Structural reforms to open up the economy and make it more competitive Internal strains: India which emerged string from global recession 2008 was soon bogged down by the emergence of energy, infrastructure, human capital and institutional bottlenecks. The supply of energy and natural resources, transport infrastructure and skills the key engines of growth has not been able to keep pace. with increased demand. Institutions and public as well as private governance also need to adapt to the development of India and the progressive transformation of its economy.
In 2009-2010, 33.8% of the rural population and 20.9% of the urban population lived below the Government’s official absolute poverty line, down from 42% and 25.5%, respectively, in 2004-2005.
Development strategies public exp - india
Public Expenditure Trends and Patterns - India Nayana RenuKumar CENTRE FOR GOOD GOVERNANCE
Indian Economy Impressive growth in last two decades Recent slow down in response to global cues and internal strains (rising inflation, declining investment, structural bottlenecks) Latest reforms measures cover FDI, subsidies, tax reforms, innovation and open government Opportunities: Demographic dividend, innovative and entrepreneurial business class Key challenges: Making growth more inclusive, addressing widespread poverty and rising inequality Large share of population employed in informal sector affecting tax collection and in turn, public sending Limited access to basic services
State of public finances Substantial improvement till 2007-08 Fiscal deficit down to 4% Expansion of Corporate sector and corporate tax receipts New tax on services and high proceeds from personal income tax Weakening of finances since 2010 High fiscal deficit from tax cuts, debt write offs, public sector wage raise and high subsidies in energy sector Regulatory environment characterised by state control, barriers to entrepreneurship and obstacles to trade and investment
Public spending for Development : Reducing Poverty and Inequality Impressive progress in reducing absolute poverty offset by rising inequality since 1990s especially between rural and urban areas India ranks 134 in HDI 2010-11 but has performed better than most (including high and very high human development) countries in terms of average annual HDI growth rate Existing gap in health and education indicators indicates the need for much faster and wider spread of basic health and education 2011-12Item Areas Exp. BE Education 3.11Expenditure on socialservices as a proportion of 6.74% Health 1.3GDP Others 2.34Expenditure on social Education 11.5services as a proportion of 25% Health 4.8total governmentexpenditure Others 8.7
Public expenditure trends and patterns Total investment in infrastructure (roads, railways, ports, airports, electricity,Infrastructure telecommunications, oil gas pipelines and irrigation) have increased from 5.7% of GDP in base year of the 11th Plan to around 8.0% in the last year of the Plan India’s public spending at 1.4 % of GDP is among the lowest in the world India spends $43 per head, counterparts in Sri Lanka invest $87, China spendsHealth $155 and Thailand over six times at $261 Out-of-pocket costs accounts for 67% of total expenditure on health in IndiaEducation Public spending on education is about 3.1% of GDP
India’s expenditure on flagships programs for inclusiveness Total 11th Plan Programme Ministry/ Department (Rs. In crores) Mahatma Gandhi National Rural Employment Guarantee Act Rural Development 1,56,301 Indira Awas Yojana Rural Development 41,486 National Social Assistance Programme Rural Development 23,536 Pradhan Mantri Gram Sadak Yojana Rural Development 65,002 National Rural Health Mission Health & Family Welfare 69,214 Integrated Child Development Scheme Women & Child Development 38,980 Mid Day Meal School Education & Literacy 38,602 Sarva Siksha Abhiyan School Education & Literacy 77,576 Jawahar Lal Nehru National Urban Renewal Mission Urban Development 48,485 Accelerated Irrigation Benefit Programme and Other water Water Resources 46,622 resources programme Rajiv Gandhi Gramin Vidyuti Karan Yojana Power 25,913 Rajiv Gandhi Rural Drinking Water Mission and Total Drinking Water Supply 46,722 Sanitation Campaign Rashtriya Krishi Vikas Yojana Agriculture & Cooperation 18,550 Grand Total (Rupees seventy thousand crores approx.) 6,91,976Eleventh Plan gave special impetus to several programmes aimed at building rural and urbaninfrastructure and providing basic services for increasing inclusiveness and reducing poverty
Measures to increase efficiency of public expenditure India’s emerging economy with large unmet minimum needs of the masses require focus on equity issues and macroeconomic needs. Prudential limits on deficits and debts and optimization public expenditure outcomes essential High-level committee constituted to go into the expenditure classification and management in a comprehensive way. Main recommendations : Fundamental shift in public expenditure management - budgeting linked to outputs and outcomes Portal to place information on flow of resources and their utilization on public domain All States to include information about investment outlays of State Public Sector Enterprises and resources of rural and urban local bodies as part of State Plans Provide regular updates on Project-wise, Ministry-wise and Sector-wise information on Public Private Partnerships in Central and State Budgets
Measures to increase efficiency of public expenditure Government’s has evolved a comprehensive strategy in 12 th FYP for further lowering poverty and reversing the pattern of growing inequality. Key elements: Policies to improve health, nutrition and educational outcomes Labour market reforms to reduce segmentation between formal and informal employment Tax reforms to increase redistributive effects of tax Making social spending a more powerful tool to deal with rising inequality. Social spending, which amounts to about 5% of GDP in India, is low including in comparison to other large emerging economies
Key reform measures Opening up key sectors to FDI Reduction in energy subsidies Adoption of open government policies to increase transparency and reduce corruption National data sharing and accessibility policy Right to Public Services Measures to promote innovation National Innovation Council and National Innovation Strategy Decade of Innovation 2010-2020 Indian Inclusive Innovation Fund