Budgets and Budget Advocacy in India

The following article is a budget and planning digest of sorts that consists of information that I gathered from attending capacity building workshops on budget analysis, national  & regional conventions on budget advocacy conducted by Centre for Budget and Governance Accountability (CBGA), New Delhi in collaboration with Gulati Institute for Finance and Taxation (GIFT), Trivandrum; Institute for Sustainable Development and Governance, Trivandrum; Social Watch Tamil Nadu, A.P. Budget Centre, Hyderabad and other CSOs. During these sessions, I also had the opportunity to talk to panchayat members, grassroots activists and researchers with field experience.

The Union Budget is arguably the most important document in planning and development in India. The annual financial statement by a government usually involves four stages: formulation, enactment, implementation and audit. In India, the budgetary process starts with a decision on expenditure. Sources of revenue are looked at later. The gap between expenditure and revenue is filled by borrowing. 

Expenditure is broadly classified into Plan and Non Plan. Plan schemes include the programmes designed by the Central Planning Commission and all the State Planning Boards while Non Plan spending includes wages, salaries, pensions, maintenance of law and order, etc. There is no effective demarcation between Plan and Non Plan spending according to C. Rangarajan, Chairman of the PM’s Economic Advisory Council. The ratio between Plan and Non Plan is 35:65. So essentially, if the budget is Rs 100, Rs 65 is spent on implementing programmes worth Rs 35. Expenditure is also classified as revenue and capital. Capital expenditure entails repayment of debt. Essentially those that increase assets and decrease liabilities. 
A myth associated with the Indian Union Budget is that it is a technical process while in reality, it is a purely political process. One simple example is the additional Rs 15,000 crore that Uttar Pradesh managed to secure as ‘Normal Central Assistance’ in the 2012-13 budget.
According to the seventh schedule of the Constitution of India, legislative powers are divided into three different lists: union list, state list and concurrent list. In terms of taxation and revenue mobilisation, the centre has greater powers than the state or local governments. Majority of the tax revenue of the centre comes from income tax, corporation tax, excise duty, customs duty and service tax. The state governments derive a majority from entertainment tax, stamp duty, VAT, etc. while the local governments rely on property tax, octroi, user charges, professional tax, etc. 
There are two important bodies in the planning and revenue sharing process. They are the Central Planning Commission (CPC) and the Central Finance Commission (CFC). CPC is a permanent body while the CFC is constituted every five years. The implication of CPC being a recommendatory body is that its recommendations need not be implemented by the government while those of the CFC have to be fulfilled once accepted. There are four kinds of fund transfers by the CFC:
(i) Normal central assistance for state plans (formula-based)
(ii) Special central assistance (conditionalities) – JNNURM, Vidarbha package
(iii) Additional central assistance – Kuttanad package
(iv) Plan schemes of central ministries – NRHM
Central Finance Commission (CFC) recommends the state’s share in central taxes and also the non-plan grants from the centre while the Central Planning Commission (CPC) recommends the central assistance for state plans. 
There are three kinds of services in the budget: general, economic and social services. The allocation for these services depends on whether the subjects under these services are in the union, state or concurrent lists. For instance, under general services, allocation for police services and maintenance of law and order incur expenditure from the state budget while funds for defence services are from the union budget. Irrigation, transport services etc. are classified as state services while health, education, water & sanitation, etc. come under social services.

State and Local Budgeting

While the government has accepted decentralization-deconcentration-devolution as a principle, most of the funds that come from the centre as ‘Special Central Assistance’ have conditionalities that act as impediments to local government spending. What local governments require is administrative, financial and functional autonomy. The lack of a manual of acts and rules also delay projects to a great extent as most local bureaucracies have to wait for five year plan documents to come out. The lack of data, ritualisation, routinisation and trivialisation of functions have slowed down the forward and backward linkages between village, block and district panchayats.
At the local level, there are three kinds of audit: AG Office Audit, Performance Audit and Local Fund Audit.

Lack of effective decentralization has caused inefficient allocation of resources. For example, in 1999, the Sampoorna Grameen Rozgar Yojana (SGRY) for rural employment had its funds transferred directly from the central ministries to District Rural Development Agencies (DRDAs) in panchayati raj institutions. Once the allocation was made, the union budget showed that the expenditure was made. Since the funds bypassed the state governments, the state budgets never showed the expenditure. Similarly, most flagship programmes under the UPA government are not included under the Comptroller and Auditor General’s (CAG) office. In the case of most economic and social services, the state contributes 65-70% of the expenditure especially education and health, so the lack of a proper channel of decentralization will lead to bad accounts.

