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Learning Pundits on Budget analysis. REPP class 9. BUDGET REVIEW ON What Does Budget 2007-08 Offer Women? By- Yamini Mishra , Bhumika Jhamb. REEP, LEARNING GROUP 10. FUNCTIONAL DETAILS OF THE GENDER BUDGETING STATEMENT.

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Learning pundits on budget analysis

Learning Pundits onBudget analysis

REPP class 9


Budget review on what does budget 2007 08 offer women by yamini mishra bhumika jhamb

BUDGET REVIEW ONWhat Does Budget 2007-08Offer Women?By- Yamini Mishra, BhumikaJhamb

REEP, LEARNING GROUP 10


Functional details of the gender budgeting statement

FUNCTIONAL DETAILS OF THE GENDER BUDGETING STATEMENT

Gender budgeting(GB) statement has been started as a government exercise since the last 3 years.

Government has made efforts in correcting mistakes as pointed out by a civil society.

Part A of the statement contains schemes in which 100% allocations are for women. Eg: Indra Awas Yojana, Rashtriya MahilaKosh .

Part B constitutes schemes in which at least 30% of the allocation in for the women. Eg ICDS, PMRY

REEP, LEARNING GROUP 10


Budget highlights touching gender aspects

BUDGET HIGHLIGHTS TOUCHING GENDER ASPECTS

The total magnitude of the gender budget is Rs 31,177 crore in 2007-08 that is an increase of 40 per cent.

As a percentage of total union government expenditure, this constitutes a rise from 3.8 per cent to 4.8 per cent.

Gender budgeting cells have been set up by 50 ministries/department.

General Budget Statement demand for grants has increased from 10 in 2005-06 to 33 in 2007-08.

REEP, LEARNING GROUP 10


Critical analysis of gb statement

CRITICAL ANALYSIS OF GB STATEMENT

Ambiguous and wrong allocation still remains

Under the department of health and family welfare all the allocation on contraceptives has been treated as exclusively for women.

IAY has also been treated similarly although in 2004-05 , 18% of houses constructed but allotted to men and 29% jointly to husband and wife .

Similar discrepancies remain in various schemes under Labour Ministry , Ministry of youth affairs and Sports etc.

REEP, LEARNING GROUP 10


Learning pundits on budget analysis

Percentage spending in the Gender Budgeting Statement

REEP, LEARNING GROUP 10


Learning pundits on budget analysis

Women Education: Allocations high at 31% but still insufficient to control the high drop out rate of 73%

Women Health: Allocation high at 24% but much needs to be done to lower the high maternal mortality rate.

Women food security and nutrition: Meagre increase in allocation and no concrete steps.

REEP, LEARNING GROUP 10


Learning pundits on budget analysis

Women Livelihood: Significant budgetary progress by substantial and right allocation of schemes and funds.

Women Housing: At 8% of the allocation it remains low considering the magnitude of the problem.

Women in difficult circumstances: There is no allocation at all for provisions like these. For e.g no provision for the efficient implementation of the Domestic Violence Act.

REEP, LEARNING GROUP 10


Gb statement the way forward

GB Statement: The way forward

Although the GB statement is a well intentioned initiative several more steps need to be taken.

Women face discrimination in many aspects.

They face discrimination on the basis of caste, class, disability, HIV status, rural-urban divide,

etc.

There is no mechanism to ensure that the allocations reach the most marginalized section of the women community

REEP, LEARNING GROUP 10


Conclusion

Conclusion

Conclusion

A crucial flaw is that the GB statement assumes the women as a homogenous mass. It does not account for the various power dynamics and discrepancies that remain in the society.

Also, women have long been discriminated and marginalized and the GB statement needs to take this into account.

REEP, LEARNING GROUP 10


Learning pundits on budget analysis

The Gender Budgeting exercise recognizes that gender-neutral allocations are not enough and the government needs to step up its allocations for women-specific schemes.

The Gender Budgeting exercise cannot be done in isolation from the political and socio-economic scenario of the country and needs to incorporate these aspects to make it cater truly to women welfare

REEP, LEARNING GROUP 10


Learning pundits on budget analysis

Black Economy, Underestimationof Unemployment and Budget 2005-06by Prof.Arun KumarProfessor of Economics,JNU,Author – Black money in India


Contents

Contents

  • Introduction

  • Model of Black Income Generation in Legal Activities

  • Some Facts

  • Union Budget 2005-06, Employment and the Black Economy

  • Conclusion

  • Some questions to ponder upon

  • Some other Links


Learning pundits on budget analysis

“ An Indian is affected at every step by the black economy. The education of a child, a visit to a doctor, policeman who extort money…..electricity or water departments all demands black economy”

- Prof. Arun Kumar


Black economy introduction

Black Economy - Introduction

  • A hidden sector of the economy where private cash transactions go unreported. It is a sector of economic activities involving illegal economic activities including buying and selling of drugs.

