Whither development?

1. Government or Governance: Malevolence or Benevolence?
Use Budget and Accounts for the National Interest
Decades ago, the redoubtable US Senator Adlai Stevenson aptly remarked that “Bad
administration, to be sure, can destroy good policy; but good administration can never save bad
policy.” In India many are tempted to tamely accept that it is both bad policy and bad administration
that ranks India in 84th place (effectively 86th) in Transparency International‟s Global Integrity Index
2009 while the UNDP‟s Human Development Index 2007 ranks it in 134th place. India‟s only first is
remittances from Indians abroad. Why do such dubious rankings plague this noble land?
The Public Finance Statistics from 1990-91 to 2007-08 portray an alarming quality of
governance and accountability in India even as the population crossed the billion mark. Of about Rs.
623000 crore spent for non-development purposes by states and centre, bulk was expended on
administering various organs of state, pensions and food subsidy in 2007-08. In stark contrast,
development expenditure of about Rs. 685000 crore was only about 10% more than non-
development expenditure. Reduced to 1990-91 prices, the real value of government‟s developmental
expenditure in 2007-08 is only Rs. 320000 crore. Social and community services accounted for about
Rs. 288000 crore or approx. Rs. 2400 per head of India‟s 1.20 billion populations in 2007-08.
Reduced to 1990-91 prices, the real annual expenditure declines to about Rs. 134000 crore or
Rs.1160 per head or Rs. 3 per day. If this were further conservatively reduced by 20% for nimble-
fingered practices, 15% to wastage and 8% to a conservative inflation rate the per capita
development expenditure outlay collapses to barely Rs. 661 per annum or a ludicrous Rs. 2 per day.
Today when arhar lentils retail for nearly Rs. 100 or sugar at Rs. 50 a kilogram the cost of
government is almost the same as that of governance (development).
Adding to the diminution is the inability of government departments to use allocated funds.
In 2007-08 total surrenders by central government departments of about Rs. 108000 crore, of the
total Rs. 24500000 crore central development and non-development budgets for 2007-08, occurred.
While in percentage terms such savings may only be notional, the undeniable fact remains that the
sheer volume of such savings is substantial. Such surrenders include moneys for modernization of
police forces, maintenance of sugar buffer stocks, Sarva Shiksha Abhiya, scholarships, education and
court infrastructure, immunization programmes, and seemingly inadequate funds for international
cooperation, notably ITEC. Surrenders of funds owe to several reasons such as grandiose populist
plans not facile of implementation, release of funds even on the last midnight of the fiscal year, lack
of capabilities in contracting and identifying vendors and oft disputed and whimsical qualitative
requirements, delays inherent in the centralized procurement of stores, poor coordination between
administrative departments and their expenditure sanctioning authorities, inter- and intra-ministerial
wrangling over directions, targets and implementation methods and year-ending real time monitoring
by expending departments – all controllable phenomena. For all such failures government borrows
moneys that consume 43% of its annual budget, maybe about Rs. 7000 crore in 2007-08 on
surrendered central funds alone, without any return for itself or by way of service to citizens. The
future benevolence of governance must therefore necessarily overshadow government‟s antediluvian
processes if, as Will Durant said, “government is not to perish by excess of its basic principles.”
Even if one were to assume that, with better monitoring, surrender of funds were reduced by
75% to about Rs. 80000 crore, this alone would yield 220 lakh jobs at Rs. 100 per day for 365 days a
year under NREGS (plus the utilized allocation), or 110 lakh NREGS jobs plus perhaps 4-5 AIIMS-
like hospitals per annum; or an AIIMS in Nepal, Bhutan or the Maldives in furtherance of our
national interests in the neighbourhood every year (in addition to other budgeted assistance). Indeed
the definition of the poverty line would change dramatically if such rampant surrenders of funds
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2. were sternly penalized by the Govt. of India‟s principal budget, finance and administrative officers
acting in tandem. Adding 50% of food subsidy of Rs. 33000 crore and interest payout of Rs. 7000
crore on central surrenders and the rural poor have another 65 lakh NREGS jobs. Every Rs. 100
crore saved from non-development expenditure translates into over 27000 year-round jobs. This is
when the Census 2001 shows that about 4.50 crore rural people are seeking/available for work to
provide for whom, additional Rs. 70000 crore is required per annum, part of which is already
available in the NREGS budget. Aggregating similar surrenders and interest payouts by states, part
of the two crore urban unemployed may be covered under a similar scheme.
As if this were not sufferance enough, non-development expenditure consumed 60% of the
total revenues. The Controller General of Accounts (CGA) in the Appropriation Accounts for 2007-
08 informs that GOI‟s tax revenues have risen four-fold in the last decade which too appears
inaccurate as it is based on a simple linear calculation without accounting for inflation. In the same
breath the CGA also informs us that revenues have trailed expenditure by providing only 82% of the
feedstock for central government, the rest being presumably left to currency printing presses to make
good in paper. This has left the GOI with an illusory cash balance of Rs. 230000 crore neutralised
nearly seven times over by an accumulated deficit of Rs. 1587156 crore in 2007-08 - the price for
government over governance.
Suggestions for direct cash transfers to citizens and communities in the form of self-help
loans/grants for specific purposes are pertinent in this context – more bang for the buck without
pilferage or overheads leading to empowerment of citizens. Every rupee surrendered or wasted
enhances alienation of the rulers from those ruled and strikes at the core of our nationhood and
national pride. NREGS bridges the rural-urban poverty-centric tensions and makes our cities
liveable. Equally, ITEC enhances our „sphere of influence.‟ NREGS and ITEC are only two
examples that moneys are not in short supply as is the public perception. Government budgets and
accounts can sharpen focus manifold on all major policy issues and increase accountability in
government for governance. Government is the benefactor; therefore, as Thomas Jefferson aptly
remarked, “The care of human life and happiness and not their destruction is the first and only
legitimate object of Government.”(1060 words)
Note: The aggregated annual average inflation rate from 01/04/90 to 31/03/2009 has been used in
computing figures of 2007-08 at 1990-91 prices.
Note: The views expressed are personal to the author and may not reflect his official opinion.
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