Transparency and Accountability in Implementation of Govt. Schemes

According to Mr Selvaraj, Dept of Planning, Tamil Nadu State Planning Board, PDS, MGNREGA and RTE are relatively well run entitlement-based programmes. But most of these programmes are annual and based on targets. There’s no long term vision. The lack of participation at the grassroots level in certain places also add to the woes. The District Collector is the chairperson at the district level for the implementation of most centrally sponsored schemes. He sanctions the money which has to be approved by the District Magistrate and the Project Officer implements it. More often that not, the complex bureaucracy at the local level lets funds go lapse just by delaying settlement of account vouchers. The complicated guidelines in fund utilization for the State Plan is also another issue. Essentially, three areas have to be taken care of in implementation.
(i) Adequacy of utilization
(ii) Quality of utilization
(iii) Assessing the impact of outlays and outputs to outcomes

For many of the schemes, the unit costs set up by the government is not realistic. For instance, many of the grassroots activists complain about the meagre sum of Rs 500 that is provided annually for the repair of hand pumps. A high proportion of the allocation goes into salaries, civil works and pensions while maintenance and repairs, monitoring and training are given lesser priorities. Another frequent complaint is that of staff shortages. In many panchayats and corporations, the DPO, the accountant and MIS Operator may be the same person which reduces the efficiency. There’s an inordinate delay in the flow of funds in spite of the use of electronic transfers since 2004. Not to mention that the e-facility is non-existent in certain local banks.
Multiple reporting requirements also slows down implementation. Most of the funds are usually utilized in the last quarter so as to make up for funds underutilized in the previous quarters, hence rendering the expenditure inefficient.

One of the biggest handicaps in our system is the lack of an effective review mechanism. 75-80% of the proposals are not studied properly. There’s no measurement of people by targets and no penalty on people who fail to deliver. The money should not be seen as government money, but ‘public money’. 
Transparency can be ensured through pre-budget discussions and consultations. It would also be prudent to publish the Economic Survey and the Economic Review on the first day of the budget sessions. The Finance Ministry could publish a quarterly review on the extent of implementation of the funds allocated to each programme so that the utilization of funds is uniform throughout the year instead of an exponential increase in expenditure in the last quarter to clear accounts. Replacing incremental budgeting with a zero-based or performance based budgeting will raise efficiency in allocation. The need for a budget analysis and advocacy network among civil society organizations in the country will ensure that the government is kept on its toes by the people in a constructive manner. Budget tracks should be published every quarter to track whether funds allocated are transferred to consequent targets.

Budget Advocacy

The problem with the budgetary exercise in India is as mentioned above is that it is understandable only to a chosen number of academics and politicians due to its complex presentation. This complexity can naturally lead to social, economic and political exclusion of certain sections and sectors. Budget Advocacy in India started with the concept of social budgeting, the idea of an equitable share in public resources. In order to make it a reality, people’s movements and budget groups all over the country must combine.

So, the People’s Budget Initiative, a network of several civil society organizations (CSOs) with its secretariat at the Centre for Budget and Governance Accountability (CBGA), New Delhi resorted to budget advocacy, a strategic approach to influence the budget priorities of the government. It is a method of initiating social change through a political change. It is about making the process of budgeting transparent and accountable to the people. Eight sectors were identified: women, children, persons with disabilities, dalits & adivasis, education, health, water & sanitation and agriculture, food security & rural development. These are ‘rights-based demands‘ rather than privileges. Demands from these sectors will be compiled  from five different regions in the country, namely Southern, Eastern, Western, North Eastern and Northern by interacting with grassroots workers of the regions. The Regional Conventions will be held in Chennai, Ranchi, Pune, Guwahati and Lucknow respectively. The list will be finalised in the National Convention in Delhi and will be submitted to the Finance Minister of India as a ‘Charter of Demands’. Lobbying with 20-25 MPs will also be done in order to complete the process. National Conventions have been conducted for the past six years. But this is the first time that regional conventions are held in order to decentralize the process of advocacy. In recent times, budget advocacy has had its rewards. For example, until 2012-11, only the revised estimates of schemes were available. But now, actual expenditure is given separately.

One of the most effective cases of budget analysis and litigation is that which took place in the Argentinian capital of Buenos Aires. The Civil Association for Equality and Justice (ACIJ) did a study of budgetary allocations in the field of education and came to the conclusion that only 32% of the funds were being utilized every year. As a result, over 8000 children were being deprived of elementary education and the government failed to deliver on a promise enshrined in the constitution of free elementary education to every child over 45 days old. Through public pressure, the ACIJ was able to force the government to pass a legislation on the ‘Right to Elementary Education’.

Women and Gender Budgeting

In over 70 countries, analysis of public expenditure and revenues are undertaken from a gender perspective. The logic of gender budgeting stems from the idea of proportional expenditure on proportional representation in population. Since the 9th Five Year Plan, there has been a ‘Women Component Plan’ in India. As of now, very few states like Kerala, Madhya Pradesh, Rajasthan and Jammu & Kashmir have taken practical steps to gender budgeting. The lack of gender disaggregated data does not help the cause either. India being a predominantly patriarchal society faces antagonism against women.