  • This definition excludes transfer incomes, like capital gains and bribes. The definition also eliminates multiple counting of incomes

  • That part of an economy that is hidden from the government and on which taxes are not paid.


Black economy introduction cont

Black Economy – Introduction (cont.)

  • Most of the black economy is on the hand of top 3% population so that the disparity (between these people and the bottom 40 per cent) is considerably higher (five times) than what the white economy data suggests.

  • Size of the black economy was 40 per cent in 1995-96, that implies an additional GDP due to the black economy of 40 per cent in that year.


Model of black income generation in legal activities

Model of Black Income Generation in Legal Activities

  • Profit (P) = Revenue (R) – Cost (C) …(1)

  • Profit may be white (what is declared) or black (what is not declared). The declared profit appears in the income statement of the business and is called the balance sheet profit. The undeclared profit or black profit is called off-balance sheet profit.It accrues directly to the management of the business.

  • P = White Profit (Pw) + Black Profit ( Pb) …(2)

  • Further,

    P = Actual R – Actual C …(3)

  • Black Profit (Pb) is generated by declaring lower revenue and/

    or overstating costs.


Some facts

Some facts

  • The size of the black economy is estimated to be 40 per cent of GDP for 1995-96 [Kumar 1999]. Of this 8 per cent comes from illegal activities and 32 per cent from legal activities.

  • Two Sources of Black income are –

    a. Overstated Costs

    b. Under invoiced revenue

  • Then overstated costs would contribute half of the black profits (Pb) from legal activities or 16 per cent of GDP.


Some facts cont

Some facts (cont.)

  • According to the economist magazine it is estimated that in 1998 the world’s black economy accounted for a missing $9 trillion worth of output – a volume of output almost equivalent that of U.S.

  • Black income generation process, with the most plausible available assumptions, results in overestimation of employment and wages by 5 per cent.


Union budget 2005 06 employment and the black economy

Union Budget 2005-06, Employment and the Black Economy

  • Introduction of two schemes in Union Budget 2005- 06 –

    1. Banking Transaction Tax (BTT)

    2. Fringe benefit Tax (FBT)

  • The value added tax (VAT) has also been billed as a scheme to tackle black income generation in indirect taxes. It is supposed to lead to better compliance.

  • Services tax collection has shown high buoyancy. Many more services are progressively being brought under the net of this tax.

  • In the union budget for 2005-06, additional funds are allotted to employment generation and to the social sectors (education, health, etc).


Conclusion1

Conclusion

  • It is clear that without incorporating the black economy in the analysis, there can be no clarity on the issue of unemployment in India.

  • The 7 per cent rate of growth in the last three years raised the possibility of mobilizing more resources but the steps taken are grossly inadequate to deal with the problem of declared unemployment in India.

  • Not that the black economy does not generate employment, but by lowering the value of the multiplier and the potential rate of growth of the economy, it lowers the employment potential


Some questions to ponder upon

Some questions to ponder upon

  • How is the government going to tackle the twin and interrelated problem of black economy and unemployment?

  • Is black economy really an evil?

  • Is there a way to estimate and curb the black economy?

  • Are we as individuals also responsible in contributing in growth of parallel / black economy


Some other links

Some Other Links

  • http://www.financialexpress.com/news/story/126853/

  • http://in.biz.yahoo.com/050312/32/2k54q.html

  • http://www.atimes.com/atimes/South_Asia/IF05Df02.html


Budgetary policy in the context of inflation prabhat patnaik source article epw april 7 2007

Budgetary Policy in the Context of Inflation- PRABHAT PATNAIKSource (Article): EPW April 7, 2007

REPP LG 3

BUDGET REVIEW


Learning pundits on budget analysis

“The Union Budget 2007-08 utterly fails to appropriately respond to the social needs of a situation of profit inflation…”

- Prabhat Patnaik

Budgetary Policy in the Context of Inflation

25


Understanding inflation

Understanding Inflation

Inflation:The overall general upward price movement of goods and services in an economy.

  • Income Inflation: Inflation in nominal wage unit, with the price level in terms of the wage unit remaining unchanged. Purchasing Power remains constant

  • Profit Inflation: Inflation of the price level in terms of the wage unit. Fall in Purchasing Power

Budgetary Policy in the Context of Inflation

26


Fixed level of the money wage in the short run

Fixed level of the money wage in the short run -

  • Current Inflationary episode in India- “Profit Inflation”

  • Driven by excess demand for a variety of goods, notably primary

  • commodities, including food articles

Budgetary Policy in the Context of Inflation

27


Overheating of the economy high growth rates

Overheating of the Economy: High Growth Rates

Since mid-2002, the dumping of huge amounts of foodgrains on the world market and the whittling down of procurement operations, has now carried the economy from an ex ante excess supply to an ex ante excess demand situation.

  • Decline in profitability in the Agricultural Sector.

