limited, an SPV to hold the unserviceable loans of Air India to be repaid by the Government, in 2019-20. Only a token provision of Rs. 10 Crore is made for 2020-21, which will surely be increased substantially if another Rs. 20,000-25000 Crore of debt is shifted to this company to make Air India find suiters.

ii.            Rs. 36212 Crore and Rs. 1763 Crore are to be raised as borrowings by BSNL and MTNL respectively in the year 2019-20. For 2020-21, the borrowings indicated for these two organisations are Rs. 11510 Crore and Rs. 2809 Crore.

iii.           FCI’s borrowings for 2019-20RE and 2020-21BE are stated at Rs. 2,00,257 Crore and Rs. 2,22,095 Crore respectively. As FCI’s borrowings from NSSF has been counted as Off-budget borrowing and FCI’s cash credit limits result in Government’s expenditure only to the extent of interest liability thereon, which is included in the food subsidy in any case, only long term borrowings of Rs. 13262 Crore in 2019-20 and Rs. 8000 Crore in 2020-21 can be considered as Government’s liability.

iv.           Extra Budgetary Resources of Rs. 2700 Crore and Rs. 3000 Crore respectively for 2019-20 and 2020-21 to be raised by HEFA for the Department of Health and Family Welfare and Rs. 1000 Crore and Rs. 3000 Crore to be raised for the Department of Higher Education have been included in the Fully Serviced Bonds (FSB) statement, the same will lead to double counting if included. The same treatment needs to be accorded to Rs. 15000 Crore of FSBs accounted as EBR under the Ministry of Housing and Urban Affairs and Rs. 12000 Crore of FSBs under the Ministry of Drinking Water.

v.            Borrowings by public enterprises of Railways of Rs. 88247 Crore in 2019-20 and Rs. 90792 Crore in 2020-21 received as internal resources for capital expenditure by the Railways are entirely Government’s liability and therefore needs to be taken as Government’s expenditure.

vi.           NHAI proposes to raise resources of Rs. 75000 Crore in 2019-20 and Rs. 65000 Crore in 2020-21 for debt servicing and undertaking construction programme. These expenditures need to be counted as public expenditures as there is very little commercial viability of these expenditures.

A number of commentators include the entire internal and extra budgetary resources (IEBR) in the Government’s fiscal deficit defined as Public Sector Borrowing Resources (PSBR). I don’t think it would be advisable to include the resources of commercial public sector in the fiscal deficit of the Government. Likewise, there is considerable double counting if you include Off-budget borrowings listed in the statement of the FM’s budget speech and also in the IEBR statement. In my judgement, expenditure supported by the borrowings/ liability undertaken of Air India Asset Holding, BSNL and MTNL, FCI’s borrowings other than NSSF and Cash Credit, Railways and NHAI should be included as Government expenditures. Such expenditures aggregate to Rs. 2,43,948 Crore in 2019-20 and Rs. 1,78,121 Crore in 2020-21.

Annex-D

Economic and Functional Classification of Budget

Official

The Government brings out an economic and functional classification analysis of the Central Government Budget. This analysis firstly classifies the budget expenditures in three broad categories of (i) final outlays comprising a. Government’s consumption expenditure and b. gross capital formation by the Government, (ii) transfer payments to the rest of the economy comprising again a. current transfers like subsidies and interest and b. capital transfers and (iii) financial investments and loans to the rest of the economy.

From the perspective of Gross Domestic Product or GDP, final outlays representing Governments’ consumption expenditure becomes part of the Consumption Expenditure part of the economy whereas final outlays representing gross capital formation becomes part of the Gross Capital Formation of the economy. The taxes received by the Government net of the transfer payments to the rest of the economy are added to the Gross Value Added (GVA) to determine the GDP. Financial investment and loans to the rest of the economy can be ignored as far as GDP is concerned being the financing item.

This economic classification analysis can be quite useful. However, even though the analysis is based on ‘budget estimates’ number, the annual publication from the Ministry of Finance is excessively delayed. Only recently (7^th November 2019), Chief Economic Advisor has released this classification for 2017-18. These budget numbers were presented on 1^st February 2017, more than two and a half years back. No wonder that this publication receives no attention and is not useful. This publication has become a formality and serves no economic or functional purpose.

