The document presented in the OECD Public Governance workshop in Seoul, gives an overview of India's public expenditure trends and patterns with focus on its development expenditure.

1. Public Expenditure Trends and
Patterns - India
Nayana RenuKumar
CENTRE FOR GOOD GOVERNANCE

2. 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

3. 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

4. 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
2011-12
Item Areas Exp.
BE
Education 3.11
Expenditure on social
services as a proportion of 6.74% Health 1.3
GDP
Others 2.34
Expenditure on social Education 11.5
services as a proportion of
25% Health 4.8
total government
expenditure Others 8.7

5. 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 spends
Health $155 and Thailand over six times at $261
 Out-of-pocket costs accounts for 67% of total expenditure on health in India
Education  Public spending on education is about 3.1% of GDP

6. 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.) 6,91,976
Eleventh Plan gave special impetus to several programmes aimed at building rural and urban
infrastructure and providing basic services for increasing inclusiveness and reducing poverty

9. 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

10. 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

11. 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

12. Thank you