  • Rural development expenditure as a proportion of GDP has declined to a level much lower than in the eighth plan period.

  • Per capita foodgrain output has declined over a long period, and especially since the beginning of this century.

  • Public procurement operations have been wound down.

  • The procurement prices offered for foodgrains have simply not been remunerative enough.

Budgetary Policy in the Context of Inflation

28


Learning pundits on budget analysis

This requires an increase in fiscal transfers to the poor, financed, ideally by an increase in taxes on the profit earners. And the basic problem with the 2007-08 budget is that it is oblivious of these social demands of a situation of profit inflation.

  • Dilemma- the basic feature of a profit inflation is that it is self-limiting, in the sense that, leaving aside the element of speculation, the “forced savings” that such inflation generates, eventually eliminate the ex ante excess demand that causes it!

  • The end of profit inflation, however, may not mean the end of inflation in nominal wages and prices.

  • Even if we assume it does, that will still leave the level of real wages below what it was before profit inflation began.

Budgetary Policy in the Context of Inflation

29


Learning pundits on budget analysis

  • Reduction in the revenue and fiscal deficits relative to GDP is necessary for curbing inflation.

  • It has to be achieved through a restriction on government expenditure relative to GDP. Otherwise the ‘animal spirits’ of entrepreneurs will get destroyed by higher taxes, and growth will be curbed.

  • In short, what a situation of profit inflation requires is both the ensuring of appropriate supplies through imports, and a transfer of purchasing power from the profit earners to the workers.

Budgetary Policy in the Context of Inflation

30


Union budget 2007 08

Union Budget 2007-08

  • While the government has seen the need for “supply management”, i.e, for importing certain essential commodities to augment domestic supplies, it has not seen the need for transfers.

  • To check the fiscal deficit, there has been a curtailment of expenditure, including transfer payments.

Budgetary Policy in the Context of Inflation

31


Percentage increase in items in the budget between 2006 07 re and 2007 08 be

Percentage increase in items in the budget between 2006-07 (RE) and 2007-08 (BE)

GDP is currently rising at over 9 per cent and prices at around 7 per cent, this 17 per cent increase in most budget items matches the 16-17 per cent increase in the nominal GDP, leaving their proportion to GDP unchanged.

Budgetary Policy in the Context of Inflation

32


Transfers decline relative to gdp

“Transfers” decline relative to GDP

  • Outlay on the National Rural Employment Guarantee Scheme (NREGS) is supposed to rise from Rs 11,300 crore to Rs 12,000 crore, i.e, by a mere 6.2 per cent in nominal terms

  • Total expenditure on rural employment is supposed to rise by only 3.5 per cent

  • Aggregate expenditure on NREGS, SampoornaGraminRozgarYojana (SGRY) and Swarnajayanti Gram SwarozgarYojana (SGSY) is supposed to increase by just about 7 per cent

  • Food subsidy is supposed to rise by a mere 6.2 per cent

Budgetary Policy in the Context of Inflation

33


Agriculture

Agriculture

  • The Budget does little to remove the basic cause of the profit inflation itself, which consists in the steady decline in per capita foodgrain output.

  • The Central Plan outlay on agriculture is budgeted to increase only by 15.8 per cent, and the outlays on rural development, and irrigation and flood control by 11.4 and 11 per cent respectively.

    “This modest increase, in the light of the fact that the Central Plan outlay itself is expected to increase as much as 31 percent, suggests a lack of emphasis”

Budgetary Policy in the Context of Inflation

34


Learning pundits on budget analysis

  • Lack of mention of any price-support for the farmers.

  • When the talk is about “productivity” increases within peasant agriculture, it requires a certain amount of investment. This seems difficult unless the remuneration improves.

  • In the absence of a price support mechanism, tariff changes in either direction may work to the disadvantage of farmers.

    • The gainsfrom increases in tariffs may be appropriated by middlemen (which may even be large multinationals), while the effects of such tariff increases in the form of higher prices of downstream goods may even hurt the farmers as consumers.

    • The losses from tariff decreases on the other hand may well get passed down by the middlemen to farmers, a possibility that arises in the context of this year’s budget itself since duties on several agricultural goods have been reduced apparently as a means of combating inflation.

Budgetary Policy in the Context of Inflation

35


Learning pundits on budget analysis

There is a case for increasing the tax-GDP ratio in a period of profit inflation.

This is because since a profit inflation increases the wealth of the capitalists while forcing the workers to reduce their consumption, i.e, it first squeezes the consumption of the workers, then transfers these amounts arising from the reduced consumption of the workers as savings to capitalists, whose wealth increases as a result of this.

This wealth inequality can be removed only by increasing the share of taxes in profits, which, since the share of profits in total income is rising during the profit inflation, would necessarily mean increasing the share of taxes in income.

