Against total receipt of Rs 32.1 lakh crore, central government is projected to spend nearly Rs 48.2 lakh crore in FY25. 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 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. The revenue expenditure is classified as A) General services which includes central government expenditure such as interest payments, pension, defence, government staff salaries etc; B) Social services such as education, health, housing which are for the benefit of people and does not give any return; C) Economic services such as agriculture, rural, railways, roads etc which generate revenue or provide tangible economic outcome and D) Grants-in-aid to state governments and UTs (Union territories). All the money is spent through as many as 58 ministries and 93 departments with expenses shown for each of them separately in budget documents.<\/p>\n
General services expenditure is budgeted at Rs 19.8 lakh crore in FY25, up 5.3% over FY24 actuals. FY24 actuals, in turn, was higher by 12% over FY23 and up 2.4% over FY24 BE. Looking at the past pattern, actual expenditure may exceed the budgeted estimates. Biggest item within this is interest payments, projected at Rs 11.9 lakh crore, increase of 9% over FY24 actuals, which, in turn, was 14% higher than FY23. Interest payments account for over 29% of total FY25 budget, up from less than 20% before Covid. The significant increase in government debt after Covid has destabilized government finance. The other item within this is Defence Services (revenue expenditure only) accounting for Rs 2.9 lakh crore, projected to decline by 5%. Again, this looks optimistic considering the fact that FY24 actuals is 16% higher than FY23 actuals and 10% higher than BE. Pension expenditure also comes under this head which is projected at Rs 2.7 lakh crore, same as FY24 actuals. FY24 actuals is 3% higher than FY23 actuals but 6% higher than BE.<\/p>\n
Economic services are budgeted at Rs 12 lakh crore, 3% higher than FY24 actuals, which is 5% lower than FY23. Within this, agriculture plus rural expenditure is estimated at Rs 4.6 lakh crore, 4% lower than FY24, which was 15% lower than FY23. The expenditure under this head had risen sharply over last three years due to additional free food provided to minimize the adverse impact of Covid and higher outgo due to increase in demand under MGNREGA. The same was only Rs 3.1 lakh core in FY20, rising to Rs 7 lakh crore in FY21 and Rs 5.6 lakh crore in FY23. (However, a part of FY21 expenditure was due to accounting adjustment as government took over loans from the account books of Food Corporation of India). Other expenditure within this are Rs 2.7 lakh crore to Railways and Rs 1.6 lakh crore to industries, primarily as subsidy to fertilizer industry. It may be noted that these are only revenue expenditure and does not include capex. Major expenditure under the third category, social services, are water supply at Rs 64,000 crore, education at Rs 60,000 crore and health at Rs 39,000 crore. Total expenditure under social services is only about Rs 2.4 lakh crore which corresponds to just 0.7% of GDP. This is quite low and social infrastructure needs to be built to improve the delivery capacity of the system. Except for the general services expenditure, rest of the money is spent as part of various government schemes. These schemes, totalling 170 in numbers, are segregated into three groups – A) Core of the core schemes. B) Core schemes. C) Major Central Sector Schemes. The plethora of schemes with some of them having outlay of less than Rs 1,000 crore, possibly, call for a relook and consolidation into fewer ones for better execution and outcome. Among the major schemes are Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), MGNREGA, National Health Mission etc.<\/p>\n
The last, Grants-in-aid to state governments and UTs, comprises of grants for creation of capital assets, grants mandated by finance commission, grants for projects aided by foreign bodies etc and transfer from centre for implementation of central scheme. (It does not include states\u2019 share in total taxes as stated in Part I). Amount under this corresponds to Rs 6.7 lakh crore, 8.6% higher than FY24 actuals, which was about 8% lower than FY23 and 10% lower than FY24 BE. Lower than BE is most likely due to state governments not meeting the required milestone, failing which, funds were not released. Total funds transfer to states, including states\u2019 share in taxes and other finance commission grants etc, is projected at Rs 23.5 lakh crore, 12% higher FY24 actuals, which was 13% higher than FY23. The total transfer implies nearly 40% of gross funds (including states\u2019 share in tax receipt) mobilised by central government is spent through state governments.<\/p>\n
In terms of capex, budget has projected spending of Rs 11.1 lakh crore, significant increase of 17% over FY24 actuals, which, in turn, was 28% higher than FY23. Among the major heads of capex are Roads & Highways at Rs 2.6 lakh crore, Railways at Rs 2.5 lakh crore, 56% increase for both together and Defence at Rs 1.7 lakh crore. Other than this, budget has earmarked Rs 3.9 lakh crore as grant in aid to state governments for creation of capital assets, 20% higher than FY24 RE. (This amount is part of transfer to states stated above). FY24 actuals for states\u2019 transfer is marginally lower than FY23 since states couldn\u2019t spend the entire amount allocated. In terms of subsidy, projection for FY25 is Rs 3.8 lakh crore, 8% lower than FY24. FY24, in turn, is 10% higher than BE but 22% lower than FY23 actuals. FY23 had risen sharply due to more than doubling of fertilizers subsidy and significant increase in food subsidy, a fall-out of Russia-Ukraine war.<\/p>\n
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Against total receipt of Rs 32.1 lakh crore, central government is projected to spend nearly Rs 48.2 lakh crore in FY25. 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":19349,"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-19291","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","membership-content","access-restricted"],"yoast_head":"\n