This year’s Union Budget was criticized by experts for a material decline in allocation for welfare schemes, at a time of post-Covid-19 recovery when welfare spending should have been a priority. Similarly, last year’s budget also ignored social expenditure in favor of capital expenditure.
The analysis below, based on budget papers, shows that the trend of declining central government spending on key social schemes is not new, since the National Democratic Alliance (NDA) government came to power in 2014. Since then, central allocations for welfare schemes and sectors ensuring basic rights have declined as a proportion of GDP.
Saksham Anganwadi and Poshan 2.0 aims to address child malnutrition and hunger. From 2021-22, the Anganwadi Program (ICDS) was merged with the POSHAN Abhiyaan and the POSHAN Yojana for adolescent girls. Even with higher components, its allocation has come down from 0.13% of GDP in 2014-15 to 0.07% in 2023-24 – almost halving.
According to the National Family Health Survey (NFHS)-5 data, the percentage of anemic, underweight and stunted children in India is 67%, 32% and 36% respectively, the worst in the world. Yet, funds to address malnutrition are being drastically cut.
Another important nutrition scheme is the Mid Day Meal (MDM) scheme, which covers about 12 crore children. Evidence shows that the scheme has improved classroom attendance, learning as well as nutritional outcomes and reduced stunting among children. However, the budget allocation for MDM has been reduced by 50% as a share of GDP, from 0.08% in 2014-15 to 0.04% in 2023-2024. In 2021, the finance ministry rejected the breakfast in school scheme citing paucity of funds, a scheme that has shown promising results in Tamil Nadu within a year.
Lastly, the PM Matru Vandana Yojana (PMMVY) provides maternity benefits in the form of a conditional cash transfer of ₹5,000 to women in the unorganized sector. To cover all women and births as per the National Food Security Act (NFSA) mandate, the scheme needs about ₹14,000 crore, but the PMMVY budget is yet to cross ₹3,000 crore.
Working class crisis deepens
The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) and NFSA (food subsidy) have also declined as a share of GDP since 2014. MGNREGA guarantees 100 days of employment to every rural household while NFSA provides subsidized food grains to over 80 crore people.
MNREGA expenditure as a share of GDP to increase from 0.26% in 2014-15 to 0.20% in 2023-24. For NFSA it went up from 0.94% in 2014-15 to 0.65% this year. As experts point out, MGNREGA and the Public Distribution System were key to averting disaster during the pandemic. Both the schemes saw record demand in 2020-21; MGNREGA provided employment to 8.55 crore households, while Public Distribution System (PDS) food grain offtake was 93 million tonnes, leading to 2.73% and 0.56% of GDP spent on NFSA and MGNREGA, respectively. However, from 2020-21 onwards, there has been a sharp decline in NFSA and MGNREGA allocations as a share of GDP.
As the economist, Jean Dreze recently highlighted, real wages of casual workers grew less than 1% per year from 2014-15 to 2021-22, according to data from the Reserve Bank of India. Pro. Dreze argues that this worrying trend calls for a reorientation of economic policies, with a greater focus on the drivers of wage growth.
National Social Assistance Program (NSAP) is a scheme that provides pension to the elderly, widows and disabled persons below the poverty line and provides financial assistance to families who have lost their breadwinner. As a share of GDP, its allocation has come down from 0.06% in 2014-15 to 0.03% in 2023-24. The stock declined consistently over this period except in 2020-21, when it was up 0.21% with the COVID relief in cash included in NSAP.
The cut in NSAP is against the advice of 60-odd economists, who have long been urging the government to increase the nominal pension amount to Rs 200 per month for the elderly and Rs 300 for widows. Pension has not increased since 2006.
As a share of GDP, central expenditure on school education (primary and secondary) is set to decline from 0.37% in 2014-15 to 0.23% in 2023-24. It is surprising that there has been no growth here even after the pandemic, which had devastating effects including an increase in primary dropout rates due to more than 70 weeks of school closures – twice the global average.
only marginal health care benefits
Health care expenditure increased under the NDA government, unlike others. The share of central health expenditure in GDP increased from 0.25% in 2014-15 to 0.30% this year. While this is a welcome change, it is too late in the post-Covid world.
According to UNICEF’s latest State of the World’s Children report, India has the lowest immunization rate in South Asia. Furthermore, India’s out-of-pocket expenditure on health is much higher than the global average, pushing millions of people into poverty every year.
For these schemes/sectors, for which comparable data was available, the allocations showed a significant increase from 2004-05 to 2013-14. The share of GDP remained constant for MDM, food subsidy and health care, tripling for ICDS, doubling for NSAP, and 45% for school education, increasing from 1.48% of GDP in 2004–05 to 2014. 15. But then it came down to 1.32% this year under the NDA government.
On the other hand, the NDA government was relatively successful in delivering concrete goods – a policy paradigm Subramanian et al. (2021) is called the New Welfarism of the Right. They show that substantial progress has been made in access to cooking fuel, electricity and financial inclusion of women, with rapid improvements since 2015. The authors argue that new welfarism has rich electoral benefits because tangible goods and services are easy to obtain. Providing, monitoring and crediting the central government in comparison to traditional government services such as primary education and child nutrition.
a stable HDI rank
It is only reasonable to expect that as a country’s GDP grows, its spending on welfare programs should increase proportionately. In fact, as per international experience, the share of social expenditure in GDP in India has been increasing over time. The critical importance of social security programs was acknowledged by the government when it increased the budget allocation for all the above schemes to 4.3% of GDP during the pandemic year; But now we are back to only 1.5%.
According to the World Social Security Report by the International Labor Organisation, only 24.8% of Indians are covered by at least one social security scheme against the Asia-Pacific average of 44%. The result can be clearly seen in India’s stagnant Human Development Index rank of 132 and rising malnutrition levels. It is difficult for India to become a superpower with uneducated and unhealthy population.
If fiscal prudence is a concern, we suggest that the government recover the ₹4.3 lakh crore revenue foregone due to tax concessions during NDA-1 and reduce corporate tax rates in 2019 to 2019-21 Recover ₹1.85 lakh crore left between
Fiza Suhail is a research associate at the Center for Research on the Economics of Climate, Food, Energy and Environment (CECFEE), Indian Statistical Institute. Mohit Verma is Research Associate at Good Business Lab