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Learning Pundits
onBudget analysis
REPP class 9
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BUDGET REVIEW ON
What Does Budget 2007-08Offer Women?By- Yamini Mishra, Bhumika Jhamb
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FUNCTIONAL DETAILS OF THE GENDER
BUDGETING STATEMENT
Gender budgeting(GB) statement has beenstarted as a government exercise since the last 3years.
Government has made efforts in correctingmistakes as pointed out by a civil society.
Part Aof the statement contains schemes inwhich 100% allocations are for women. Eg: Indra
Awas Yojana, Rashtriya Mahila Kosh .
Part Bconstitutes schemes in which at least 30%of the allocation in for the women. Eg ICDS,PMRY
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BUDGET HIGHLIGHTS TOUCHING
GENDER ASPECTS
The total magnitude of the gender budget is Rs31,177 crore in 2007-08 that is an increase of 40per cent.
As a percentage of total union governmentexpenditure, this constitutes a rise from 3.8 percent to 4.8 per cent.
Gender budgeting cells have been set up by 50ministries/department.
General Budget Statement demand for grantshas increased from 10 in 2005-06 to 33 in 2007-08.
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CRITICAL ANALYSIS OF GB STATEMENT
Ambiguous and wrong allocation still remains
Under the department of health and familywelfare all the allocation on contraceptives has
been treated as exclusively for women. IAY has also been treated similarly although in
2004-05 , 18% of houses constructed but allottedto men and 29% jointly to husband and wife .
Similar discrepancies remain in various schemesunder Labour Ministry , Ministry of youth affairsand Sports etc.
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Percentage spending in the Gender Budgeting Statement
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Women Education: Allocations high at 31%
but still insufficient to control the high drop
out rate of 73%
Women Health: Allocation high at 24% but
much needs to be done to lower the high
maternal mortality rate.
Women food security and nutrition:Meagre
increase in allocation and no concrete steps.
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Women Livelihood: Significant budgetaryprogress by substantial and right allocation ofschemes and funds.
Women Housing: At 8% of the allocation itremains low considering the magnitude of the
problem.
Women in difficult circumstances: There is noallocation at all for provisions like these. For e.g
no provision for the efficient implementation ofthe Domestic Violence Act.
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GB Statement: The way forward
Although the GB statement is a wellintentioned initiative several more steps needto be taken.
Women face discrimination in many aspects.
They face discrimination on the basis of caste,class, disability, HIV status, rural-urban divide,
etc.
There is no mechanism to ensure that theallocations reach the most marginalizedsection of the women community
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Conclusion
A crucial flaw is that the GB statementassumes the women as a homogenous mass.
It does not account for the various power
dynamics and discrepancies that remain in the
society.
Also, women have long been discriminated
and marginalized and the GB statement needs
to take this into account.
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Conclusion
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The Gender Budgeting exercise recognizes that
gender-neutral allocations are not enough and
the government needs to step up its allocations
for women-specific schemes.
The Gender Budgeting exercise cannot be done
in isolation from the political and socio-economic
scenario of the country and needs to incorporate
these aspects to make it cater truly to womenwelfare
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Black Economy,Underestimation
of Unemployment and Budget2005-06
by Prof.Arun KumarProfessor of Economics,JNU,
AuthorBlack money in India
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Contents
Introduction
Model of Black Income Generation in LegalActivities
Some Facts
Union Budget 2005-06, Employment and theBlack Economy
Conclusion
Some questions to ponder upon
Some other Links
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An Indian is affected at every step by the
black economy. The education of a child, a
visit to a doctor, policeman who extortmoney..electricity or water departments all
demands black economy
- Prof. Arun Kumar
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Black Economy - Introduction
A hidden sector of the economy where private cashtransactions go unreported. It is a sector of economicactivities involving illegal economic activities includingbuying and selling of drugs.
This definition excludes transfer incomes, like capitalgains and bribes. The definition also eliminates multiplecounting of incomes
That part of an economy that is hidden from thegovernment and on which taxes are not paid.
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Black EconomyIntroduction (cont.)
Most of the black economy is on the hand of top 3%population so that the disparity (between these peopleand the bottom 40 per cent) is considerably higher (fivetimes) than what the white economy data suggests.
Size of the black economy was 40 per cent in 1995-96,that implies an additional GDP due to the black economyof 40 per cent in that year.
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Model of Black Income Generation in
Legal Activities
Profit (P) = Revenue (R)Cost (C) (1)
Profit may be white (what is declared) or black (what is not declared).The declared profit appears in the income statement of the businessand is called the balance sheet profit. The undeclared profit or blackprofit is called off-balance sheet profit.It accrues directly to the
management of the business.
P = White Profit (Pw) + Black Profit ( Pb) (2)
Further,
P = Actual RActual C (3)
Black Profit (Pb) is generated by declaring lower revenue and/or overstating costs.