The same publication also attempts to provide a ‘functional classification’. The publication again broadly classifies the Government Budget expenditure in three broad ‘functional’ categories of i. Social and Economic services, ii. General services divided in two parts- a. Defence expenditure and b. Other than defence expenditure and iii. Unallocable. For 2017-18, as large as 38.5% of budget expenditure is categorised as Unallocable.

It would be useful if the Government classifies its expenditure on three key objects of government services i.e. growth stimulation, redistribution and delivery of public goods and services. However, the current system of functional classification does not help anyone in understanding the direction and objectives of the Government expenditure.

It is no surprise that there is not much of public discussion on economic and functional orientation, quantum and effectiveness of government expenditure on growth, redistribution and delivery of public goods and services. It is the deficits and tax proposals which dominate the attention pre and post budget. Some specific schemes of redistribution and welfare do get attention but the larger story of expenditures’ impact on economy, redistribution and effectiveness of public goods and services get completely lost or de-focused.

Objective

It is impossible for me to attempt classification of Government’s budgeted expenditure of Rs. 30.42 lakh Crore and total expenditure (including off-budget etc.) of Rs. 33.53 lakh Crore for FY 2020-21 into three really functional objectives of growth, redistribution and public services delivery. Further, for assessing the real effectiveness of these expenditures from growth perspective, the analysis should actually be done for the Government expenditure for each of the principal parts of the GDP i.e. agriculture, industry, construction, real-estate, different groups of services and so on. Further, the same analysis needs to be done from what would incentivise the consumption and capital formation.

In my blog[3] on Serious Expenditure Reforms India Needs I had attempted to pick out major expenditure programme which the Central Government currently undertakes to stimulate/ push growth and redistribution. This included agriculture and power. This paper also targeted reforms in expenditure undertaken through other major discretionary financing like the Centrally Sponsored Schemes (CSSs), which has strong redistribution objective. In this paper, I will pick up a few major growth- oriented programmes and expenditures of the Central Government for their effectiveness from growth perspective, major redistribution programmes and expenditures again for their extent and effectiveness and then expenditure on delivery of public goods and services and also private goods.

Annex-E

A Note on Infrastructure Spending by the Government of India

The largest budgeted infrastructure investment is for the roads sector at Rs. 81975 Crore for FY 2020-21. Rs. 45000 Crore has been provided for NHAI and Rs. 39455 Crore for Road Works (Other than NHAI). The NHAI is expected to raise Rs. 65000 Crore as internal and extra budgetary resources (IEBR). As NHAI is not a commercial entity, Government’s total expenditure on road sector infrastructure can be considered as Rs. 1,46,975 Crore.

Second largest destination of Central Government’s budgeted infrastructure expenditure is for Railways- Rs. 70000 Crore for the FY 2020-21. The Railways is a Departmental Undertaking of the Government of India and it also proposes to raise and spend on capital works Rs. 90792 Crore as IEBR. In all, Government’s/ Railways infrastructure spend on railways transportation related infrastructure in FY 2020-21 is estimated to be Rs. 1,60,792 Crore.

Next largest infrastructure spend of the Central Government is on Urban Infrastructure, mostly on supporting metro construction in large urban towns. The Budget 20-21 provides Rs. 17,482 Crore for metros and Rs. 2089 Crore for National Capital Region Transport Corporation, in all Rs. 19,571 Crore for transportation infrastructure.

Rs. 22050 Crore has been budgeted as capital expenditure for Support to Infrastructure Pipeline. This seems to be a lumpsum provision and is unlikely to be used by the Department of Economic Affairs. Instead it would cushion increase in allocation of more capital expenditure to any other line Ministry in case some pipeline project were to fructify or an existing pipeline project under implementation requires more funds.

There are some other smaller infrastructure projects also budgeted to be funded during 202-21- Exhibition cum Convention Centre, Dwarka (outlay Rs. 348 Crore),  residential and non-residential housing projects of Ministry of Housing and Urban Affairs (Rs. 1287 Crore), financing of buildings of IITs and other institutions through Higher Education Finance Agency (HEFA) (Rs. 2200 Crore), Construction of Strategic Crude Reserve Facility (Rs. 690 Crore), power infrastructure under Integrated Power Development Programme (Rs. 900 Crore) and Space Infrastructure (Rs. 7733 Crore). This additional miscellaneous infrastructure investment adds up to approximately Rs. 13160 Crore.

