HOW THE GOVERNMENT SPENT THE YEAR

At first glance the most recent numbers on central finances are reassuring with overall performance broadly in line with the budget estimates, as pointed out in the Mid-Year Review of the Economy. But a closer look at the more detailed ministry-wise spending patterns show some very disconcerting trends. For one there is a sharp disparity in the share of budget allocations spent by the different ministries. And what is worse is that the expenditure of some of the major ministries, where there is a large subsidy component, has far exceeded the norms, while those of the many other economic ministries, that play a pivotal role in boosting the long-term growth prospects, are way below par.

 

Leading the list of the big spenders is the ministry of consumer affairs, food & public distribution, which has already spent 84% of its budget allocation in the first seven months of the fiscal. This is on account of the huge expenditure incurred by the department of food & public distribution, which had already spent Rs 45,076 crore of the Rs 53,262 crore allocated in the budget. The primary reason is the large procurement and demand for PDS grain, which will ensure that the food subsidy Bill significantly exceeds the budget allocation of Rs 52,489 crore.

 

The second biggest spender is the ministry of communication & information technology, which spent as much as 78% of the annual budget allocations during April-October 2009-10. And both the department of posts and the department of telecommunications have spent heavily. The worst-case scenario was in the department of posts, where the cost of running the unviable postal system has ensured that the department has already spent 98.8% of its entire budget allocation of Rs 6,021 crore. The spending of the department of telecommunication was only slightly lower at 80%.

 

The other major spender was the ministry of chemicals & fertilisers, which doles out the fertiliser subsidy. Numbers for the first six months of the fiscal show that the ministry has spent close to three-fourths of its budget allocations. The government effort to roll back fertiliser subsidies by reducing the spending from Rs 75,849 crore in 2008-09 to Rs 49,980 crore in 2009-10 budget estimates has obviously not been backed with matching measures to bring down subsidy payouts.

 

A back-of-the-envelope calculation shows that if the past trends continue through the rest of the year, the spending of these three ministries alone would exceed the annual budget projections by Rs 41,684 crore, which would mean that their actual expenditure can exceed annual budget allocations by more than a third. And apart from these major three, there are another eight ministries that have already spent 64-75% of the budget allocations in April-October. These are ministries of labour & employment (75%), textiles (67%), law & justice (66%), civil aviation (66%), science & technology (65%), personnel, public grievance & pensions (65%), mines (64%), and women & child development (61%), all of which have spent more than the pro rata share of 58%.

 

Equally, if not even more, disturbing is the slow pace of spending by other ministries that play a significant role in improving economic and social infrastructure or in building governance capacity. This is an impressive list that includes ministries of rural development, human development, road transport & highways, power, panchayati raj, petroleum & natural gas, micro, small and medium enterprises, development of north eastern region, housing & urban poverty alleviation, heavy industry & public enterprises, and new & renewable energy.

 

Expenditure in these ministries during April-October 2009-10 was less than 50%. Apart from these there were another 14-odd ministries who spent less than half their budget allocation in the first seven months of the year.

Topping this list is the ministry of heavy industry, with jurisdiction over many important public sector units, which has spent only 11% of its annual budget allocation of Rs 829 crore. The ministry of housing & urban poverty alleviation was another major laggard, spending only 16% of its annual budget outlay of Rs 858 crore. Similarly, ministry of panchayati raj could also make only limited headway so far, spending just about a quarter of its annual budget outlay of Rs 4,781 crore.

 

But more distressing is the slow pace of spending by important infrastructure-related ministries. For instance, the ministry of shipping, which has close to 45% of its annual outlay of Rs 1,756 crore allocated to ports, could spent only 15% of the amount till now. Similarly, the ministry of power has only been able to spend 21% of its allocation of Rs 9,202 crore, even when power deficits in the states remain at fairly high levels.

 

The list of laggards include other ministries with high visibility and large budgets like the ministries of rural development, HRD, road transport & highways, and petroleum & natural gas, which could only spent 41-48% of their annual budget allocations during April-October 2009-10.