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Some facts
The size of the black economy is estimated to be 40 per centof GDP for 1995-96 [Kumar 1999]. Of this 8 per cent comesfrom illegal activities and 32 per cent from legal activities.
Two Sources of Black income area. Overstated Costs
b. Under invoiced revenue
Then overstated costs would contribute half of the blackprofits (Pb) from legal activities or 16 per cent of GDP.
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Some facts (cont.)
According to the economist magazine it is estimated thatin 1998 the worlds black economy accounted for a
missing $9 trillion worth of outputa volume of outputalmost equivalent that of U.S.
Black income generation process, with the mostplausible available assumptions, results inoverestimation of employment and wages by 5 per cent.
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Union Budget 2005-06, Employment and
the Black Economy Introduction of two schemes in Union Budget 2005- 06
1. Banking Transaction Tax (BTT)2. Fringe benefit Tax (FBT)
The value added tax (VAT) has also been billed as ascheme to tackle black income generation in indirecttaxes. It is supposed to lead to better compliance.
Services tax collection has shown high buoyancy. Many
more services are progressively being brought under thenet of this tax.
In the union budget for 2005-06, additional funds areallotted to employment generation and to the social
sectors (education, health, etc).
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Conclusion
It is clear that without incorporating the black economy inthe analysis, there can be no clarity on the issue ofunemployment in India.
The 7 per cent rate of growth in the last three yearsraised the possibility of mobilizing more resources butthe steps taken are grossly inadequate to deal with theproblem of declared unemployment in India.
Not that the black economy does not generateemployment, but by lowering the value of the multiplierand the potential rate of growth of the economy, it lowersthe employment potential
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Some questions to ponder upon
How is the government going to tackle the twin andinterrelated problem of black economy andunemployment?
Is black economy really an evil?
Is there a way to estimate and curb the blackeconomy?
Are we as individuals also responsible incontributing in growth of parallel / black economy
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Some Other Links
http://www.financialexpress.com/news/story/126853/
http://in.biz.yahoo.com/050312/32/2k54q.html
http://www.atimes.com/atimes/South_Asia/IF
05Df02.html
http://www.financialexpress.com/news/story/126853/http://www.financialexpress.com/news/story/126853/http://in.biz.yahoo.com/050312/32/2k54q.htmlhttp://in.biz.yahoo.com/050312/32/2k54q.htmlhttp://www.financialexpress.com/news/story/126853/http://www.financialexpress.com/news/story/126853/ -
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Budgetary Policy in the Context of
Inflation
- PRABHAT PATNAIK
Source (Article): EPW April 7, 2007
REPP LG 3BUDGET REVIEW
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The Union Budget 2007-08
utterly fails to appropriately
respond to the social needs of asituation of profit inflation
- Prabhat Patnaik
25Budgetary Policy in the Context of Inflation
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Understanding Inflation
Inflation: The overall general upward price
movement of goods and services in an economy.
Income Inflation: Inflation in nominal wage unit,
with the price level in terms of the wage unitremaining unchanged. Purchasing Power
remains constant
Profit Inflation: Inflation of the price level interms of the wage unit. Fall in Purchasing
Power
26Budgetary Policy in the Context of Inflation
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Overheating of the Economy: High
Growth Rates
Decline in profitability in the Agricultural Sector.
Rural development expenditure as a proportion of GDP hasdeclined to a level much lower than in the eighth planperiod.
Per capita foodgrain output has declined over a longperiod, and especially since the beginning of this century.
Public procurement operations have been wound down.
The procurement prices offered for foodgrains have simplynot been remunerative enough.
28Budgetary Policy in the Context of Inflation
Since mid-2002, the dumping of huge amounts of foodgrains on the world
market and the whittling down of procurement operations, has now carried
the economy from an ex ante excess supply to an ex ante excess demand
situation.
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This requires an increase in fiscal transfers to the poor, financed,
ideally by an increase in taxes on the profit earners. And the basic
problem with the 2007-08 budget is that it is oblivious of these social
demands of a situation of profit inflation.
Dilemma- the basic feature of a profit inflation is thatit is self-limiting, in the sense that, leaving aside theelement of speculation, the forced savings that
such inflation generates, eventually eliminate the exante excess demand that causes it!
The end of profit inflation, however, may not meanthe end of inflation in nominal wages and prices.
Even if we assume it does, that will still leave thelevel of real wages below what it was before profitinflation began.
Budgetary Policy in the Context of Inflation 29
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Reduction in the revenue and fiscal deficitsrelative to GDP is necessary for curbing inflation.
It has to be achieved through a restriction ongovernment expenditure relative to GDP.Otherwise the animal spirits of entrepreneurswill get destroyed by higher taxes, and growthwill be curbed.
