Kapur Vikram Srinivas Accountability Initiative Center for Policy Research Decoding Budget 201516 Implications for the social sector Based partially on work done collectively with Amee ID: 565652
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Slide1
Avani KapurVikram SrinivasAccountability Initiative, Center for Policy Research
Decoding Budget 2015-16: Implications for the social sector
Based partially on work done collectively with
Amee
Misra
,
Ekta
Joshi,
Smriti
Iyer
and
Anindita
AdhikariSlide2
Outline Key recommendations of the 14th FC (relevant from the Budget perspective)Implications on the social sector (current allocations and review of past scheme performances)
Thoughts on challenges and next stepsSlide3
Major takeawaysFourteenth Finance Commission (FFC) recommendations have devolved significant “untied” funds from Center to StatesCenter has responded by cutting allocations in social sector schemesSlide4
How do funds flow from Center to State?Finance Commission is the Constitutional body which recommends transfers for a five-year periodThe Center also routes its own funds to states through a variety of methods, which were coordinated by the Planning CommissionSlide5
Tax devolution Grants-in-aid
Major taxes collected by the Center (income tax, corporation tax, service tax etc), are combined into a ‘divisible pool’, of which a share is given to the States
This is ‘untied’ funding: States are free to use it as they wish
13
th
FC
provided untied grants
to local bodies and for reducing non-plan revenue deficit, as well as tied
grants
for elementary education, health, disaster relief, infrastructure
maintenance
as well as for specific states.
Two channels of Finance Commission fundingSlide6
14th FC recommendations States' share in divisible pool of taxes increased from
32% to 42%Grants-in-aid have been made substantially untied:
53
%
of total grants are untied and for
local
governments
36
%
is
untied grants for certain States where revenue deficits exist.
Only
11
% is for disaster relief.Slide7
Effects of 14th FCTotal share of funds transferred to States has only increased marginally from 49% to 50% of gross Central Government Revenues.
Composition of transfers has significantly changed: FC
grants now constitute
75%
of total transfers to states, as
opposed to
58
% in
FY 2014-15
.
Increase
in untied funds
transferred to states
amounts to Rs. 1.8 lakh crore, equivalent to nearly 15% of estimated State revenues for FY 2015-16. Slide8
Where does the money come from?Rs. 1.3 lakh crores of funding to Central Assistance to State Plans has been cut
.Of this:Rs. 51,000
crores comes from elimination of various modes of Central Assistance
Remainder is from various schemes which assisted StatesSlide9
Which schemes are being cut?
Type of Scheme
No.
of Schemes
Change from
last
year
Discontinued/Delinked
from Centre Support though states can continue
(
BRGF, JNNURM, National E-Governance
Plan, RGPSA, National Scheme for the modernisation of Police
)
8
+
16
-100%
States will need to shoulder a greater share of resources
(
ICDS, NHM,
SSA, RKVY, SBM
)
24
-44%
Center
to continue to bear full share
(
MGNREGS, NSAP, MPLADS, ICPS
)
31
0%Slide10
WHAT WE KNOW AND WHAT WE HOPE TO FIND OUT SOONIMPLICATIONS FOR THE SOCIAL SECTORSlide11
Some Budget TerminologiesBudget Estimates (BE)Estimates of expenditure for the next financial year (FY). For e.g: in FY 2014-15, Budget 2015 had BE for 2015-16
Usually termed loosely as allocations.Revised Estimates (RE)
Estimates of expenditure for the current FY. For
e.g
: Budget 2015 had RE for FY 2014-15
In November/December ministries look at current years expenditures till the third quarter and “estimate” expenditures for the remaining quarter
Includes adjustments such as supplementary grants demanded by Ministries/states as well as low release or utilisation of funds
Actuals
Actual Expenditure incurred by government
Has a 2 year time lag. For
e.g
actuals
available in Budget 2015 are for FY 2013-14Slide12
Is the social sector now going to be starved of funds? Is it an opportunity to make Centrally sponsored schemes more effective? Crisis or opportunity? Slide13
Impact on schemes and ministries
Ministries
2014-15
BE
(Rs.
Crore
)
2014-15
RE
(Rs.
Crore
)
2015-16
BE (Rs.