Dalits & Adivasis

There’s no shortage of schemes for dalits and adivasis. But most of these schemes have no impetus for growth as pointed out by Mr. Christudas Gandhi IAS. They are essentially freebies to score political points or vote banks. The continuing policies of reservations for over 60 years have not ensured their adequate participation in the planning process. So, programmes must be designed that will generate wealth that will in turn lead to growth and eventually social change. In addition to the lack of innovative schemes, the funds set up in the form of Special Component Plan (SCP) and Tribal Sub-Plan (TSP) have been misallocated numerous times. The most blatant being the Rs 788 crore allocated under SCP that was used for completing infrastructure projects in Delhi before the start of the Commonwealth Games 2010. This was brought to light by the National Campaign for Dalit Human Rights (NCDHR).


Dr. Padmini of Child Rights Trust, Bangalore noted how the health and family welfare budget has increased only marginally in the past few years. In most of the states, health and development expenditure go down because previous years’ funds go lapse. The International Committee on Rights of Child states that the Integrated Child Development Scheme (ICDS) is universal. But it is far from the truth. While the Mid-day Meal Scheme confers Rs 9 per meal per child in Tamil Nadu, it is Rs 4.6 in Karnataka. These abysmally low allocations can hardly be termed as universal coverage. Also, there’s a huge gap between the estimated additional expenditure and actual expenditure under Right to Education in terms of textbooks, uniforms and toilets in schools.

Water and Sanitation

The Ministry of Drinking Water and Sanitation provides grants for the construction of toilets in schools. The HRD Ministry allocates Rs 5,000 per primary school per year and Rs 10,000 per upper primary schools per year as maintenance grants. Now after relentless pressure from water and sanitation advocacy groups, the Union Rural Development Minister, Jairam Ramesh has made the suggestion that the grant be made Rs 1,000 per month per school. This is almost 7% of the budget of Sarva Shiksha Abhiyan (Economic Times, October 25 2012).

Drinking water and sanitation should be made a justiciable right. As of now, all villages in which the pipeline barely reaches the centre are seen as fully covered. Instead, they should be recorded as fully covered only if strict monitoring ensure complete access. PILs have ensured adequate water to schools but around 1 million anganwadis in the country under ICDS are not covered yet. The social audit which saw a more effective disbursal of funds for MGNREGA in Andhra Pradesh could be followed here too.


One of the main concerns in education is with regard to the implementation of the Right to Education Act. Most agree that the funds allocated are not sufficient and the focus is more on regulating the private sector rather than the growth of quality public education. Proper monitoring channels and funds for teacher training especially should be encouraged.


There, ideally should be a ‘Right to Health’ in our constitution that has special provisions for the poor, marginalised, physically disabled and the elderly. The focus should be on preventive care. There should be a more allocation to school health programmes considering the favourable demographic dividend. The National Rural Health Mission has to be monitored more strictly in order to raise efficiency of expenditure. The tendency to move towards drug price deregulation should be reversed as it will result in unaffordable healthcare for certain sections. Public health infrastructure should be strengthened instead of private sector regulation.

Persons with Disabilities (PWDs)

PWDs are probably one of the most neglected groups in the country. Statistics say that around 10% of the population suffers from some kind of physical or metal disability. Most government policies ignore the fact that the existence of a PWD affects the entire family, and not just the one person. A conversation I had with a person suffering from multiple sclerosis made me aware of the woeful lack of attention towards this section. She has to take injections every week that is worth over Rs 9,000. The government subsidises Rs 2,000. But it is hardly feasible on her income of Rs 10,000 per month. 
In addition , mental health expenditure is thought of in terms of institutions rather than services to help them earn independently. Most of the schemes are only till the district level and not till the panchayats. Accessible housing, transportation and procurement have to made. Mental retardation and psycho-social problems are given the least priority. 

Food Security, Agriculture & Rural Development

The land reforms bill should adequately address explicit land grab.
The quality of foodgrains supplied and recommended by the National Institute of Nutrition should be considered.
Strengthen the Public Distribution System
More incentives to dry-land farmers
MGNREGA wages should be at par with the Minimum Wage Act.
Regularize wage payments in Indira Awas Yojna, Old Age Pension, Widow Pension and Disability Pension.

I have included most of the recommendations and the concerns that were expressed in the discussions many of which were in regional languages. These are by no means final, or technically analyzed. The aim is to reach out to all sections of society from all corners of the country instead of addressing the concerns of a chosen few. Many more of such discussions will be held in the future and hopeful priority areas will be taken care of soon.


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