In short, what a situation of profit inflationrequires is both the ensuring of appropriate
supplies through imports, and a transfer ofpurchasing power from the profit earners to theworkers.
Budgetary Policy in the Context of Inflation 30
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Union Budget 2007-08
While the government has seen the need for
supply management, i.e, for importing
certain essential commodities to augment
domestic supplies, it has not seen the needfor transfers.
To check the fiscal deficit, there has been a
curtailment of expenditure, including transferpayments.
Budgetary Policy in the Context of Inflation 31
Percentage increase in items in the
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Percentage increase in items in the
budget between 2006-07 (RE) and 2007-
08 (BE)ITEM PERCENTAGE INCREASE
Gross tax revenue 17.2
Tax revenue net of states share 17.0
Total receipts and total expenditures 17.0
Plan expenditure 18.7
Non-plan expenditure 16.3
Budget support for the Central plan 22.5
Budget support for states and union territories 8.5
Budgetary Policy in the Context of Inflation 32
GDP is currently rising at over 9 per cent and prices at around 7
per cent, this 17 per cent increase in most budget items
matches the 16-17 per cent increase in the nominal GDP,
leaving their proportion to GDP unchanged.
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Transfers decline relative to
GDP Outlay on the National Rural Employment Guarantee
Scheme (NREGS) is supposed to rise from Rs 11,300crore to Rs 12,000 crore, i.e, by a mere 6.2 per cent innominal terms
Total expenditure on rural employment is supposed torise by only 3.5 per cent
Aggregate expenditure on NREGS, Sampoorna GraminRozgar Yojana (SGRY) and Swarnajayanti Gram
Swarozgar Yojana (SGSY) is supposed to increase byjust about 7 per cent
Food subsidy is supposed to rise by a mere 6.2 per cent
Budgetary Policy in the Context of Inflation 33
A i l
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Agriculture
The Budget does little to remove the basic cause
of the profit inflation itself, which consists in thesteady decline in per capita foodgrain output.
The Central Plan outlay on agriculture isbudgeted to increase only by 15.8 per cent, and
the outlays on rural development, and irrigationand flood control by 11.4 and 11 per centrespectively.
This modest increase, in the light of the factthat the Central Plan outlay itself is expected to
increase as much as 31 percent, suggests alack of emphasis
Budgetary Policy in the Context of Inflation 34
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Lack of mention of any price-support for the farmers.
When the talk is about productivity increases withinpeasant agriculture, it requires a certain amount of
investment. This seems difficult unless the remunerationimproves.
In the absence of a price support mechanism, tariff changesin either direction may work to the disadvantage of
farmers. The gains from increases in tariffs may be appropriated bymiddlemen (which may even be large multinationals), while theeffects of such tariff increases in the form of higher prices ofdownstream goods may even hurt the farmers as consumers.
The losses from tariff decreases on the other hand may wellget passed down by the middlemen to farmers, a possibilitythat arises in the context of this yearsbudget itself since dutieson several agricultural goods have been reduced apparently asa means of combating inflation.
Budgetary Policy in the Context of Inflation 35
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There is a case for increasing the tax-GDP ratio in aperiod of profit inflation.
This is because since a profit inflation increases thewealth of the capitalists while forcing the workers toreduce their consumption, i.e, it first squeezes theconsumption of the workers, then transfers theseamounts arising from the reduced consumption ofthe workers as savings to capitalists, whose wealthincreases as a result of this.
This wealth inequality can be removed only byincreasing the share of taxes in profits, which, since
the share of profits in total income is rising duringthe profit inflation, would necessarily meanincreasing the share of taxes in income.
Budgetary Policy in the Context of Inflation 36
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Tax GDP Ratio 11.4% in 2006-07 (RE)
Tax GDP Ratio 12.0% in 2006-07 (BE)
(http://www.abnamro.co.in/Research/pdf/budget-FY2007-08-comment.pdf)
The tax-GDP ratio and the ratio of transfers to the
workers to GDP should both have increased in thecontext of inflation, together with supply
management measures.
The budget for 2007-08 raises neither the tax-GDP ratio, nor the ratio of GDP being transferred
tothe poor and the working people.
Budgetary Policy in the Context of Inflation 37
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Budget Review
Topic- Budget and Growth
LG_2
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An overview of Budget 2006-07
GDP growth likely to be 8.1 per cent with the manufacturing sector at 9.4
per cent; agricultural growth bounced back to 2.3 per cent; inflation was
4.02 per cent.
Allocation for eight flagship programmes (Sarva Siksha Abhiyan, Mid day
meal, Drinking water and sanitation, National Rural Health mission, ICDP,
NREGS, JNNURM et.) to increase by 43.2 per cent from Rs.34,927 crore in
2005-06 to Rs.50,015 crore.
Government to provide equity support of Rs.16,901 crore and loans of
Rs.2,789 crore to Central PSEs (including Railways).