Central Government’s total estimated expenditure on infrastructure adds up to Rs. 3,63,000 Crore or say Rs. 3.63 lakh Crore, which forms a hefty 20.7% of the total discretionary expenditure of Rs. 17.5 lakh Crore.

Annex-F

A Note on Agriculture Expenditure Budget Provisions for 2020-21

These expenditures are provided as under:

i.              18 Schemes under the CSS Green Revolution: Rs. 13320 Crore. In addition, Rs. 4000 Crore under another CSS- Pradhan Mantri Krishi Sinchai Yojana. Total outlay Rs. 17320 Crore.

ii.            14 Schemes run as Central Sector Schemes & Other Central Expenditure Schemes by the Department of Agriculture and Farmers Welfare: Rs. 1,16,524 Crore. This includes the largest redistribution scheme to benefit farmers- the PM-Kisan (outlay Rs. 75000 Crore) and a few other smaller schemes like Pradhan Mantri Kisan Man Dhan Scheme- farmers’ pension scheme and Pradhan Mantri Annadata Aay Sanrakshan Yojna- food assistance to indigent rural people. These two schemes have smaller outlays of Rs. 200 and Rs. 500 Crore.

iii.           12 Schemes under the CSS White Revolution: Rs. 1805 Crore.

iv.           A significantly large scheme run by the Department of Animal Husbandry- National Animal Disease Control for Foot and Mouth Disease (FMD) and Brucellosis run as a Central Sector Scheme with an outlay of Rs. 1300 Crore.

v.            2 Schemes under the CSS Blue Revolution: Rs. 570 Crore.

vi.           A couple of Schemes run as Other Central Sector Schemes by Department of Fisheries with a small outlay of Rs. 82 Crore.

vii.          Food Subsidy Programme administered by the Department of Food and Public Distribution. The Department has budgeted outlay of Rs. 1,21,078 lakh Crore spread over 21 schemes. The largest programme of course is the Food Subsidy programme with budgeted allocation of Rs. 1,15,570 Crore. The Government has provided off-budget financing of Rs. 68,200 Crore[4] from NSSF. Taken together, estimated Food Subsidy expenditure in 2020-21 is Rs. 1,83,770 Crore and total agriculture related expenditure of the Department is Rs. 189,278 Crore.

viii.         Fertiliser subsidy programme administered by the Department of Fertilisers with an outlay of Rs. 71309 Crore.

ix.           8 Irrigation water related schemes run under the umbrella programme of Pradhan Mantri Krishi Sinchai Yojna by the Department of Water Resources: Rs. 5127 Crore. Other 12 irrigation related programme run as Central Sector Schemes with an outlay of Rs. 2746 Crore

x.            Other Ministries Schemes: Ministry of Tribal Affairs, Ministry of North East States Development, Ministry of Social Welfare, Ministry of Commerce and a few other Ministries also have programmes for agriculture development addressing the areas/ social groups of their concern. Total such allocation may be taken at Rs. 12000 Crore.

The Government of India runs several dozens of agriculture and food related programme with an approximate budgeted outlay of Rs. 3,50,000 Crore. In addition, Food Subsidy of Rs. 68,200 Crore and irrigation works of Rs. 5000 Crore are being funded through NSSF. Thus, total expenditure on agriculture related programme comes to Rs. 4,23, 200 Crore or roughly Rs. 4.23 lakh Crore. This forms 24.3% of the total discretionary expenditure of the Government of India. A large part of this expenditure: Rs. 75000 Crore of PM-Kisan, Rs. 1,83,770 Crore of Food Subsidy and small outlays of Rs. 500 Crore and Rs. 200 Crore under PM Annadata Sanrakshan and Farmers’ Pension scheme, totalling to Rs. 3.29 lakh Crore are of redistribution nature.

Remaining expenditure of Rs. .94 lakh Crore is intended/ designed to be of growth stimulating nature.

