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Mainstream, VOL LIV No 8 New Delhi February 13, 2016

Crisis in the Social Sector

Saturday 13 February 2016, by Bharat Dogra


A crisis situation has emerged in the social sector in several parts of the country due to lack of availability of adequate financial resources.

The ‘social sector’ includes women and child development, nutrition, health, education, panchayat raj, special provisions for weaker sections (Scheduled Castes and Tribes, Other Backward Classes, minorities etc.), some aspects of agriculture and water (such as special schemes for livelihood protection, drinking water and sanitation for weaker sections etc.), special poverty alleviation and employment programmes.

The ‘social sector’ may not be rigorously defined but its meaning and implications are well understood and appreciated. Lack of adequate resources for the social sector is widely equated with increasing distress of people, particularly the poorest people.

It is widely agreed that most components of the social sector, particularly health, education and nutrition, are substantially under-funded in India, compared to the actual needs. The most often cited case is that of health which just gets 1.2 per cent of the GDP at time when there is (quite literally) a crying need for an allocation closer to at least five per cent. At one stage the Union Government’s commitments for higher allocations were actually being made (by the previous UPA Government) but the UPA Government itself didn’t keep these promises and now the new NDA Government seems even less inclined to do so. At one time the 12th Plan (2012-17) was supposed to be the period for the long-overdue rise in the health budget, but firstly this was not visible in the 12th Plan draft and secondly one doesn’t even know where the 12th Plan is (as the Planning Commission is already dead).

So the shortage of adequate resources existed even before the present crisis emerged about one year earlier in three parts.

I. The Budget Estimates (BEs) for the financial year 2014-15 for the social sector were cut midway in the financial year, as is evident from the Revised Estimates (REs) for this financial year.

II. In the Union Budget 2015-16, allocations for the social sector were cut drastically on the plea that these will be made up in the State budgets as, so it was stated, the State governments are being provided additional resources for this as per the recommendations of the 14th Finance Commission.

III. As per the available information so far, this optimism of the Finance Ministry was not justified as the cuts made in the Union Budget were not made up by adequate hikes in the State budgets. The situation differs from State to State, but overall there is a reduction in the resources available for the social sector at the national level.

The effect of this is visible at the field level. In recent visits to villages I found several women and children deprived of ICDS nutrition, several students deprived of stipends and several old persons deprived of pensions as also a deterioration in healthcare delivery, shortages of medicines in government hospitals, cutbacks in mid-day meals at several places. In addition the employment works to reduce the distress of drought-and-scarcity affected people were very less or even negligible. When questioned about this, the local officials at the ICDS office said: “Panjiri peeche se nahi aa rahi hai. (We were not getting adequate supplies of nutritious food so how can we give it to people).” Corruption made things much worse, but that is another story.

The immense distress caused to people could have been avoided by a more careful and sensitive fiscal policy. Overall there is a need for higher allocations as well as other improvements in the social sector.

Now let’s examine the three stages mentioned earlier in greater detail.

I. Downward Revision in 2014-15 Budget

Despite the fact that the Union Budget (final) was presented quite late by the new NDA Government, still there were drastic cuts in the REs (Revised Estimates) for 2014-15 compared to the BEs of 2014-15. This means that billions of rupees were taken away from priority social sectors in a few months or perhaps a few weeks. In this case there is no fig-leaf of making up in State budgets to conceal the removal of billions from priority and welfare programmes.

In the analysis below, the tables have been adapted from the more detailed tables given in the analysis of the Union Budget 2015-16 by the Centre for Budget and Governance Accountability (CBGA).

Ia. Cuts in Important Schemes of Ministry of Women and Child Development

These huge cuts can be seen in Table 1.

Ib. Cuts in schemes for the Department of Disability Affairs

Very significant cuts were made, denying relief to lakhs of disabled or differently abled people. This can be seen in Table 2.

Ic. Cuts in Health Sector

The reduction in the REs of 2014-15 compared to BEs for this year were huge. (See Tables 3, 4, 5)

Id. Cuts in Education Sector

Very significant downward revisions were also made in the education sector. For example, allocations were cut down to almost half on the original allocations (REs compared to BEs) in the case of mid-day meals. (See Table 6)

Ie. Cuts in Urban Priority Schemes

Allocations for the Ministry of Housing and Urban Poverty Alleviation (MOHUPA) and Ministry of Urban Development (MOUD) were also revised downwards. (See Table 7)

If. Decline in Allocations for Scheduled Castes and Tribes and Minorities

The Budget Estimate for the Scheduled Caste Sub-Plan (SCSP) was Rs 43,208 cr. but this was reduced to Rs 33,638 cr. in 2014-15. The Budget Estimate for Tribal Sub-Plan in the 2014-15 Budget was Rs 26,715 cr. but this was reduced to Rs 20,536 cr. in Revised Estimates.