Farm Credit increased to Rs.175,000 crore in 2006-07 with addition of 50
lakh farmers; banks asked to open a separate window for self- help groups
or joint liability groups of tenant farmers.
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Global growth spree
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Contribution of Developing
& Developed nations in world economy
Developed Countries Developing countries
Contribution in world output 54% Contribution in world output 45.4%
Export 71% Export 28.2%
World population 15.4% World population 84.6%
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A
Mismatch
f
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What is exactly driving the growth of
Indian economy???
The production base
Or
The consumption base
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An illustration
Housing and retail credit registered higher
growth rate
This fostered the growth in construction
sector
But the Author envisages that the world wide
experience with regard to construction boon
driven growth raises doubts
Is this growth sustainable??
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Can we have growth without production ???
Government has reduced capital expenditure toreduce the fiscal deficit
Along with production, employment has taken aback seat
Our budget lacks coherence to approach savings
It goes like mathematical proportion that withthe increase in employment , income increasesand what is saved is expected to be invested
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Perils to Indian growth
Barrier in the world trade in spite of free and
fair talks.
Inadequate measures/provisions to foster
saving and investment in 2006-2007 budget.
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Overview of Challenges
Infrastructure andEnvironment
Economy RelatedRegulatory/Governance
Poor Physical
Infrastructure(road, sea,
airports etc.)
Weak Rural
Infrastructure
High Cost and
unreliable power
Bureaucracy
Investment has
fallen short of savingsIn three consecutiveyears from 2001-02to 2003-04Low level of domesticInvestment absorption
CapacityConsumption creditExpansion lead growthLack of labour marketreforms due to declinein capital expenditure
Politicization of
investment decisions
Poor performance
Of Public sector
Poor regulatory
Support to the
Unorganized sector
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MDGsMillenium DevelopmentGoals or Moving Development
Goals?
An article by Vinish Kathuria
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Government says.
After education, health is second sector withmajor govt. spending.
Increase of 22%?? In effect, after inflation,works out to 16.5%.
Increased outlay vis--vis MDGs.
Health component distribution (PHC,Disease control programme, healtheducation, reproductive and child health)
f
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At a first glance
Country 1990 (IMR) 2003 (IMR) % changeover 13
years
China 38 30 21.05
Pakistan 96 81 15.63
India 80 63 21.25
Bangladesh 96 46 52.08Among the South Asian Countries, India has the2ndhighest MMR (540 per 100,000 births)
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MDG Goals
Related to health are primarily the 4th,5thand 6thgoals.
4thGoalTo reduce IMR. 5thGoalTo improve maternal health.
6thGoalTo combat HIV/AIDS,
malaria and other diseases.
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Target 2015 IMR42 deaths per 1000 live births. MMR109 per 100,000 live births.
HIV/ AIDS comabting is on a low. Whereas TB
and malaria statistics are gradually improving.
Bottlenecks
Inefficiency in the use of resources. Lack of funds towards various schemes of
these goals.
Institutional changes in few states.
H lth S t O tl b th
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Health Sector Outlay by theGovt.
Total Outlay in Crores
0
2000
4000
6000
8000
10000
12000
14000
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Total Outlay in Crores
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Discrepancies in the health sector.
Budget allocations, increased outlay to be takenwith caution.
Progress made in combating leprosy and polio,but yet to be eradicated.
Resource requirement (Rs. 19,995 crores) notmatching the actual outlay (Rs 12,100 crores).
Is the allocation sufficient to support ASHA
volunteers? Support NHRM. Other indirect schemes like ICDS.
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Conclusion
More focus on PHCs
Increase expenditure to PHCs
Insurance of poor against healthuncertainties.
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Why Do the States Not Spend?
By T M Thomas Isaac, R Ramakumar
Article Review
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Current Situation
Public expenditure by states on social &economic services is a crucial necessity.
It is low in India by any standard & need
urgent attention. In 1990s & 2000s, the ratio of revenue
expenditure by all states to the GDP hasstagnated, if not declined.
Investment outstanding by all states- Rs64,000 crore.
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The growing importance of state finances inthe macro-economy is evident from the fact
that the total expenditures of state
governments (Rs 3,25,634 or 16.6% of GDP)have even overtaken those of the centre (Rs
313,258 crore or 16% of GDP) in the year
1999-2000.
http://www.epwrf.res.in/Archives1.asp?CatId=4
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FRBM Act
The main elements of the FRBM acts passed by the states werethe following:
(a) 2 to 3 per cent target for fiscal deficit to be achieved by2005-06 to 2010-11;
(b) elimination of revenue deficit by aroundthe same time;
(c) limits to state government guarantees on debt;
(d) limits to overall liabilities that could be incurred
(e) formulation of a medium-term fiscal plan to reach
these targets &(f) institution of a complaint redressal mechanism.