Budgetary Policy in the Context of Inflation

36


Learning pundits on budget analysis

Tax GDP Ratio 11.4% in 2006-07 (RE) Tax GDP Ratio 12.0% in 2006-07 (BE)(http://www.abnamro.co.in/Research/pdf/budget-FY2007-08-comment.pdf)The tax-GDP ratio and the ratio of “transfers” to the workers to GDP should both have increased in the context of inflation, together with “supply management” measures. The budget for 2007-08 raises neither the tax-GDP ratio, nor the ratio of GDP being transferred to the poor and the working people.

Budgetary Policy in the Context of Inflation

37


Budget review

Budget Review

Topic- Budget and Growth

LG_2


An overview of budget 2006 07

An overview of Budget 2006-07

GDP growth likely to be 8.1 per cent with the manufacturing sector at 9.4 per cent; agricultural growth bounced back to 2.3 per cent; inflation was 4.02 per cent.

Allocation for eight flagship programmes (Sarva Siksha Abhiyan, Mid day meal, Drinking water and sanitation, National Rural Health mission, ICDP, NREGS, JNNURM et.) to increase by 43.2 per cent from Rs.34,927 crore in 2005-06 to Rs.50,015 crore.

Government to provide equity support of Rs.16,901 crore and loans of Rs.2,789 crore to Central PSEs (including Railways).

Farm Credit increased to Rs.175,000 crore in 2006-07 with addition of 50 lakh farmers; banks asked to open a separate window for self- help groups or joint liability groups of tenant farmers.


Global growth spree

Global growth spree


Contribution of developing developed nations in world economy

Contribution of Developing& Developed nations in world economy


Learning pundits on budget analysis

A

Mismatch


What is exactly driving the growth of indian economy

What is exactly driving the growth of Indian economy???

The production base

Or

The consumption base


An illustration

An illustration

Housing and retail credit registered higher growth rate

This fostered the growth in construction sector

But the Author envisages that the world wide experience with regard to construction boon driven growth raises doubts

Is this growth sustainable??


Learning pundits on budget analysis

Can we have growth without production ???

Government has reduced capital expenditure to reduce the fiscal deficit

Along with production, employment has taken a back seat

Our budget lacks coherence to approach savings

It goes like mathematical proportion that with the increase in employment , income increases and what is saved is expected to be invested


Perils to indian growth

Perils to Indian growth

Barrier in the world trade in spite of ‘free and fair’ talks.

Inadequate measures/provisions to foster saving and investment in 2006-2007 budget.


Overview of challenges

Overview of Challenges

Infrastructure and Environment

Economy Related

Regulatory/ Governance

  • Poor Physical

  • Infrastructure

  • (road, sea,

  • airports etc.)

  • Weak Rural

  • Infrastructure

  • High Cost and

  • unreliable power

  • Bureaucracy

  • Investment has

  • fallen short of savings

  • In three consecutive

  • years from 2001-02

  • to 2003-04

  • Low level of domestic

  • Investment absorption

  • Capacity

  • Consumption credit

  • Expansion lead growth

  • Lack of labour market

  • reforms due to decline

  • in capital expenditure

  • Politicization of

  • investment decisions

  • Poor performance

  • Of Public sector

  • Poor regulatory

  • Support to the

  • Unorganized sector


Mdgs millenium development goals or moving development goals

MDGs – Millenium Development Goals or Moving Development Goals?

An article by Vinish Kathuria


Government says

Government says….

  • After education, health is second sector with major govt. spending.

  • Increase of 22%?? In effect, after inflation, works out to 16.5%.

  • Increased outlay vis-à-vis MDGs.

  • Health component distribution (PHC, Disease control programme, health education, reproductive and child health)


At a first glance

At a first glance

  • Among the South Asian Countries, India has the 2nd highest MMR (540 per 100,000 births)


Mdg goals

MDG Goals

  • Related to health are primarily the 4th, 5th and 6th goals.

  • 4th Goal – To reduce IMR.

  • 5th Goal – To improve maternal health.

  • 6th Goal – To combat HIV/AIDS, malaria and other diseases.


Target 2015

Target 2015

  • IMR – 42 deaths per 1000 live births.

  • MMR – 109 per 100,000 live births.

  • HIV/ AIDS comabting is on a low. Whereas TB and malaria statistics are gradually improving.

Bottlenecks

  • Inefficiency in the use of resources.

  • Lack of funds towards various schemes of these goals.

  • Institutional changes in few states.


Health sector outlay by the govt

Health Sector Outlay by the Govt.


Learning pundits on budget analysis

  • Discrepancies in the health sector.

  • Budget allocations, increased outlay to be taken with caution.

  • Progress made in combating leprosy and polio, but yet to be eradicated.

  • Resource requirement (Rs. 19,995 crores) not matching the actual outlay (Rs 12,100 crores).

  • Is the allocation sufficient to support ASHA volunteers? Support NHRM.

  • Other indirect schemes like ICDS.