Annex-G

List of Programme to Promote Industry and Services

2020-21

1.    Regional connectivity scheme of the Ministry of Civil Aviation (outlay Rs. 465 Crore) to bring smaller airports of tier 2 and 3 cities in the air travel network;

2.    Exploration of coal and lignite (Rs. 700 Crore);

3.    Agriculture and Marine products export Development Authorities and Trade Infrastructure for Export (Rs. 310 Crore);

4.    Duty Drawback Scheme for export promotion (Rs. 701 Crore);

5.    Assistance to various export promoting bodies like Tea Board, Rubber Board etc. (Rs. 776 Crore);

6.    Market Access Initiative of Department of Commerce (Rs. 300 Crore);

7.    Interest Equalisation Scheme for subsidised export credit (Rs. 2300 Crore);

8.    Transport and Marketing Assistance for specified agriculture products (Rs. 100 Crore);

9.    Stimulus Package for Export Credit (NIRVIK) (Rs. 95 Crore);

10. India Leather Development Programme (Rs. 370 Crore);

11. Industrial Corridor (primarily Delhi-Mumbai) Development through National Industrial Corridor Development and Implementation Trust (NICDIT) (Rs. 1200 Crore);

12. Scheme for Investment Promotion (Rs. 140 Crore);

13. Startup India (Rs. 50 Crore);

14. Schemes of Assistance to Sugar Mills (Rs. 1292 Crore);

15. Promotion of Electronics and IT HW Manufacturing (three schemes of MSIPS, EDF and Manufacturing Clusters) (Rs. 980 Crore);

16. Promotion of IT/ITeS Industries (Rs.170 Crore);

17. Promotion of Digital Payments (Rs. 220 Crore);

18. Investment in National Investment and Infrastructure Fund (NIIF) (Rs.503 Crore);

19. Viability Gap Funding for PPP projects (Rs. 241 Crore);

20. Interest Subsidy through EXIM Bank for promoting export to developing countries (Rs.779 Crore);

21. Guarantee expenditures for loans extended through Pradhan Mantri Mudra Yojana (Rs. 500 Crore) and Stand-Up India (Rs.100 Crore);

22. Promotion of Food Processing Industries through PM Kisan Sampada Yojana (Rs.1081 Crore);

23. National Automotive Testing and Research and Development Infrastructure Project (NATRIP) (Rs.300 Crore);

24. Scheme for Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle in India (FAME-India) (Rs.693 Crore);

25. Enhancement of Competitiveness in the Indian Capital Goods Sector (Rs.173 Crore);

26. Scheme for Fund for Regeneration of Traditional Industries (SFURTI) (Rs. 465 Crore);

27. Coir Development Scheme (Rs. 104 Crore);

28. Khadi Vikas Yojana (Rs.370 Crore);

29. ASPIRE (Promotion of Innovation, Rural Industry and Enterprise (Rs.30 Crore);

30. Credit Linked Capital Subsidy and Technology Upgradation Scheme (Rs.654 Crore);

31. Prime Minister Employment Generation Programme (Rs. 2500 Crore);

32. Credit Support Programme (Rs. 100 Crore);

33. Interest Subvention Scheme for Incremental Credit to MSMEs (Rs.200 Crore);

34. Promotional Services Institutions and Programme (Rs.259 Crore);

35. MSME Fund (Rs. 50 Crore);

36. Fund of Funds (Rs.200 Crore);

37. Infrastructure Development and Capacity Building (Rs.802 Crore);

38. Establishment of new Technology Centres (Rs.200 crroe);

39. Infrastructure Development and Capacity Building – EAP Component (Rs. 400 Crore);

40. National Schedule Caste/ Schedule Tribe Hub Centre (Rs.150 Crore);

41. Development of Wind Power (Rs.1299 Crore);

42. Development of Small Hydro Power (Rs. 100 Crore);

43. Development of Bio-Power (Rs. 75 Crore);

44. Development of Solar Power (Rs.2150 Crore plus Rs. 366 Crore);

45. Kisan Urja Suraksha evam Utthan Mahaabhiyan (KUSUM) (Rs.300 + 700 total Rs. 1000 Crore);

46. Green Energy Corridors (Rs.300 Crore);

47. Interest Payment and Bond Issuing Expenses on the Bonds (Rs.125 Crore);

48.  Payment to ISPRL for Strategic Crude Oil Reserve (Rs.690 Crore plus Rs.155 Crore);

49. Deen Dayal Upadhyay Gram Jyoti Yojana (Rs. 4500 Crore);

50. Integrated Power Development Scheme (Rs. 4500 Crore);

51. Power System Development Fund (Rs. 574 Crore);

52. Sagarmala Programme for Port Development (Rs. 297 Crore);

53. Assistance to Ship Building, Research and Development (Rs.151 Crore);

54. Grants to Inland Waterways Authority (Rs. 302 Crore);

55. Inland Waterways Development Projects (Rs.377 Crore);

56. Amended Technology Upgradation Fund Scheme (ATUFS) (Rs. 762 Crore);

57. National Handloom Development Programme (Rs.190 Crore);

58. Procurement of Cotton by Cotton Corporation under Price Support Scheme (Rs. 2017 Crore in 2019-20; .01 Crore for 2020-21);