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Remedial measures
Expenditure compression such ascurtailment of benefits to employees
Reduction in social subsidies, includingwelfare pensions
Closure of sick PSUs
All-round increases in user charges.
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States like Haryana, Karnataka, Gujarat and TamilNadu, which have been characterised as fiscallybetter managed have shown declining ratio ofrevenue expenditure to GSDP of state govts.
a common factor to all state govts is thecompulsion set by the FRBM Acts to eliminaterevenue deficits by 2008-09.
C l l i Fi l i b l
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Central role in Fiscal imbalance
RoI on borrowings of states were sharplyincreased after the mid-1980s.
Coupon rates of state govts. securities were
raised sharply by the RBI from 11.5% in 1990-91 to 14% in 1995-96.
Similarly, the interest rates on small saving
borrowings by states also increased from 13%1990-91 to 14.5% in 1992-93.
Revenue deficit of states more than doubledfrom 1.1% in 1997-98 to 2.5% in 1998-99.
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Central Govt. Stand
Union Finance Minster- much more needsto be invested in education, healthcare,mid-day meal schemes, rural roads &
urban development. States are unable to spend because they do
not have absorptive capacity.
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Reverse transfer from state to centre
Investments by state in 14 day intermediarytreasury bill of centre earn them a return of 5%per annum
But the average cost of mobilization of fundsby state is much higher.
In 2005-06 the interest rate on borrowing ofstates against small savings was 9.5% per
annum ( the costliest debt in the market) The average interest rate on market borrowing
was 7.4% per annum.
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Reverse transfer from state to centre
The total transfer of NSSF loans from the centre tostates was Rs 90,000 Cr in 2005-06.
At the end of the same period, the total reverseinvestment by states in treasury bills was Rs 61,886Cr- about 1/3rdof its NSSF borrowing.
This has enabled the centre to make profit and thecentre is blaming states for the surpluses.
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Author Stand Author claimed this as false and misleading argument. States do not spend because of legal constraints. Finance Ministry has forced states to pass fiscal
responsibility in their legislative assemblies.
Revenue & fiscal deficit target- 3% of GSDP by 2008-09 In tune with target, revenue & fiscal deficit declined
sharply in 2000s by keeping revenue expenditure toGSDP ratio stagnant despite increase in revenue receiptto GSDP.
States could have raised revenue expenditure by makinguse of increased receipt & kept revenue deficit constant. Cash surplus phenomenon is a perverse outcome of
FRBM Acts.
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Case Study of Kerala
Adverse implications of mechanically designed fiscaladjustment programmes in context of long termcommitments to social spending & exogenous changeslike pay revisions.
As per provisions of FRBM Act. Kerala had to sharplycut plan expenditures- reduce social spending & curtaildevolution to local self-governments.
Planning Commission demanded flexibility in FRBMAct provisions.
International experience with fiscal responsibilitylegislations also endorse flexibility.
The author advocated drastic amendment of FRBM Act.
Why Kerala?
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Why Kerala? It is characterized by fiscal imbalance: high revenue deficit,
fiscal deficit and public debt, as ratios to GSDP.
Its expenditure pattern- high commitment to social servicesexpenditure, as high priority to social sector historically.
Focus on social sector has led to better health and longevity
to its people, resulting in a high burden of pension paymentson the exchequer. In 2005-06, pension payments in Keralaconstituted about 51 per cent of the total salary expenditure.
According to RBI- Karnataka, West Bengal, Uttar Pradesh,Tamil Nadu, Maharashtra, Haryana, Gujarat and Bihar havesurpluses of around Rs 3,000 crore each
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http://www.cseindia.org/programme/nrml/infocus-feb07.htm
Situation in Kerala is an indicative of the situation in
other states, majority of the states are facing the similarsituation and has been caught in the catch-22 situation.
High level of public spending are needed in many
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g p p g yareas but they should and they must be achievedthrough improvements in revenue mobilisation andgreater efficiency in expenditure.
Prime Minister, Dr Manmohan Singh
Due to the precarious fiscal position, we will not meetthe target set under FRBMA. The Centre needs support
for carrying on with social sector initiatives.-Thomas Isaac, Finance Minister, Kerala
FRBM targets shouldnt come in between povertyalleviation grants. The Centre must make concessions to
backward states like Orissa and provide more centralfunds. We will oppose any such move to curtail funds.
--Prafulla Chandra Ghadei, Finance Minister, Orissa.
In the long term, social sector spending creates social andi i l S i i di i
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economic capital. So terming it revenue expenditure is notsensible.
-C P Chandrashekhar, Economic Research Foundation,
New Delhi
Reducing deficit may well have depressing effects oneconomic activity. The large-scale fiscal deficits do notnecessarily lead to higher inflation as inflation is caused by
excess demand against supply.Prof. Jayati Ghosh, JNU, New Delhi
There is nothing wrong in maintaining large-scale fiscaldeficits if resorting to public debt is done only to meetinvestment requirements as long as their social rate of returnis higher than the rate of interest.