Conclusion2

Conclusion

  • More focus on PHCs

  • Increase expenditure to PHCs

  • Insurance of poor against health uncertainties.


Why do the states not spend by t m thomas isaac r ramakumar

Why Do the States Not Spend?By T M Thomas Isaac, R Ramakumar

Article Review


Current situation

Current Situation

  • Public expenditure by states on social & economic services is a crucial necessity.

  • It is low in India by any standard & need urgent attention.

  • In 1990s & 2000s, the ratio of revenue expenditure by all states to the GDP has stagnated, if not declined.

  • Investment outstanding by all states- Rs 64,000 crore.


Learning pundits on budget analysis

The growing importance of state finances in the macro-economy is evident from the fact that the total expenditures of state governments (Rs 3,25,634 or 16.6% of GDP) have even overtaken those of the centre (Rs 313,258 crore or 16% of GDP) in the year 1999-2000.

http://www.epwrf.res.in/Archives1.asp?CatId=4


Frbm act

FRBM Act

The main elements of the FRBM acts passed by the states were the following:

(a) 2 to 3 per cent target for fiscal deficit to be achieved by 2005-06 to 2010-11;

(b) elimination of revenue deficit by around

the same time;

(c) limits to state government guarantees on debt;

(d) limits to overall liabilities that could be incurred

(e) formulation of a medium-term fiscal plan to reach these targets &

(f) institution of a complaint redressal mechanism.


Remedial measures

Remedial measures

  • Expenditure compression such as curtailment of benefits to employees

  • Reduction in social subsidies, including welfare pensions

  • Closure of sick PSUs

  • All-round increases in user charges.


Learning pundits on budget analysis

  • States like Haryana, Karnataka, Gujarat and Tamil Nadu, which have been characterised as fiscally better managed have shown declining ratio of revenue expenditure to GSDP of state govts.

  • a common factor to all state govts is the compulsion set by the FRBM Acts to eliminate revenue deficits by 2008-09.


Central role in fiscal imbalance

Central role in Fiscal imbalance

  • RoI on borrowings of states were sharply increased after the mid-1980s.

  • Coupon rates of state govts. securities were raised sharply by the RBI from 11.5% in 1990-91 to 14% in 1995-96.

  • Similarly, the interest rates on small saving borrowings by states also increased from 13% 1990-91 to 14.5% in 1992-93.

  • Revenue deficit of states more than doubled from 1.1% in 1997-98 to 2.5% in 1998-99.


Central govt stand

Central Govt. Stand

  • Union Finance Minster- much more needs to be invested in education, healthcare, mid-day meal schemes, rural roads & urban development.

  • States are unable to spend because they do not have absorptive capacity.


Reverse transfer from state to centre

Reverse transfer from state to centre

  • Investments by state in 14 day intermediary treasury bill of centre earn them a return of 5% per annum

  • But the average cost of mobilization of funds by state is much higher.

  • In 2005-06 the interest rate on borrowing of states against small savings was 9.5% per annum ( the costliest debt in the market)

  • The average interest rate on market borrowing was 7.4% per annum.


Reverse transfer from state to centre1

Reverse transfer from state to centre

  • The total transfer of NSSF loans from the centre to states was Rs 90,000 Cr in 2005-06.

  • At the end of the same period, the total reverse investment by states in treasury bills was Rs 61,886 Cr- about 1/3rd of its NSSF borrowing.

  • This has enabled the centre to make profit and the centre is blaming states for the surpluses.


Author stand

Author Stand

  • Author claimed this as false and misleading argument.

  • States do not spend because of legal constraints.

  • Finance Ministry has forced states to pass fiscal responsibility in their legislative assemblies.

  • Revenue & fiscal deficit target- 3% of GSDP by 2008-09

  • In tune with target, revenue & fiscal deficit declined sharply in 2000s by keeping revenue expenditure to GSDP ratio stagnant despite increase in revenue receipt to GSDP.

  • States could have raised revenue expenditure by making use of increased receipt & kept revenue deficit constant.

  • Cash surplus phenomenon is a perverse outcome of FRBM Acts.


Case study of kerala

Case Study of Kerala

  • Adverse implications of mechanically designed fiscal adjustment programmes in context of long term commitments to social spending & exogenous changes like pay revisions.

  • As per provisions of FRBM Act. Kerala had to sharply cut plan expenditures- reduce social spending & curtail devolution to local self-governments.

  • Planning Commission demanded flexibility in FRBM Act provisions.

  • International experience with fiscal responsibility legislations also endorse flexibility.

  • The author advocated drastic amendment of FRBM Act.


Why kerala

Why Kerala?

  • It is characterized by fiscal imbalance: high revenue deficit, fiscal deficit and public debt, as ratios to GSDP.

  • Its expenditure pattern- high commitment to social services expenditure, as high priority to social sector historically.

  • Focus on social sector has led to better health and longevity to its people, resulting in a high burden of pension payments on the exchequer. In 2005-06, pension payments in Kerala constituted about 51 per cent of the total salary expenditure.