59. Yam Supply Scheme (Rs.155 Crore);

60. Central Silk Board (Rs.800 Crore);

61. Scheme for Development of Jute Sector and Subsidy to Jute Corporation of India (Rs. 95 Crore plus 40 Crore);

62. Power Tex India (Rs. 110 Crore);

63. Scheme for Integrated Textile Parks (Rs. 80 Crore);

64. Integrated Scheme for Skill Development (Rs.150 Crore);

65. National Institute of Fashion Technology (Rs. 110 Crore);

66. NER Textile Promotion Scheme (Rs. 125 Crore);

67. Integrated Development of Tourist Circuits around specific themes (Swadesh Darshan) (Rs. 1200 Crore);

68. Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive (PRASHAD) (Rs. 208 Crore);

69. Other Support to Tourist Infrastructure (Rs. 248 Crore);

70. Overseas Promotion and Publicity including Market Development Assistance (Rs. 450 Crore); and

71. Domestic Promotion and Publicity including Market Development Assistance (Rs.140 Crore);

Annex-H

List of Investment in Equity of Public Sector Entities

2020-21

1.    Bhartiya Nabhikiya Vidyut Nigam Ltd. and Uranium Corporation of India (Rs. 80 Crore plus Rs. 50 Crore);

2.    Nuclear Power Corporation of India (Rs. 500 Crore);

3.    Export Credit and Guarantee Corporation or ECGC (Rs. 650 Crore);

4.    India Post Payment Bank (Rs. 220 Crore);

5.    Bharat Sanchar Nigam Limited (Rs. 14115 Crore);

6.    Indian Telephone Industries (Rs.105 Crore);

7.    Mahanagar Telephone Nigam Limited (Rs.6295 Crore);

8.    National Investment and Infrastructure Fund Ltd. (Rs.2000 Crore);

9.    Strategic and Social Infrastructure Finance Corporation of India (Rs.1000 Crore);

10. Export Import Bank (EXIM) Bank (Rs. 1300 Crore);

11. India Infrastructure Finance Company Ltd. (IIFCL) (Rs. 10000 Crore);

12. Industrial Finance Corporation of India (IFCI Ltd.) (Rs.200 Crore);

13. NABARD (Rs.1000 Crore);

14. National Insurance Companies (Rs.6950 Crore);

15. Recapitalisation of Regional Rural Banks (Rs.200 Crore);

16. NEPA Ltd. (Rs.137 Crore);

17. National Minorities Development and Finance Corporation (Rs. 160 Crore);

18. National Backward Classes Development and Finance Corporation (Rs. 200 Crore);

19. National Scheduled Castes Development and Finance Corporation (Rs. 180 Crore);

20. National and State Scheduled Tribes Development and Finance Corporation (Rs. 150 Crore);

Annex-I

Rural and Other Backward Area Development Programme Expenditure

2020-21

1.    Pradhan Mantri Gram Sadak Yojana to connect villages and habitations with national road network through all-weather roads (outlay Rs. 19500 Crore);

2.    Urban Rejuvenation Mission: AMRUT and Smart Cities (Rs.13750 Crore);

3.    Border Area Development Programme (Rs.784 Crore);

4.    Shyama Prasad Mukherjee Rurban Mission (Rs. 600 Crore);

5.    North Eastern Industrial and Investment Promotion (Rs. 200 Crore);

6.    Transport/ Freight Subsidy Scheme (Rs. 300 Crore);

7.    Package for Special Category States of Jammu & Kashmir, Himachal Pradesh and Uttarakhand (Rs. 175 Crore);

8.    Refund of Central and Integrated GST to Industrial Units in North Eastern States and Himalayan States (Rs. 1716 Crore);