-Siba Sankar Mohanty, Centre for Budget and Accountability,New Delhi
B d t A l i B LG 7
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Budget Analysis By LG:7
No New Deal for
Farm Revival
By
S. Mahendra Dev
Economic & Political Weekly
April 7, 2007
A i lt A
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Agricultures Agony
Beset with many problemsTenth Plan(2002-07) growth rate 2.3%
Last decade growth rate
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Beware of the fury of patient man- John Dryden
Good economics works for everyone but not at
the same time for everyone. This budget has a
large package for agriculture
- P. Chidambaram
Beware of the fury of Indian farmer
- S. Mahendra DevLG-7 77
P Chidambarams Musings
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P. Chidambaram s Musings
Old Wine in new bottle
Items on credit,
Accelerated irrigation benefit programme
(AIBP)Fertiliser subsidies, agricultural insurance,
the rural infrastructure development fund
(RIDF)Restoration of water bodies
LG-7 78
P Chidambarams Musings
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P. Chidambaram s Musings
New wine
Committee on indebtedness
A mission for pulses,
Special purpose funds for the plantation
Training of farmers
Revitalising the extension system
Groundwater rechargeSocial security for rural landless
householdsLG-7 79
Whither Agriculture Focus?
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Whither Agriculture Focus?
No New Deal
Expenditure on agriculture, rural development
and irrigation increased by 15.8%, 11.45% and
9.7% respectively
Share of agriculture dropped in central plan
outlays from 3.03% to 2.67%, and in central
plan expenditure from 4.28% to 4.17%
LG-7 80
No Water But Drops
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No Water, But Drops
Irrigation woes
Public expenditure is stagnant
Target of achieving 10 million hectares
under Bharat Nirman appears remoteOutlay for irrigation Rs 4500 cr in the year
(2005-2006) & Rs
restoration of water bodies and recharge ofgroundwater: no allocations
LG-7 81
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LG-7 82
0
2000
4000
6000
8000
10000
12000
2005-06 2006-07 2007-08
InRs(cr.)
year
Allocation in Budget under AIBP
Series1
Centres Expenditure on Agriculture, 1990-91 and 2005-06, in Current Rupees and
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Constant (1993-94) Rupees
1990-91 2004-05 RE 2005-06 BE
Agriculture
(current Rs bn)27.71 55.90 72.43
Agriculture (in
1993-94 Rs
bn*)
37.59 30.10 37.23
Irrigation &
Flood Control
(current Rs bn)
3.19 6.84 8.75
Irrigation &
Flood Control(in 1993-94 Rs
bn*)
4.32 3.68 4.50
LG-7 83
C t E dit A i lt d
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Centres Expenditures on Agriculture and
Irrigation as % of GDP
Agriculture & Allied Activities
1990-91- 0.49%
2005-06 BE - 0.21%
LG-7 84
A i lt l C dit
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Agricultural Credit
Farm Credit: Quantitative targets vs.
Distributional aspects
Credit plus services, farm advisory services:
Integration
LG-7 85
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LG-7 86
L d M t
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Land Management
Land degradation: Water logging, imbalances
in fertilizer use and pesticides, extension
services
Involvement of local communities
LG-7 87
Research & Extension/ Risk
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Management & Insurance
India: only 0.5 per cent of GDP on agricultural
research
NCF: knowledge gap between the yields in
research stations and actual yields in farmersfields
Risk mitigation: Weather based crop insurance
(NAIS)
LG-7 88
Inputs, Prices, Marketing &
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p , , g
Diversification
Proper supply of inputs and remunerative
prices for their output: Immediate need
Output price fluctuations & Diversification
into high value crops and
Allied activities??
LG-7 89
Oth I
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Other Issues
PDS strengthening: no strategy!
Social security for unorganized workers:
peanuts!
LG-7 90
S
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Summary
No new deal: incremental notcomprehensive/ holistic strategy
More of promises AND Short on allocations
and implementation
Argument- large leakages- therefore no
allocation? Whether this should be the
approach??