  • According to RBI- Karnataka, West Bengal, Uttar Pradesh, Tamil Nadu, Maharashtra, Haryana, Gujarat and Bihar have surpluses of around Rs 3,000 crore each


Learning pundits on budget analysis

Situation in Kerala is an indicative of the situation in other states, majority of the states are facing the similar situation and has been caught in the catch-22 situation.

http://www.cseindia.org/programme/nrml/infocus-feb07.htm


Learning pundits on budget analysis

  • “High level of public spending are needed in many areas but they should and they must be achieved through improvements in revenue mobilisation and greater efficiency in expenditure.”

    – Prime Minister, Dr Manmohan Singh

  • “Due to the precarious fiscal position, we will not meet the target set under FRBMA. The Centre needs support for carrying on with social sector initiatives.”

    -Thomas Isaac, Finance Minister, Kerala

  • “FRBM targets shouldn’t come in between poverty alleviation grants. The Centre must make concessions to backward states like Orissa and provide more central funds. We will oppose any such move to curtail funds.”

    --Prafulla Chandra Ghadei, Finance Minister, Orissa.


Learning pundits on budget analysis

  • “In the long term, social sector spending creates social and economic capital. So terming it revenue expenditure is not sensible.”

    -C P Chandrashekhar, Economic Research Foundation, New Delhi

  • “Reducing deficit may well have depressing effects on economic activity. The large-scale fiscal deficits do not necessarily lead to higher inflation as inflation is caused by excess demand against supply.”

    – Prof. Jayati Ghosh, JNU, New Delhi

  • “There is nothing wrong in maintaining large-scale fiscal deficits if resorting to public debt is done only to meet investment requirements as long as their social rate of return is higher than the rate of interest.”

    -Siba Sankar Mohanty, Centre for Budget and Accountability, New Delhi


Budget analysis by lg 7

Budget Analysis By LG:7

No ‘New Deal’ for

Farm Revival

By

S. Mahendra Dev

Economic & Political Weekly

April 7, 2007


Agriculture s agony

Agriculture’s Agony

Beset with many problems

  • Tenth Plan(2002-07) growth rate 2.3%

  • Last decade growth rate <2%

  • Farmers’ suicides have continued or increased

    in some states

  • Productivity, growth and profitability

    declined

  • Unemployment rate increased 9.5% (1993-

    94) to 15.3% (2004-05)

LG-7

76


Learning pundits on budget analysis

  • ‘Beware of the fury of patient man’

    - John Dryden

  • ‘Good economics works for everyone but not at

    the same time for everyone. This budget has a

    large package for agriculture’

    - P. Chidambaram

  • ‘Beware of the fury of Indian farmer’

    - S. Mahendra Dev

LG-7

77


P chidambaram s musings

P. Chidambaram‘s Musings

Old Wine in new bottle

  • Items on credit,

  • Accelerated irrigation benefit programme

    (AIBP)

  • Fertiliser subsidies, agricultural insurance,

    the rural infrastructure development fund

    (RIDF)

  • Restoration of water bodies

LG-7

78


P chidambaram s musings1

P. Chidambaram‘s Musings

New wine

  • Committee on indebtedness

  • A mission for pulses,

  • Special purpose funds for the plantation

  • Training of farmers

  • Revitalising the extension system

  • Groundwater recharge

  • Social security for rural landless

    households

LG-7

79


Whither agriculture focus

Whither ‘Agriculture Focus’?

No ‘New Deal’

  • Expenditure on agriculture, rural development

    and irrigation increased by 15.8%, 11.45% and

    9.7% respectively

  • Share of agriculture dropped in central plan

    outlays from 3.03% to 2.67%, and in central

    plan expenditure from 4.28% to 4.17%

LG-7

80


No water but drops

No Water, But Drops

Irrigation woes

  • Public expenditure is stagnant

  • Target of achieving 10 million hectares

    under Bharat Nirman appears remote

  • Outlay for irrigation Rs 4500 cr in the year (2005-2006) & Rs

  • restoration of water bodies and recharge of groundwater: no allocations

LG-7

81


Learning pundits on budget analysis

LG-7

82


Learning pundits on budget analysis

Centre’s Expenditure on Agriculture, 1990-91 and 2005-06, in Current Rupees and Constant (1993-94) Rupees

LG-7

83


Learning pundits on budget analysis

Centre’s Expenditures on Agriculture and Irrigation as % of GDP

Agriculture & Allied Activities

1990-91- 0.49%

2005-06 BE - 0.21%

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Agricultural credit

Agricultural Credit

  • Farm Credit: Quantitative targets vs. Distributional aspects

  • Credit plus services, farm advisory services: Integration

LG-7

85


Learning pundits on budget analysis

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86


Land management

Land Management

  • Land degradation: Water logging, imbalances in fertilizer use and pesticides, extension services

  • Involvement of local communities

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87


Research extension risk management insurance

Research & Extension/ Risk Management & Insurance

  • India: only 0.5 per cent of GDP on agricultural research

  • NCF: knowledge gap between the yields in research stations and actual yields in farmers’ fields

  • Risk mitigation: Weather based crop insurance (NAIS)

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88


Inputs prices marketing diversification

Inputs, Prices, Marketing & Diversification

  • Proper supply of inputs and remunerative prices for their output: Immediate need

  • Output price fluctuations & Diversification into high value crops and

  • Allied activities??