9.    North Eastern Industrial Development Schemes, 2017 (Rs. 1716 Crore);

10. Compensation to Service Providers for creation and augmentation of telecom infrastructure (Rs. 8000 Crore);

11. Schemes of North East Council (Rs. 606 Crore);

12. Schemes of North East Council- Special Development Projects (Rs.264 Crore);

13. Central Pool of Resources for North East and Sikkim (Rs. 552 Crore);

14. North East Special Infrastructure Development Scheme (NESIDS) (Rs. 674 Crore);

15. North East Road Sector Development (Rs. 800 Crore);

16. North Eastern Regional Urban Development Project (NERUDP) (Rs. 150 Crore);

17. Management Support to Rural Development Programmes and Strengthening of District Planning process (Rs.367 Crore);

18. Land Records Modernisation Programme (Rs. 239 Crore);

Annex-J

Central Government Programme for Labour Welfare

Ministry of Labour

1.    Labour Welfare Scheme (outlay Rs. 150 Crore);

2.    Bima Yojana for Unorganised Workers (Rs. 200 Crore);

3.    Employees Pension Scheme (Rs. 7457 Crore);

4.    Pradhan Mantri Shram Yogi Mandhan (Rs. 500 Crore);

5.    Pradhan Mantri Karam Yogi Mandhan (Rs. 180 Crore);

6.    National Child Labour Project (Rs. 120 Crore)

Department of Rural Development

1.    Mahatma Gandhi National Rural Employment Guarantee Programme (Rs. 61500 Crore);

Department of Financial Services

1.    Government Co-contribution to Atal Pension Yojana (Rs. 299 Crore);

Total: Rs. 70,406 Crore

Annex-K

Central Government Programme for Human Capital Development

1.    National Education Mission (Rs.39161 Crore);

2.    National Health Mission (Rs. 34115 Crore);

3.    National Programme of Mid-Day Meals in Schools (Rs. 11000 Crore);

4.    Umbrella ICDS (Rs. 28558 Crore);

5.    Mission for Protection and Empowerment of Women (Rs. 1163 Crore);

6.    Jobs and Skill Development CSS (Rs.2372 Crore);

7.    Pradhan Mantri Jan Arogya Yojana, Including Rashtriya Swasthya Bima Yojana (Rs.6429 Crore);

8.    Fortification of Rice and its Distribution under PDS (Rs. 20 Crore);

9.    Pradhan Mantri Swasthya Suraksha Yojana (Rs. 6020 Crore);

10. National AIDS and STD Control Progamme (Rs. 2900 Crore);

11. Family Welfare Schemes (Rs. 600 Crore);

12. National Means cum Merit Scholarship Scheme (Rs. 373 Crore);

13. National Scheme for incentive to Girl Child for Secondary Education (Rs.110 Crore);

14. Interest Subsidy and Contribution to Education Loan Guarantee Funds (Rs. 1900 Crore);

15. Scholarship for College and University Students (Rs. 141 Crore);

16. Special Scholarship Scheme for Jammu and Kashmir (Rs. 225 Crore);

17. Skill Development and livelihoods (Minorities) (Rs. 602 Crore);

18. Education Empowerment of Minorities (Rs. 2530 Crore);

19. Self-Employment Scheme for Rehabilitation of Manual Scavengers (Rs. 110 Crore);

20. Integrated Scheme for Skill Development- Ministry of Textiles (Rs. 150 Crore);

21. National Fellowship and Scholarship for Higher Education of ST Students (Rs. 100 Crore);

22. Eklavya Model Residential School (Rs. 1313 Crore);

23. National Service Scheme (Rs. 172 Crore);

24. Assistance to Promotion of Sports Excellence (Rs. 250 Crore);

25. Khelo India (Rs.890 Crore)

Total Rs. 1,51,204 Crore

Annex-L

Central Government Programme for Poor & Vulnerable Sections

1.    Umbrella Scheme for Development of Scheduled Castes (Rs.6243 Crore)

2.    Umbrella Scheme for Development of Scheduled Tribes (Rs.4191 Crore)

3.    Umbrella Scheme for Development of Minorities (Rs.1820 Crore)

4.    Umbrella Scheme for Development of Other Vulnerable Groups (Rs.2210 Crore)

5.    Prime Mantri Awas Yojana (PMAY) (Rs. 27500 Crore);

6.    Jal Jeevan Mission (JJM)/ National Drinking Water Mission (Rs. 11500 Crore);

7.    Swachh Bharat Mission (Rs. 2300 Crore for Urban and Rs. 9994 Crore for Rural);

8.    National Livelihood Mission (Rs. 10005 Crore);