LG-7 91
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Budget AnalysisImplementation of
Employment Guarantee :
A Preliminary AppraisalBy
Pinaki Chakraborty
Economic & Political Weekly
February 17, 2007
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What is NREGA?An Introduction Enacted in 2005
To provide minimum guaranteed wage
employment of 100 days in everyfinancial year
To rural households with unemployed
adult members prepared to do unskilled
manual work
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How it is different?Unique as Never before such mammoth scheme
It goes beyond poverty alleviation Recognises employment as legal right
Provide opportunity to rural households
To an extent livelihood security
Budgetary Allocation
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Key Budgetary Indicators to GDP Ratio (percent)
0
5
10
15
20
1996-9
7
1998-9
9
2000-0
1
2002-0
3
2004-0
5
2006-0
7
Year
%o
fGDP
Revenue Receipts
Revenue Expenditure
Expenditure : MORD
Rural Employment
Total Expenditure
Selection Criteria
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Per Capita Income and Distribution of NREGS
5606
9963 10164 11139 11500
12244 12641
18494 19087
26858
23 22 19 20 18 11 6 10 13 12
0
5000
10000
15000
20000
25000
30000
Bihar
Uttar
Pradesh
Orissa
Jharkha
nd
Madhya
Pradesh
Chha
ttisgarh
Rajasth
an
WestBeng
al
Andh
raPrade
sh
Maharash
tra
State
PerCapitaIncome(inRs.),
No
.
ofDistrictsCovered
About NREGS Districts
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% Distribution of Rural BPL Households in NREGS
20.73
13.49
11.119.087.94
4.53
1.07
13.58
4.48
5.32
8.67
Bihar
Uttar Pradesh
Orissa
Jharkhand
Madhya Pradesh
Chhattisgarh
Rajasthan
West Bengal
Andhra Pradesh
Maharashtra
Others
About NREGS Districts
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% Distribution of Rural Households in NREGS
14.36
13.26
7.1
6.296.573.75
2.4
13.08
12.43
6.87
13.89
Bihar
Uttar Pradesh
Orissa
Jharkhand
Madhya Pradesh
Chhattisgarh
Rajasthan
West Bengal
Andhra Pradesh
Maharashtra
Others
Rural Development
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ProgrammesExpenditure Distribution across various RD Prog.
0
10
20
3040
50
60
70
1999-0
0
2000-0
1
2001-0
2
2002-0
3
2003-0
4
2004-0
5
2005-0
6
2006-0
7
Year
%Contribu
tionto
Schem
es
SGSY
SGRY
NFWP
NREGS
Other Exp.
IMPLEMENTATION ISSUES
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Multi tier StructureThe agencies involved are:
Central EmploymentGuarantee Council
State EmploymentGuarantee Council
District Programme
Coordinator
Programme Officer
IMPLEMENTATION ISSUES
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The responsibility of the gram panchayat is theidentification, execution and supervision of projects as perthe recommendations of gram sabha (village assembly)
The gram sabhas are given the power to conduct a regular
social audit of individual schemes for accountability andtransparency
For the purpose of funding and the implementation of the
NREGA, the central government will set up a NationalEmployment Guarantee Fund. State governments willalso set up their Employment Guarantee Fund to makematching contribution
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It has been specified in the Act that if an applicantunder this act is not provided such employment within15 days of his application seeking employment, s/heshall be entitled to a daily unemployment allowancewhich will be paid by the state government.
This implies an inbuilt structure of incentive forperformance and disincentive for non-performance forthe state government.
Individual states will have to evolve a well coordinatedapproach to equate supply of employment inaccordance to the demand.
IMPLEMENTATION ISSUES
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It requires an in-depth understanding of region-
specific labour demand and its seasonality so
that a demand-based scheme of projects can be
implemented at a frequency matching the
demand for work
Thus, there is a need to design a monitoring
mechanism by strengthening the institutionalstructure at the local level so that resources can
be used optimally.
IMPLEMENTATION ISSUES
Spatial Dimension
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Panchayat is the principal authority to implement and monitoring(social audit) the Act of individual schemes
Mostly the districts deprived of rural connectivity, spread of banking,nature of rural power supply and quality of governance are taken intoconsideration through this Act
Identification of Indicator for performance of NREG scheme
The demand performance(i) EG enrolment as percentage of total number of rural households.(ii) EG enrolment as a percentage of rural BPL households
(iii) EG enrolment as a percentage of application for enrolment
The supply performance(i) EG provisioning as a percentage of rural households(ii) EG provisioning as a percentage of rural BPL households.
(iii) EG provisioning as a percentage of number of households enrolled
NREG fund Utilization Ratio
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An interstate Competition
Observations
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NREG enrolment as a percentage of the number of
applicants, it is abysmally low in Maharashtra, followed
by Karnataka, Bihar and Jharkhand
For Andhra Pradesh and Gujarat the supply of
employment has met the demand, for most other states
enrolment falls far short of the demand.
The fund utilisation ratio it is again low in poorer states
in the country
A positive slope implying that the states with higher per
capita income could manage to spend more.
Making the Indian Budget
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LG9
Making the Indian Budget .How Open and Participatory?
Vinod BhanuEconomic and political weekly .
Issue : March 31, 2007.
Making the Indian Budget .
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LG9
Making the Indian Budget .How Open and Participatory?
Vinod BhanuEconomic and political weekly .
Issue : March 31, 2007.
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LG - 9
Making of Indian Budget..
