Big spurt in social sector expenditure since FY21: Govt keen to regulate welfare spend but task easier said than done
The assorted social sector schemes that have either been launched or fortified by the Centre since the Narendra Modi government 1.0 took office in May 2014 have resulted in a material improvement in people’s welfare and access to public services. They have also yielded electoral dividends to the ruling BJP.
Some of these schemes have, however, fallen far below the respective targets, going by their quantified outcomes. While there are now talks of a re-calibration of such spending to address the rising concerns of high budget deficits, the fact is most of these schemes will need to continue for several more years for them to meet the hefty targets.
Given the level of income deficiency among large sections of people and electoral compulsions, once a scheme is borne, it is hard to end it. Some experts, however, feel that the JanDhan-Aadhaar-Mobile (JAM) facility could allow the government to track the progress of the schemes and close them once the objectives are met. NR Bhanumurthy, vice-chancellor at Dr BR Ambedkar School of Economics University at Bengaluru, says: “Many of the social-sector schemes launched over the last seven decades haven’t had a sunset clause (which made it difficult to close them). However, with JAM at its disposal, it would be much easier for the government to restructure public expenditures and close social sector schemes. I think that is what the government is doing. It is creating space for higher capital expenditure.”
However, political considerations are hard to be ignored in the real world. So, if the Centre’s revenue expenditure saw a spurt in FY21 and FY22 due to the pandemic, expectations have to be tempered on the feasibility of any effort to rationalise welfare expenditures even in the post-Covid scenario. Uttar Pradesh’s Yogi Adityanath government, for instance, is set to extend the Rs 1,000 crore/a month free ration scheme launched a few months ahead of the state assembly elections to beyond the 2024 Lok Sabha elections.
Also, few welfare schemes have produced results that would allow them to be phased out soon (Swachh Bharat Mission-Gramin to expand household toilet coverage and Pradhan Mantri Gram Sadak Yojana, meant to build all-weather roads to unconnected habitations are the two exceptions as these have nearly achieved the final targets already).
There are some schemes which have come unstuck or under-achieved due to their faulty designs. For instance, the Pradhan Mantri Ujjwala Yojana (PMUY) could not enable the low-income households to use LPG as cooking fuel permanently; of the 80 million beneficiaries under PMUY, 32 million did not refill their subsidised LPG cylinders in the first quarter of FY22 as the end-price of the standard 14.2-kg cylinder rose to levels they could not afford. Since June 2020, the government hasn’t been depositing the subsidy on cooking gas in the bank accounts of target beneficiaries, resulting in a big dip in its fuel subsidy budget from Rs 23,667 crore in FY21 to just Rs 3,400 crore in FY22.
Schemes involving large expenditures like the explicit subsidies on food and fertilisers have seen big increases in outlays in the last two years as additional succor was provided by the Centre to people affected by Covid-19 by way of free grains and protection against surge in fertiliser prices. The one-time scheme to give free Covid vaccines to the large chunk of adult population is seen to cost the Centre Rs 39,000 crore in FY22.Other schemes such as the rural job guarantee scheme (MG-NREGS), the National Social Assistance Programme (NSAP) designed for welfare of the elderly and PM Awas Yojana have also seen jumps in outlays in the last two years. In the absence of virulent new waves of the pandemic, expenditures on MGNREGA and NSAP are being re-calibrated so that more funds could be found for capital spending.
Once pandemic-related expenditures such as on free grains and vaccines come down, additional resources will be available for other developmental as well as welfare schemes, a senior official told FE.
Stating that there are schemes that are due for closure, Bhanumurthy says: “For example, the PM Awas Yojana would achieve its objective of providing pucca houses in the rural areas in 2022. There are other schemes such as providing toilets to households under the Swachh Bharat Abhiyan that may be close to completion.”
Although the pandemic has somewhat slowed the disbursement of Mudra loans — meant for small and budding entrepreneurs — in the past two years, it still remained well above the annual average of Rs 2.66 trillion until FY20. In FY21, Mudra loan disbursement stood at Rs 3.12 trillion and until March 11 this fiscal, it touched Rs 2.79 trillion. While the Mudra scheme has improved access to credit at affordable rates for people from vulnerable sections, experts have warned of bad loan risks, as most of these loans are collateral-free.
Jan Dhan accounts, which were used by the government for the first time to transfer relief amount directly to the poor women beneficiaries in the aftermath of the Covid outbreak, remained one of the most successful financial inclusion schemes. From 383 million until FY20, the number of such no-frills accounts went up to 449 million until March 9 and covered every unbanked household. The deposits under the scheme remained as much as Rs 1.63 trillion as of March 9, compared with Rs 1.46 trillion as of March 31, 2021.
The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), a universal social security system, especially for the poor, witnessed a surge in enrolment in the aftermath of the pandemic. From 69.6 million as of March 2020, the cumulative enrolment under the scheme jumped to 102.7 million until March 2021 and 121.3 million as of January 26, 2022. It offers a renewable one-year term life cover of Rs 2,00,000 to all subscribing bank account holders in the age group of 18 to 50 years, with an annual premium of just Rs 330 per subscriber.
Similarly, the Pradhan Mantri Suraksha Bima Yojana, a scheme that provides cover for death/disability due to accident, saw enrolment rising from 185.4 million as of March 2020 to 232.6 million until March 2021 and 272.6 million by January 26, 2022. It offers a renewable one-year accidental death-cum-disability cover of Rs 2,00,000 to all subscribing bank account holders in the age group of 18 to 70 years for an annual premium of only Rs 12 per subscriber.
India Ratings chief economist Devendra Kumar Pant said the Jan Dhan accounts have come in handy for the government as an architecture for transferring benefits directly to the beneficiaries while curbing potential pilferage. The government doesn’t bear the cost of maintaining such low-frills accounts but banks owned by it do. So, there is an indirect cost to the exchequer. The Mudra loans may involve certain NPA risks but they enable the vulnerable sections of society get credit at cheaper rates for starting a venture. Obviously, there are some costs involved (the government offers interest subsidy in case of Mudra loans) and there has to be proper due diligence while extending the loans. But the benefits of these schemes far outweigh the costs. Plus, the government has a social and welfare obligation to fulfill, he added.