9.    National Fellowship for SCs (Rs. 300 Crore);

10. National Fellowship for Other Backward Classes and Economically Backward Classes (Rs. 120 Crore);

11. Free Coaching and Other Scholarships (Rs. 125 Crore);

12. Integrated Programme for Rehabilitation of Beggars (Rs. 100 Crore);

13. Assistance to Disabled Persons for Purchase/Fitting of Aids and Appliances (Rs.230 Crore);

14. Deendayal Disabled Rehabilitation Scheme (Rs. 130 Crore);

Total Rs. 65,468 Crore

Annex- M

List of Major Public Goods Expenditures

1.    Agriculture research and education: Rs. 2729 Crore and Rs. 5620 Crore through ICAR;

2.    Atomic Energy: Rs. 6286 Crore;

3.    Ayurved and other AYUSH services: Rs. 1171 Crore.

4.    Postal operations: 1204 Crore;

5.    Maintenance and promotion of cultural resources; Rs. 578 Crore and Rs. 1012 Crore through subordinate organisations;

6.    Defence Services: Rs. 1,16,784 Crore;

7.    Meteorological and other earth science services: Rs. 1337 Crore and Rs. 202 Crore through other subordinate organisations;

8.    Electronic Governance: Rs. 425 Crore;

9.    Unique ID services: Rs. 985 Crore;

10. Cyber Security projects: 170 Crore;

11. R & D in IT/Electronics/CCBT: Rs. 763 Crore;

12. Promotion of Digital Payment: Rs. 200 Crore;

13. Environment, Forest and Climate Change expenditure: Rs. 1017 Crore;

14. Relations with Foreign Governments, including neighbours: Rs. 7450 Crore and Rs. 4388 Crore on other diplomatic services;

15. Expenditure on Health Institutions like AIIMS etc.: Rs. 10193 Crore;

16. Health Research: Rs. 1796 Crore;

17. Disaster and other security expenditure of MHA: Rs. 1600 Crore;

18. Census Survey and RGI expenditure: 4568 Crore;

19. Expenditure on Policing and Immigration services: Rs. 7297 Crore;

20. Police research: Rs. 3290 Crore;

21. Educational Institutions (Schools): 9205 Crore;

22. Higher Education Institutions: Rs. 28601 Crore;

23. Information and broadcasting services: Rs. 740 Crore and support to autonomous bodies Rs. 3080 Crore;

24. River development, ground water development and other flood protection expenditures: Rs. 2746 Crore;

25. Administration of law and justice: 286 Crore plus other expenditure Rs. 117 Crore

26. Geological Survey of India: Rs. 637 Crore;

27. Scientific research and technology development: Rs.3202 Crore and assistance to autonomous bodies etc. Rs. 2457 Crore;

28. Social justice and empowerment: Rs. 606 Crore;

29. Bio-technology research and development: Rs. 1903 Crore;

30. Scientific and industrial research expenditure: Rs. 50 Crore;

31. Space sciences, technology and application: Rs. 12587 Crore

32. Local Area Development through MPLAD: Rs. 3960 Crore;

Total Rs. 2,51,242 Crore

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[1] 1. How much and On what the Central Government spends Rs. 31 lakh Crore: subhashchandragarg.blogspot.com/2020/01/expenditure-budget-how-much-and-on-what.html?spref=tw and

      2. Serious Expenditure Reforms India Needs: https://subhashchandragarg.blogspot.com/2020/01/serious-expenditure-reforms-india-needs.html?spref=tw)

[2] Comprehensive Note on Fiscal Deficit and Debt in India at https://subhashchandragarg.blogspot.com/2020/01/comprehensive-note-on-fiscal-deficit.html?spref=tw

[3] Serious Expenditure Reforms India Needs https;//subhashchandragarg.blogspot.com/2020/01/serious-expenditure-reforms-india-needs.html?spref=tw

[4] Annex V to the Budget Speech mentions Rs. 1,36,600 Crore of Food Subsidy to be funded from NSSF in 2020-21. This is gross number. As Rs. 68,400 Crore has been provided as repayment of earlier NSSF loan in the NSSF budget and not in the budget of the Department of Food and Public Distribution, the net additional flow would only be Rs. 68,200 Crore, which should only be added to the Food Subsidy expenditure.