Discuss about the lack of Public Participation in
Budget Making Process in India.
IBP( International Budget Project) and Open Budget
Indexan indicator of peoples participation in
Budget Making.
India ranks very low as the level of participation has
been found to be dismal.
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Compared with countries like UK, USA, South Africa
and New Zealand, Indian Government provides very
little pre budget information to common citizens.
Budget is passed by the parliament, ideally, it is
approved by the general public. But very few MPsunderstand the complexities of the Budget.
Even political parties are not capable of training theirMPs in this regard.
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Standing Committees of the Parliament review the
drafts demands of different departments. They areopen to public but few members of general public
make representations before them.
The whole process of involvement of parliament in
Budget Preparation( which is practically non existent)
and its approval needs to be restructured.
Industrial and Corporate houses have free access to
the finance ministry, there by they have significant
influence on Budget Proposal.
CSO s have very little influence on the other hand they
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CSO s have very little influence on the other hand, they
can not obtain a lot of pre budget information using the
RII Act.
The article calls for making the process of budget making
more participatory and open to the general public (&CSOs)
A clear-cut legal framework for establishing the practice
of participation and transparency is urgently required
Our Parliament lacks the institutional capacity to do
budget research and provide sound analytical briefings
Some Issues:
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Cut motions or No confidence motions
Roles of finance related committees of the Parliament
Practices of transparency and participation in budget making
winter session and pre-budget business
Myth of closed budget process
Why finance minister had a pre budget consultation with the
parliamentarians belonging to his party only ?
The pre budget discussions and political parties
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The International Budget Project:
IBP was established as part of the centre on Budgetand
Policy priorities(a Washington DC based non profit
research organization) in 1997.
To support civil society organizations around theworld interested in strengthening public budgetprocesses, institutions and outcomes.
Source: www.openbudgetindex.org
O B d I i i i 2006
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Open Budget Initiative 2006
First-Ever Budget Transparency Country Rankings
civil society organizations from 59 countries around
the world participated
India scores 52% out of a possible 100% on the open
Budget index 2006
Source: www.openbudgetindex.org
Public Availability of key Budget
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Public Availability of key Budget
Documents
1. Pre Budget Statement
2. Executives Budget Proposal
3. Citizens Budget
4. In Year Reports
5. Mid Year Review
6. Year End Report
7. Auditors Report
Source: www.openbudgetindex.org
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NDA & UPA Budget
2/3/2014
117
LG-5
Continuity or Change?
Central Theme
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Comparison of NDA & UPA governments fiscalperformance on the basis of revenue generationthrough tax collection & Capital expenditure on vitalsocial sectors like health & education.
2/3/2014
118
LG-5
Three Phases
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Phase I (non-NDA and UPA): 1991-92 to 1997-98.
Phase II (NDA): 1998-99 to 2003-04.
Phase III (UPA): 2004-05 to 2005-06 (RE)
2/3/2014
119
LG-5
Y = + T + TD1+ TD2+
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1 2
Fiscal Performance (Y) Depends on the followingIndependent variables:
1. Liabilities of the Central Government
2. Fiscal Deficit3. Revenue Deficit4. Tax Revenue5. Total Expenditure6. Revenue Expenditure7. Capital Expenditure
2/3/2014
120
LG-5
State of Variables Used
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Non-NDA Non-UPA phase Only Total expenditure is significant
Others are insignificant
UPA phase
Out of 7, five variables are significant i.e., Fiscaldeficit, Revenue deficit, Tax revenue, Total
expenditure, Revenue expenditure
2/3/2014
121
LG-5
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2/3/2014
122
LG-5
Comparison of the two Regimes
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Attribute UPA Government NDA Government
Social Service as CE 0.04% 0.08%
CE on Health of TE 0.01% 0.01%
CE Allocation to Economic Services 4.03% 4.06%
Administration 3.27% 3%
Subsidies 9.23% 9.17%
2/3/2014
123
LG-5
UPA Govt. Highlights
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The present UPA Govt. has tried to cut the fiscal andrevenue deficits.
The Educational Expenditure as in terms of CapitalExp remained constant.
2006-07 budget plans to hike the Expenditure onhealth to 0.02% of Total Exp.
Allocation for Agri & Allied activities is lower by
0.01% than the NDA Average. Allocation to Rural Development is constant but has
shifted from CE to RE.
2/3/2014
124
LG-5
UPA Govt. Highlights
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Rural Development initiatives appear more underflagship programmes.
Food subsidies reduced by 0.01% points in the first 2years but increased in the 2006-07 budget.
Tax per GDP ratio increased during UPA regime. NDA fared in non-tax per GDP ratio.
Interests receipts have fallen but the dividendreceipts have increased significantly for the UPA.
Corporation, Service & Income tax has fared betterthan NDA.
2/3/2014
125
LG-5
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LG-5
Thank You126