Crore
)
% change from RE
% change from BE
MHRD
82,771
70,505
69,075
-2%
-17%
MoWCD
21,19418,58810,382-44%-51%MoRD83,85270,71373,3334%-13%MoHFW38,23831,96533,2824%-13%MoDWS15,26712,1076,244-48%-59%MoUD20,00913,16619,21746%-4%
Schemes 2014-15 BE(Rs. Crore)2014-15 RE(Rs. Crore)2015-16 BE(Rs. Crore)% change from RE% change from BESSA28,25824,38022,000-10%-22%SBM4,2602,8503,62527%-15%NHM22,97118,60918,8751%-18%RMSA5,00034,803,5652%-29%MGNREGS34,00032,99234,6865%2%ICDS18,39116,6678,754-47%-52%
Figures in Rs.
croreSlide14
MGNREGS allocation: “not the highest ever”MGNREGS accounts for close to half the RD budgetAfter Rs 40,100 crore in FY 2009-10, decline in allocation (at current prices)Slide15
Expenditure has exceeded allocations since FY 2011-12Increase in allocations between 2013-14 and 2014-15 was 3% and between 2014-15 and 2015-16 has been 5% but spending as a proportion of funds available has increased from 87% to 92% over the last three yearsExpenditure + pending liabilities exceed allocationsMounting pending liabilities since 2011-12, highest at
Rs. 5,500 crore in 2013-14Wage liabilities already
Rs
. 2500+
crore
in 2014-15Slide16
Increasing delays in paymentsMost severe in 2014-15 with 72% of all payments being delayedAverage delays between 15 days and 1 month (39%), followed by 1-2 month delays (34%)Slide17
Allocations aren’t the whole storyHistorically, significant variations between BE, RE and ActualsBudget allocations are often never spent, and sometimes not even released by the Center to States
Example: 11th Five Year Plan
MoHFW
released only
67
% of its allocations
Only
51
% of funds allocated for SBM in 2013-14 were released by GOI Slide18
Fund release is not smoothFunds are often released towards the end of the financial year; making it difficult for States to spend the moneyOnly 15
% of SBM allocations released in the first two quarters of FY 2014-15. 36
% of SBM
allocations
were released in the last quarter of FY
2013-14:
30
% in fact released in the last month!
Conditions attached to fund release mean that allocations are often delayed further till States can prove compliance
For example:
Utilisation
Certificates, States putting their own share etc
Further delays to last mile delivery Only 34% schools had got the school development grant for buying basic school supplies like dusters, chalk etc half-way through the FY 2013-14Slide19
State priorities take a backseatA significant portion of CSS funds has been getting tied to “routine activities” like salaries and civil worksIn RMSA: 90
% on teacher salaries and civil works in FY 2013-14In SSA: 79% on teacher salaries and civil works in FY 2013-14
Center compels States to create line-item plans per a given format, which it then modifies as per its own priorities
SSA: Centre’s infrastructure priority meant cut in state demands for teaching learning materials and “quality” programmes
SSA: Example of Bihar and Children Entitlements
Overall only
58
% of total proposals by states and only
14%
of proposals to improve quality of education approved by
GoI
in FY 2014-15
NHM: Only
60% of state proposals under the NRHM flexible pool approved in FY 2014-15Slide20
States are unable to spend fundsIn not one of the schemes we reviewed were all States
able to spend all the funds available with them. Despite much focus on SBM, for example, only
35
% of funds available
with
states were spent from March 2014 to February
2015 (
45
% the previous year)
Only
50
% of RMSA funds available were spent in FY 2013-14.
Rs
. 5,194 crore were lying unspent with states, but Rs. 5,000 crore was additionally allocated in FY 2014-15Uncommitted Unspent balances for NHM as on 1st
April 2013 (
Uttar Pradesh:
819
crore
; Rajasthan:
300
crore
; Odisha and Tamil Nadu:
141
crore
)Slide21
SummaryCenter no longer centerstage: States now play a key role in design and implementation of schemes.
This is the basic principle of federal government: enable service delivery at as low a level as possible.In a scenario of reduced allocations, bottlenecks in fund flows would need to be reduced.
Centre can play a greater role in building state capacities, technical advisor, mentor, evaluations and fostering state competition
States have the flexibility to prioritise according to their “ needs”Slide22
Concerns and Next steps1) Despite greater devolution with cuts in scheme budgets, are states worse of financially?(Not according to Economic Survey calculations: though some state-wide differences, UP, Bihar may suffer more than others)
2) How will States spend this additional money? Will it lead to a neglect of the social sector? (Unsure: however they have historically 30-40% of expenditure has been on social sector, but there may be state- variations
)
3) States don’t have capacity
(
Yes: Delivery system reform critical: no accountability for service quality delivery by service providers but capacity argument even true when Centre was giving funds
)
4) Will this lead to further decentralization from States to local governments?
5) How to track state performance?
Woeful absence of data about what states do: even budget data is collected late
6) How will states react to schemes where they need to put in a larger share?
(
Will it cut into their fiscal space? Or will they now have greater bargaining powers on scheme design
)Slide23
Thank youFor more details on specific schemes please seewww.accountabilityindia.in/expenditure_trackFor answers to these questions..we will just need to wait and watch!