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Other issues

Other Issues

  • PDS strengthening: no strategy!

  • Social security for unorganized workers: peanuts!

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Summary

Summary

  • No new deal: ‘incremental’ not ‘comprehensive/ holistic strategy’

  • More of promises AND Short on allocations and implementation

  • Argument- large leakages- therefore no allocation? Whether this should be the approach??

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Budget analysis

Budget Analysis

Implementation of

Employment Guarantee :

A Preliminary Appraisal

By

Pinaki Chakraborty

Economic & Political Weekly

February 17, 2007


What is nrega

What is NREGA?

An Introduction

  • Enacted in 2005

  • To provide minimum guaranteed wage

    employment of 100 days in every

    financial year

  • To rural households with unemployed

    adult members prepared to do unskilled

    manual work


How it is different

How it is different?

Unique as

  • Never before such mammoth scheme

  • It goes beyond poverty alleviation

  • Recognises employment as legal right

  • Provide opportunity to rural households

  • To an extent livelihood security


Budgetary allocation

Budgetary Allocation


Selection criteria

Selection Criteria


About nregs districts

About NREGS Districts


About nregs districts1

About NREGS Districts


Rural development programmes

Rural Development Programmes


Learning pundits on budget analysis

IMPLEMENTATION ISSUES

  • Multi-tier Structure

  • The agencies involved are:

Central Employment

Guarantee Council

State Employment

Guarantee Council

District Programme

Coordinator

Programme Officer


Learning pundits on budget analysis

IMPLEMENTATION ISSUES

  • The responsibility of the gram panchayat is the

    identification, execution and supervision of projects as per

    the recommendations of gram sabha (village assembly)

  • The gram sabhas are given the power to conduct a regular

    social audit of individual schemes – for accountability and

    transparency

  • For the purpose of funding and the implementation of the

    NREGA, the central government will set up a National

    Employment Guarantee Fund. State governments will

    also set up their Employment Guarantee Fund to make

    matching contribution


Learning pundits on budget analysis

IMPLEMENTATION ISSUES

  • It has been specified in the Act that “if an applicant

    under this act is not provided such employment within

    15 days of his application seeking employment”, s/he

    shall be entitled to a daily unemployment allowance

    which will be paid by the state government.

  • This implies an inbuilt structure of incentive for

    performance and disincentive for non-performance for

    the state government.

  • Individual states will have to evolve a well coordinated

    approach to equate supply of employment in

    accordance to the demand.


Implementation issues

IMPLEMENTATION ISSUES

  • It requires an in-depth understanding of region-

    specific labour demand and its seasonality so

    that a demand-based scheme of projects can be

    implemented at a frequency matching the

    demand for work

  • Thus, there is a need to design a monitoring

    mechanism by strengthening the institutional

    structure at the local level so that resources can

    be used optimally.


Spatial dimension

Spatial Dimension

  • Panchayat is the principal authority to implement and monitoring (social audit) the Act of individual schemes

  • Mostly the districts deprived of rural connectivity, spread of banking, nature of rural power supply and quality of governance are taken into consideration through this Act

  • Identification of Indicator for performance of NREG scheme

  • The demand performance

  • (i) EG enrolment as percentage of total number of rural households.

  • (ii) EG enrolment as a percentage of rural BPL households

  • (iii) EG enrolment as a percentage of application for enrolment

  • The supply performance

  • (i) EG provisioning as a percentage of rural households

  • (ii) EG provisioning as a percentage of rural BPL households.

  • (iii) EG provisioning as a percentage of number of households enrolled


Nreg fund utilization ratio an interstate competition

NREG fund Utilization Ratio: An interstate Competition


Observations

Observations

  • NREG enrolment as a percentage of the number of

    applicants, it is abysmally low in Maharashtra, followed

    by Karnataka, Bihar and Jharkhand

  • For Andhra Pradesh and Gujarat the supply of

    employment has met the demand, for most other states

    enrolment falls far short of the demand.

  • The fund utilisation ratio it is again low in poorer states

    in the country

  • A positive slope implying that the states with higher per

    capita income could manage to spend more.


Learning pundits on budget analysis

Making the Indian Budget .

How Open and Participatory?

Vinod Bhanu

Economic and political weekly .

Issue : March 31, 2007.