There were cuts in the case of most priority schemes (while there were small increases in a few), as seen in Table 9.

Fund allocation under the Ministry of Minority Affairs was reduced from the BE of Rs 3734 cr. to RE of Rs 3165 cr. in the financial year 2014-15.

II. Cuts in Union Budget 2015-16

The downward tends in social sector spending continued in the 2015-16 Union Budget as is evident from the information given below.

IIa. Cuts in Key Schemes in the Ministry of Women and Child Development

Big cuts, including complete wipe-outs, were made in important schemes as is evident from Table 10

IIb. Cuts in Some Schemes for Disability

The overall budget of the Department of Disability Affairs remained more or less stagnant implying a decline in real terms. The allocation for National Institutions was reduced from Rs 147 cr. to Rs 118 cr.

IIc. Reductions in Health Sector

There were significant reductions in the health sector as is evident from Table 12 and 13.

IId. Reductions in Education

Overall significant reductions in the education sector are shown in Table -14.

IIe. Reductions in Rural Poverty Reduction Programmes

These allocations were either reduced or remained almost stagnant (implying in the case of MGNREGA as a lot of pending wages had remained unpaid from the previous year)

IIf. Reductions in Priority Agriculture Schemes 

Compared to the RE for 2014-15, the BE for the 2015-16 allocations for some priority agricultural schemes were reduced—for Rashtriya Krishi Vikas Yojna (RKVY) from Rs 8444 cr. to Rs 4500 cr., for National Food Security Mission from Rs 1830 cr. to Rs 1300 cr., for National Mission for Sustainable Agriculture from Rs 1330 cr. to Rs 835 cr.

IIg. Reductions in Allocations for SCs and STs

Allocation for the Scheduled Caste Sub-Plan decreased from BE of Rs 43,208 cr. in 2014-15 to of Rs 30,851 cr. in 2015-16, while the allocation for the Tribal Sub-Plan decreased from BE of Rs 26,715 cr. in 2014-15 to Rs 19,980 cr. in 2015-16.

III. To what extent were the Union Budget Cuts made up in various State Budgets

The Union Government took the stand that the much criticised cuts in the social sector in the Union Budget for 2015-16 were not real cuts as these would be made up in various State budgets. It was said that as per the recommen-dation of the 14th Finance Commission more resources are being transferred to the States for this purpose. This, the Union Government argued, will actually improve the social sector spending as funds will be available in a more decentralised way keeping in view local needs.

This issue raises three questions: (a) Were adequate additional funds really transferred to the State governments to make up for the Union Budget’s cuts? (b) Did the various State government’s utilise the extra funds available with them for priority social sector spending? (c ) What is the overall impact in terms of the adequate availability of funds to the social sector?

iii a. Firstly, some observers have pointed out that the much publicised transfers to States may not be adequate to make up for the Union Government’s cuts. The Centre for Budget and Governance Accountability (CBGA) says in its analysis of the Union Budget 2015-16: “It appears that the transfer of social sector responsibilities to the State governments is not going to be matched by an adequate increase in their spending capacity.”

Explaining this in greater detail the CBGA says: “Quite contrary to what has been the common preception about implications of the 14th Finnace Commission recommendations, the net increase in the spending capacity of the State governments (resulting from the changes being introduced in Centre-State sharing of resources) in 2015-16 would be very modest. It needs to be recognised that while the share of States in Central Taxes would go up from Rs 3.82 lakh crores in 2014-15 Budget Estimates (BE) to Rs 5.23 lakh crores in 2015-16 BE and Non-Plan Grants and Loans to States would increase from Rs 69,095 crores in 2014-15 BE to Rs 1.07 lakh cr. in 2015-16 BE, the overall magnitude of the Central Assistance to States for Plan Spending is going to decline sharply from Rs 3.3 lakh crores in 2014-15 to Rs 1.96 lakh crores in 2015-16 BE. This is because the Centre is not only going to stop incurring Revenue Expenditure on Plan schemes in a number of sectors expecting the States (combined for all States) in 2015-16 (as compared to the 2014-15 BE) is projected to be only Rs 46,192 crores, which would be a small 0.33 per cent of GDP for the year.”

iii b. Agreed that what the State governments have got is modest, have they made the best possible use of this? Suvrat Das, Director of CBGA, says: “It would be wrong to blame the Central Government for everything. In some cases the State governments have also been less than careful about using the available resources carefully to maintain and improve important social sector spending.”

iii c. A complete and updated picture of social sector allocations covering the entire country following the cuts made in the Union Budget in 2015-16 is not available yet. Generally the official data is released quite late and by then a lot of damage has already been done. What we know at present is that some of the social sector Ministries have been in turmoil, with senior officials and even Ministers themselves remaining very uncertain and anxious about how the cuts in social sector spending will be made up and when.

