Against total receipt of Rs 22.0 lakh crore, central government is projected to spend nearly Rs 39.4 lakh crore in FY23. Other than interest payments, broad areas which account for maximum expenditure are Defence, Subsidies and rural & agriculture sector. Here is a look at the details of various government expenses.
Government’s expenditure classification is more complicated than the income classification. These are classified in several ways, the most important being revenue and capital expenditure since capital expenditure is expected to increase the productive capacity. As per the budget, government would be spending Rs 7.5 lakh crore towards capex which is 33% higher than budget estimates (BE) for FY22. (Revised estimates for FY22 is higher by about Rs 50,000 crore because of payments towards Air India’s dues). Among the major heads of capex are Roads & Highways at Rs 1.8 lakh crore, Railways at Rs 1.4 lakh crore and Defence at Rs 1.5 lakh crore.
It would be pertinent to mention that capex increased by 30% in FY22 also but the increase came along with a similar decline in extra budgetary resources (EBR). Ministries such as Railways, Roads & Highways undertake significant capex from borrowings on their own which are actually government liability but does not form part of budget. Government has made the accounting changes over last two years to eliminate these ‘off-budget’ items and make budgeting exercise more transparent. Expenditure through EBR had reached Rs 1.5 lakh crore in FY20, which was brought down to Rs 1.2 lakh crore in FY21. While BE FY22 had made a provision of Rs 30,000 crore for EBR, this was not utilized because of buoyancy in revenue. For FY23 also, no provision has been made under IEBR.
Capex is also undertaken through grants to states for creation of capital assets. After a marginal increase of 3% in FY22 RE, the budget has made sharp increase of 33% in provision for grants for FY23 which would go up to Rs 3.2 lakh crore. There is yet another element of capex which is the capex undertaken by PSUs since government does have a role in directing it. Capex by PSUs is projected at Rs 4.7 lakh crore, down 6% after a sharp increase in FY22. It may be noted that government had pushed PSUs in the current year to raise their capex to compensate for lower investments by private sector, which they did by increasing their borrowings. Borrowings by PSUs is projected to come down by 15% in FY23.
The revenue expenditure is classified as A) General services which includes government expenditure such as salaries, pension, interest; B) Social services; and C) Economic services which provide tangible economic outcome such as agriculture, rural, railways, roads etc. General services expenditure is budgeted at Rs 15.7 lakh crore in FY23, up about 8% over FY22 against 19% increase in FY22 RE. Within this, interest payments is projected at Rs 9.4 lakh crore (almost 25% of total budget), increase of 16% on top of 20% increase in FY22. The expenditure on this count is projected to rise by 54% during FY20-23, largely due to impact of pandemic. The other item within this is Defence Services (revenue expenditure only) accounting for Rs 2.3 lakh crore, marginal increase of 1.5% after an increase of 22% in FY22. Pension expenditure also comes under this head which is projected at Rs 2.1 lakh crore, increase of 4%. Notably, expenditure under this head is projected to decline by 6% in FY22 over previous year. About Rs 1 lakh crore is spent in maintaining the Police force.
Share of social services, which includes healthcare, education, housing etc, is only about Rs 2.1 lakh crore which corresponds to less than 1% of GDP. Economic services are budgeted at Rs 7.8 lakh crore, lower by 12% on top of decline of 20% in FY22. Within this, agriculture plus rural expenditure is estimated at Rs 4.5 lakh crore in FY22. The allocation for FY21 under this head was Rs 8.1 lakh crore, primarily due to accounting adjustment as government took over loans of over Rs 3 lakh crore from the account books of Food Corporation of India (FCI). The amount has also come down because of lower allocation for food subsidy and MGNREGA as the scope of these schemes was increased in FY21 and FY22 to provide protection to the vulnerable section more affected by pandemic.
It would be pertinent to look at the amount transferred from centre to state governments and union territory. Other than the amount shared from the tax collected, central government also transfers funds as recommended by the Finance Commission, as loan for specific projects and most importantly, under the centrally sponsored schemes such as MGNREGA etc where the final payment is done by the state govt. Total transfer to states stood at Rs 16.1 lakh crore, marginally higher at 1% after an increase of 22% in FY22. This includes Rs 8.2 lakh crore as tax share and Rs 3.8 lakh crore under central govt schemes.
Pls check the excel for more details