LG9


Learning pundits on budget analysis

Making the Indian Budget .

How Open and Participatory?

Vinod Bhanu

Economic and political weekly .

Issue : March 31, 2007.

LG9


Learning pundits on budget analysis

Making of Indian Budget……..

Discuss about the lack of Public Participation in Budget Making Process in India.

IBP( International Budget Project) and Open Budget Index – an indicator of people’s participation in Budget Making.

India ranks very low as the level of participation has been found to be dismal.

LG - 9


Learning pundits on budget analysis

Compared with countries like UK, USA, South Africa and New Zealand, Indian Government provides very little pre budget information to common citizens.

Budget is passed by the parliament, ideally, it is approved by the general public. But very few MPs understand the complexities of the Budget.

Even political parties are not capable of training their MPs in this regard.


Learning pundits on budget analysis

Standing Committees of the Parliament review the drafts demands of different departments. They are open to public but few members of general public make representations before them.

The whole process of involvement of parliament in Budget Preparation( which is practically non existent) and its approval needs to be restructured.

Industrial and Corporate houses have free access to the finance ministry, there by they have significant influence on Budget Proposal.


Learning pundits on budget analysis

CSO s have very little influence on the other hand, they can not obtain a lot of pre budget information using the RII Act.

The article calls for making the process of budget making more participatory and open to the general public (& CSOs)

A clear-cut legal framework for establishing the practice of participation and transparency is urgently required

Our Parliament lacks the institutional capacity to do budget research and provide sound analytical briefings and notes to the members


Some issues

Some Issues:

  • Cut motions or No confidence motions

  • Roles of finance related committees of the Parliament

  • Practices of transparency and participation in budget making

  • winter session and pre-budget business

  • Myth of closed budget process

  • Why finance minister had a pre budget consultation with the

    parliamentarians belonging to his party only ?

  • The pre budget discussions and political parties


The international budget project

The International Budget Project:

  • IBP was established as part of the centre on Budget and

    Policy priorities (a Washington DC based non profit research organization) in 1997.

  • To support civil society organizations around the world interested in strengthening public budget processes, institutions and outcomes.

    Source: www.openbudgetindex.org


Open budget initiative 2006

Open Budget Initiative 2006

  • First-Ever Budget Transparency Country Rankings

  • civil society organizations from 59 countries around the world participated

  • India scores 52% out of a possible 100% on the open Budget index 2006

    Source: www.openbudgetindex.org


Public availability of key budget documents

Public Availability of key Budget Documents

  • Pre Budget Statement

  • Executive’s Budget Proposal

  • Citizen’s Budget

  • In Year Reports

  • Mid Year Review

  • Year End Report

  • Auditor’s Report

    Source: www.openbudgetindex.org


Nda upa budget

NDA & UPA Budget

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Continuity or Change?

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Central theme

Central Theme

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Comparison of NDA & UPA governments’ fiscal performance on the basis of revenue generation through tax collection & Capital expenditure on vital social sectors like health & education.

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Three phases

Three Phases

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  • Phase I (non-NDA and UPA): 1991-92 to 1997-98.

  • Phase II (NDA): 1998-99 to 2003-04.

  • Phase III (UPA): 2004-05 to 2005-06 (RE)

LG-5


Learning pundits on budget analysis

Y = α + βT + γTD1 + γTD2 + ε

Fiscal Performance (Y) Depends on the following Independent variables:

Liabilities of the Central Government

Fiscal Deficit

Revenue Deficit

Tax Revenue

Total Expenditure

Revenue Expenditure

Capital Expenditure

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State of variables used

State of Variables Used

Non-NDA Non-UPA phase

Only Total expenditure is significant

Others are insignificant

UPA phase

Out of 7, five variables are significant i.e., Fiscal deficit, Revenue deficit, Tax revenue, Total expenditure, Revenue expenditure

121

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Learning pundits on budget analysis

122

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Comparison of the two regimes

Comparison of the two Regimes

123

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Upa govt highlights

UPA Govt. Highlights

124

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The present UPA Govt. has tried to cut the fiscal and revenue deficits.

The Educational Expenditure as in terms of Capital Exp remained constant.

2006-07 budget plans to hike the Expenditure on health to 0.02% of Total Exp.

Allocation for Agri & Allied activities is lower by 0.01% than the NDA Average.

Allocation to Rural Development is constant but has shifted from CE to RE.

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Upa govt highlights1

UPA Govt. Highlights

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  • Rural Development initiatives appear more under flagship programmes.

  • Food subsidies reduced by 0.01% points in the first 2 years but increased in the 2006-07 budget.

  • Tax per GDP ratio increased during UPA regime.

  • NDA fared in non-tax per GDP ratio.

  • Interests receipts have fallen but the dividend receipts have increased significantly for the UPA.

  • Corporation, Service & Income tax has fared better than NDA.

LG-5


Learning pundits on budget analysis

LG-5

Thank You

126

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