Giving voice to these feelings the Union Minister for Women and Child Development, Ms Maneka Gandhi, said in October that the main programme for child nutrition has been badly affected by budget cuts that make it difficult to pay the wages of health and nutrition workers. Here it may be recalled that when in this year’s Union Budget the fund allocations for health, nutrition, child and women welfare were reduced drastically, Ms Gandhi, in her capacity as Minister for Women and Child Development, had criticised this cruel cut even then. She had said at that time that she will be approaching the Finance Minister to restore the budget.

Evidently her request was not met satisfactorily as on October 19, she again stated very clearly: “We still have problems because our cut has not been restored. Literally, it’s a month-to-month suspense on whether we can meet wages.” This has hit the plans to fight malnutrition, she added.

My own observation at the time of visits to remote villages revealed growing distress of people and reduced access to welfare programmes. Well-informed persons have informed me about the near collapse of Sabla (an important programme for adolescent girls) till it was rescued partially by providing some emergency funds, non-availability of medicines for HIV-AIDS and other diseases, delays in recruitment of health and nutrition personnel as well as delays in payments to them, denial of stipends and scholarships to school students and pensions to old persons.

Keeping in view the increasing concern on this issue the Union Government should bring out a detailed and consolidated report on social sector spending in the country based on the latest available data. This should be done as early as possible.

While such a detailed official appraisal is awaited, sporadic analysis of some State budgets for 2015-16 is already available. Here we present reports from two States—Rajasthan and Karnataka. A report on Rajasthan by the Budget Analysis Rajasthan Centre (BARC) has compared the Budget Estimates for 2014-15 and 2015-16 budgets of Rajasthan with respect to allocations for important Centrally-sponsored schemes to reveal that while for Sarva Shiksha Abhiyan the State Government could compe-nsate for the Central Government reduction, for several other important schemes the overall allocation was reduced.

Coming now to Karnataka, the Chief Minister said in the Budget Speech for year 2015-16: “The Central Government gave the impression to one and all that the States would be getting a huge financial largesse because of the increase in the divisible pool. However, our happiness was short-lived. ... The net effect is that what has been given by the Central Government on the one hand has been taken away by the other hand.”

A study titled ‘Impact of the Fourteenth Finance Commission—Karnataka Budget 2015-16’ by Pranay Kotasthane and Varun K. Ramachandra says: “The increase in tax devolution is accompanied by sharp reduction in Plan and non-Plan grants, coinciding with the restruc-turing of the grants by the Union Government. The Budget estimate of Plan and non-Plan grants has shown a decline of about 50 per cent in 2015-16 as compared to the revised estimate of 2014-15. Overall, transfers are estimated to decrease by 3 per cent over the Revised Estimate for the previous year, according to the Budget Estimate for 2015—16.”

Further these writers say: “There is a clear reduction in the revenue expenditure on elementary education and health. The revenue expenditures for water supply, irrigation, energy and social security schemes have increased. In terms of capital expenditure, secondary education outlay has nearly doubled and irrigation and flood control outlay has increased by 37 per cent; otherwise massive cuts are seen under every other head. Water supply and sanitation has seen a decline of 65 per cent, social security and welfare expenditures have been projected at 46 per cent less than the previous year. When seen in concurrence with the revenue expenditure trends of these heads, it is clear that the overall increase is due to outlays on the revenue side, and not related to long-term asset creation. Perhaps, the biggest surprise comes in the capital outlay for rural development and power. Rural development has seen a 79 per cent cut.”


This entire crisis in social sector budgets must be understood in the context of the base-reality that the social sector was already substantially under-funded before the additional cuts discussed in this paper were made.

It is therefore all the more important to be on guard to prevent any further cuts in social sector budgets and in funding for high social priority programmes.

[Note: The various tables have been taken or adapted from the analysis of 2015-16 Union Budget by the CBGA and the analysis of Rajasthan Budget by BARC—which in turn are based on government Budget data in various documents.]

Bharat Dogra is a free-lance journalist who has been involved with several social initiatives and movements.

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