Employment and Social Spending in Budget 2012-13

21 March, 2012, Jayati Ghosh

Budget 2012-13 provides conclusive proof that the UPA government has lost its way. It has managed the remarkable feat of upsetting almost everyone and making no one happy. The Budget is highly regressive in both taxation and spending terms, and will raise prices of essentials, so aam aurat and aam aadmi are not happy. Farmers, still the bulk of the workforce in India and the source of food for the country, are adversely affected by rising prices of inputs and have little else to celebrate in the fiscal policy. Surprisingly, even corporate India and foreign investors, who would seem to be the main beneficiaries, are up in arms against the Budget. They are protesting about the lack of movement in areas like FDI in retail and other deregulation as well as at the retrospective opening up of tax cases through amendments in the Direct Tax Code. 

But the Budget provides deeper evidence of the way being lost, because the UPA government seems to have forgotten the importance of its own ''flagship schemes''. It should not be forgotten that these schemes (which were ultimately brought in and implemented also because of outside pressure from the Left parties) were the basic building blocks of any success achieved by UPA-1. The Common Minimum Programme worked out with the internal and external allies created a cohesive framework within which the government operated, despite the many pulls and pushes, and despite the contradictions of implementing progressive and pro-poor policies within a broadly neo-liberal economic policy framework. In fact, these schemes contributed in no small measure to the electoral victory of the Congress Party in 2009 and the subsequent emergence of UPA-2. 

Of course, we must be the only country in the world where basic public delivery of essential social services is thought of in terms of ''schemes'' that are provided as ''populist spending'' gifts by a government to a supposedly grateful population. In most other countries, the job of the government is precisely to deliver nutrition, health, education, sanitation – and indeed, employment, or at least the conditions that enable more employment and livelihoods. Perhaps because we persist in seeing these as ‘schemes'', we are grateful for so little, and happy when spending on something does not decline even if it is still at abysmally low levels of spending. 

So, in Budget 2012-13, social sector spending overall has increased. This is certainly welcome, but only because we are so grateful for crumbs. For example, allocations for school education have been increased by around 17 per cent compared to the current year's revised estimates, though the increase is mostly in elementary education. As it happens, secondary education increasingly needs much more money, but the increased outlay barely keeps pace with the projected inflation (which incidentally is likely to be much higher than the anticipated 7.2 per cent because of the inflationary effect of the Budget itself). 

Similarly, the outlay for health and family welfare has gone up by nearly 22 per cent compared with the current year's revised estimates, but that reflects a significant shortfall in spending in the current year – of Rs 1643 crore. In any case, at a total of only Rs 30,702 crore, health spending by the central government is still embarrassingly small in relation to India's projected GDP – only 0.3 per cent! Compare this to the promise made by the UPA-1 government to increase health spending to 3 per cent of GDP. Even the poorest countries of Sub-Saharan Africa manage better ratios than this, and it helps to explain why India performs so poorly in all international indices of human development and conditions of life. 

The National Rural Health Mission was always low in ambition, and attempted to provide essential public service ''on the cheap'', by using the unpaid or underpaid services of local women who were involved in some minimal training. Even now, the appallingly low remuneration provided to ASHAs and the expectation that they should carry the burden of the public health system is shameful. But even the pathetically small amount provided for the NRHM (around Rs 16,000 core in the current fiscal year) has not been fully utilised, and there is an estimated shortfall of nearly Rs 650 crore. In the face of such disinterest, even the paltry increase by around Rs 2400 crore in the proposed Budget must be taken with a pinch of salt, since it is not clear how much will be spent. 

The Budget also provides for a substantial increase in outlay for the ICDS compared to the previous year's budget estimates. But this essentially reflects the increase in remuneration for anganwadi workers and helpers, which was implemented in the middle of this fiscal year and therefore raised the actual spending by about Rs 3,000 crore. In fact the effective increase in projected spending compared to the current year's revised estimates is hardly anything. The increase in outlay needs to be much more, because the ICDS is still not fully universal despite seven years of Supreme Court strictures, and because the ICDS workers still do not receive legal minimum wages. 

The food subsidy allocation provides another big disappointment. The UPA government has trumpeted the proposed Food Security Bill as the fulfilment of its promise to aam aadmi. This has become even more important as in the past four years, food prices have skyrocketed. They are likely to increase in the coming year, not only because of global pressures but because of the impact of this budget on fuel and fertiliser prices. But the current government has already displayed a rather cynical approach to the Food Security Bill, seeking to reduce it to a travesty of the original intent. 

In this context, the fact that the Finance Minister has maintained the food subsidy at more or less the current level (Rs 75,000 crore compared to Rs 73,000 spent in 2011-12) seems to confirm that cynicism. Obviously, the Finance Ministry at least does not anticipate that the Food Security Act when it is passed will lead to an increase in the central government's spending commitments in order to ensure minimally adequate food grains to all citizens. Indeed, we are even supposed to be grateful that the food subsidy bill has not actually been cut along with the fuel and fertiliser subsidies. So low are the current expectations, that there was actually applause in Parliament when the FM graciously declared that there would be no cut in the food subsidy. 

Finally, the most important flagship scheme of all– the Mahatma Gandhi National Rural Employment Guarantee Act – is being given such obvious step-sisterly treatment by the central government that it is now an open question whether the scheme will actually survive in the medium term. The combination of vested interests that have come together to undermine this scheme need not be gone into here, but the effects are obvious in the spending data. In the current year, only Rs 31,000 crore was spent out (around three-quarters of the budgeted amount) and the Government has been quick to reduce the coming year's allocation to only Rs 33,000 crore. Since on average less than half the promised 100 days of work are being provided across India, this suggests that the government has stopped taking its own scheme too seriously, and may even be part of the attempt to undermine it. 

But the concerns around employment involve more than the MNREGA. Overall, the macroeconomic policy context is unfavourable to more productive employment generation, and this Budget does little to address the problem. In fact, by raising the costs facing micro and small entrepreneurs, it may be making the issue of sufficient livelihood for petty producers even worse. Remember that more than half of India's work force is self employed, and the other half is dominated by workers in very small enterprises. In such a context the complete absence of any positive approach towards small business in the Budget is part of a piece with the overall large corporate-oriented strategy of this government, but it is worrying nonetheless. 

It is also remarkable that the government is apparently unaware of the policy challenges thrown up by the large pool of young people – growing numbers of whom are going through relatively expensive private tertiary education in the hope of gaining a better life through employment. Nothing in the Budget suggests that employment generation for these different categories of potential workers is even on the radar of the central government, even though ignoring this challenge is fraught with all sorts of risks. 

Why all this should be so is a real mystery. Does the government not realise that its economic success and continued political existence both depend increasingly on a greater focus on the domestic market, on ecologically sustainable production trajectories based on more employment in decent conditions, and on better delivery of essential goods and services? Is it not aware of the changing aspirations of people, especially younger people, in both rural and urban areas? Is it news to them that sustainable economic growth cannot be generated without a healthy and educated population with access to the minimum basic amenities of life? Why does it continue to neglect these issues to the detriment of the society as a whole and even at the threat of its own survival?

*This article was originally published in the Frontline, volume 29, Issue 06: March 24-April 06, 2012.

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