Budget and Vulnerable Sections

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One of the most important aspects of budgets of Union and State governments is whether these contribute to the betterment of weaker sections and vulnerable groups in the country. Therefore budget analysts try to examine the budgets from the point of view of their impacts on the poorest people and weaker sections, farmers, workers, homeless people and slum dwellers, dalits, tribals, women and children.

In the Union Budget for 2015-16 we see clearly that very big cuts have been made in some priority social programmes and areas.

The ICDS budget has been cut from Rs 16000 crore to Rs 8000 crore, the mid-day meal budget from Rs 13000 cr to Rs 9000 cr while the Sarva Shiksha Abhiyan budget has been reduced from Rs 28000 crore to Rs 22000 crore. There are reduction also in drinking water, health and family welfare.
The outlay for Women and Child Development Ministry has been reduced from Rs 21193 crore in the previous year to Rs 10351 crore this year. The overall allocation under gender budgeting has also gone down significantly.

The budget for the scheduled caste sub-plan was reduced from Rs 50548 cr (Budget estimate 2014-15) to Rs 33638 (Revised estimate 2014-15) to Rs 30850 cr (Budget estimate for 2015-16). The budget for tribal sub-plan has been reduced from Rs 32386 cr (Budget Estimate 2014-15) to Rs 20535 cr (Revised Estimate) to Rs 19979 cr (Budget Estimate 2015-16).

At the same time the ability of state governments to make higher allocations has been increased as, on the basis of the recommendations of the 14th Finance Commission, the share of the states in Central taxes has been increased from 32% to 42%.

So the question is whether the steep fall in several social programmes can be made up by higher allocations in these areas by state governments.

To answer this question we'll have to take a close look at the budgets of various state governments in the near future. However as the cuts made in the Union budget are quite steep for some priority programmes, it seems unlikely that loss in the Union budget will be fully made in the state budgets in most states.

The Union Budget could've made more efforts to raise larger resources so that the central allocation for social priority programmes could be maintained despite the higher share in the tax pool for states recommended by the finance commission. India's tax-GDP ratio can certainly be increased from the existing level of 17 percent. This is much lower than the tax-GDP ratio of other BRICS and G-20 countries (the tax-GDP ratio exceeds 30% in most of these countries). To increase tax collection more reliance should be on direct taxes as these are more progressive, impacting the rich more and helping to reduce inequalities.

However the Union Budget doesn't have any firm proposals regarding this. Instead of increasing the share of direct taxes, the share of indirect taxes has been increased. Wealth tax has been abolished and steps to reduce corporate tax have been initiated. These trends will increase inequalities and it'll be more difficult to raise resources to meet the priority need of vulnerable sections.

Frontier
Vol. 47, No. 37, Mar 22 - 28, 2015