Against total receipt of Rs 22.4 lakh crore, government is projected to spend nearly Rs 30.4 lakh crore in FY21. 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.<\/p>\n
Government\u2019s expenditure classification is possibly more complicated than the income classification. These are classified in several ways, the first being – establishment expenditure and schemes expenditure. The establishment expenditure is largely fixed such as interest payment, salary & pensions, transfer to states (other than the tax share) etc and do not exactly add to the productive capacity of the economy. For FY21, establishment expenditure stands at Rs 18.7 lakh, nearly 60% of total budget. Major items within this are Rs 7.1 lakh crore towards interest payment, Rs 4.6 lakh crore as salary & pensions and Rs 3.7 lakh crore as transfer to states. Interest expense is projected to increase by nearly 15%, higher than the projected increase in borrowings. Schemes expenditure are developmental or assistance expenditure and totalled Rs 11.7 lakh crore. Even within the schemes expenditure, there are elements such as subsidy, at Rs 2.6 lakh crore, which may not be adding to the productive capacity.<\/p>\n
A word on the subsidy bill which is actually projected to decline from over Rs 3 lakh crore in FY20. The decline is not due to actual reduction but because of lower transfer to Food Corporation of India (FCI) which has been asked to borrow from the market to meet its needs. Against budget estimates of Rs 1.8 lakh crore towards food subsidy, FCI would be getting only Rs 1.1 lakh crore. It may be noted that food subsidy has risen sharply from Rs 100,000 crore in FY18, largely due to implementation of National Food security Act.<\/p>\n
The next classification is revenue expenditure vs capital expenditure. Of the total Rs 30.4 lakh crore, only Rs 4.1 lakh crore, or 13.4%, goes towards capital formation and the rest is spent as revenue expenditure. (However, health, education etc entail significant amount of revenue expenditure and hence, cannot be classified as wasteful). An additional section was added about a decade ago called \u2018grants towards creation of capital assets\u201d which entails expenditure of Rs 2.1 lakh crore. Including this, share of capital expenditure goes to a little over 20%. (Yet, actual gains from these expenditures remain a serious issue for monitoring).<\/p>\n
Other than the budgeted capital expenditure, various ministries such as railways, highways would be spending additional over Rs 6.7 lakh crore towards capital formation from direct market borrowings or their own earnings. (However, except for railways at Rs 91,000 crore, the budget documents do not provide the breakup for the same). These are also government expenditure, which give fillip to economic activity, but not reflected in budget. Total capital expenditure, including these, is projected to rise to Rs 10.8 lakh crore for FY21. It may be noted that a late stimulus during the current year helped push this expenditure to Rs 10.6 lakh crore against budget estimates of Rs 8.8 lakh crore. Major ministries undertaking capital expenditure are railways, road transport and defence totalling Rs 2.4 lakh, Rs 1.6 lakh crore and Rs 1.1 lakh crore.<\/p>\n
The next and final classification is ministry-wise allocation. Within this, maximum allocation goes to ministry of agriculture and rural development (two separate ministries) at Rs 3.4 lakh crore. Over Rs 1 lakh crore of this would be spent on rural employment. Strangely, the documents show just Rs 150 crore as capital allocation even though significant amount is spent towards irrigation projects etc. A comprehensive overhaul of the schemes, as stated by the finance minister in her budget speech, should help the classifications and efficacy of various schemes. The need is even more so since almost half of the money is given as grant-in-aid and spent through state governments and therefore, prone to higher leakages\/ inefficient utilization.<\/p>\n
The other ministry with significant expenditure is Defence at Rs 3.4 lakh crore (including Rs 1.1 lakh crore towards capital expenditure). Among other sectors receiving substantial sum are ministry of fertilizers and food (two separate) at close to Rs 2 lakh which largely goes towards subsidy and ministry of health at Rs 1.1 lakh crore. Housing & urban affairs would be spending over Rs 21,000 crore towards capital investment largely going towards development of Metro Network.<\/p>\n","protected":false},"excerpt":{"rendered":"
Against total receipt of Rs 22.4 lakh crore, government is projected to spend nearly Rs 30.4 lakh crore in FY21. 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.<\/p>\n","protected":false},"author":8,"featured_media":14000,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[857],"tags":[],"class_list":["post-13999","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","membership-content","access-restricted"],"yoast_head":"\n