Rural development, farm spending rises by 10%

Contrary to popular impressions, social sector spending has risen across the board

Contrary to the general impression that social sectors are suffering under the Prime Minister Narendra Modi-led NDA government, latest official data show a nearly 10 per cent increase in real expenditure on agriculture and rural development in the first six months of this year over the corresponding period last year. No belt-tightening is visible in the health sector with expenditure rising. The increases are substantial both in absolute terms as well as a percentage of GDP.

Actual plan spending by the Rural Development Ministry touched Rs 48,204 crore in April–September 2015, up from Rs 45,050 crore in the corresponding period last year. Spending by the Ministry of Urban Development has surged to Rs 7,031 crore from Rs 5,532 crore. The Health Ministry’s planned spending is up to Rs 15,020 crore from Rs 14,250 crore. Spending on education too is up by Rs 6,700 crore though its share in the overall GDP declined marginally.

The quality of spending has improved too with the shift in expenditure away from current to capital investments. Data for both Centre and States shows aggregate capital expenditure is up by 0.5 percentage point of GDP. In real terms, this translates in to a 25 per cent jump. Of this, the Centre contributed 60 per cent and the rest came from the States. There is a corresponding reduction of 0.3 percentage points in revenue expenditures as a percent of GDP. The enhanced expenditure levels will not disturb the government’s fiscal arithmetic, said a source at the Finance Ministry. The likely achievement of the fiscal deficit target of 3.9 per cent of GDP for the year, the source said, will be without the large expenditure cuts towards the year’s end, typical of the last few years. The Ministry is relying on the increase in tax buoyancy achieved in the first half the year for this. For taxes as a whole, buoyancy rose by between 50-80 per cent relative to the average of the previous three years.