Tatsat Chronicle Magazine

Holes In The Safety Net: The Impact Of Social Sector Spending Cuts

Social sector spending cuts in the 2023-24 Union Budget have been criticised by experts, who feel that the Modi government’s drive for increased capital expenditure has left the most vulnerable exposed to greater risks. On the one hand, the government has increased spending on tribal outreach, on the other it is taking away their rights


While the investor and business communities have approved of the Budget’s raising of capital expenditure, compressing the fiscal deficit and slightly hiking the disposable income of the middle class with income tax adjustments, abjectly poor India has little to cheer about.

The allocation for the national rural employment guarantee scheme (MGNREGA), which gives people the right to demand work from panchayats, has been set at ₹60,000 crore. If in a year when the economy was expected to grow by 6.8%, a revised provision of ₹89,400 crore — 22% higher than the Budget estimate — was made, how can allocation be cut by 33% when the economy is expected to slow because of global headwinds?

The scheme is demand-driven, and any household demanding employment shall be provided 100 days of unskilled manual work in a financial year in accordance with the scheme, the rural development ministry said in a press release, in response to comments that it was under-funding MGNREGA. It listed the Budget and revised estimates of the past eight years to emphasise that in seven of those years, the revised estimate was higher and additional funds were released.

“Every year they say more funds will be provided if needed, but later in the year funds run out and wage arrears pile up. Then they make an inadequate supplementary allocation, and the remaining arrears are carried over to the next year,” Jean Dreze, development economist and visiting professor of economics at Ranchi University, said in an email. Dreze had helped craft the employment guarantee scheme. “This year’s meagre Budget allocation is going to aggravate the vicious cycle, instead of ending it,” he added. Delayed payments would frustrate employment seekers and reduce the demand for work.

Being pushed out: Dilution of forest rights threatens to upend the lives of indigenous people (adivasis) (Photo: WIKI COMMONS)

According to news reports, funds for MGNREGA ran out around October and the rural development ministry sought ₹25,000 crore more. But the extra allocation in the Budget was less—₹16,400 crore. This year’s revised estimates include arrears of last year, and the arrears of this year will spill over to the next, says Nikhil Dey, one of the founders of the Rajasthan-based Mazdoor Kisan Shakti Sangathan (MKSS), which had campaigned for the employment guarantee scheme and helped draft the Right to Work Bill during the Manmohan Singh regime.

Pending dues, accounting jugglery

Dey also said MGNREGA workers in West Bengal were suffering owing to a political tussle between the state and the Centre. On December 26, 2022, Dey had tweeted that it was exactly a year that the Centre had not paid wages to more than one crore MGNREGA workers in West Bengal. They are owed ₹2,744 crore. The law, he said, requires wages to be paid within 15 days. Delay, he pointed out, citing a Supreme Court ruling, is “forced labour”. The Centre has alleged corruption in MGNREGA work in the state and has invoked a provision in the legislation to disallow payments.

Putting the squeeze: Compared to last fiscal, MGNREGA outlay has been reduced by ₹29,000 crore in the 2023-24 Union Budget (Photo: WIKI COMMONS)

The MGNREGA website of the rural development ministry shows ₹843 crore as West Bengal’s expenditure on wages for unskilled work until February 7. The spending on this count in 2020-21 and 2021-22—₹7,368 crore and ₹8,107 crore, respectively—shows the extent of the programme’s contraction in the state.

The global economy is expected to grow slower than last year. This will impact exports, especially labour-intensive sectors which absorb unskilled workers

Vijay Ram of People’s Action for Employment Guarantee (PAEG) estimates that the arrears of this year amount to about ₹10,000 crore. One way of looking at the reduced allocation is to assume that the government is banking on improved economic prospects to reduce demand for distress-relieving wage labour. “Recovery complete,” is the theme of this year’s Economic Survey. The government is banking on enhanced public investment to have a ripple effect on the economy. It expects more private investment too. Of the fiscal deficit of ₹17.86 lakh crore, 77% is the effective capital expenditure. But the after-effects of the pandemic are still being felt. Rural unemployment rate in the September-December quarter, according to the Centre for Monitoring Indian Economy, was 7.1%, almost unchanged from 7% during the corresponding quarter last year. It’s slightly higher than the 6.8% during the pre-Covid period of September-December 2019. The global economy is expected to grow slower than last year. This will impact exports, especially labour-intensive sectors like garment-making, which absorb unskilled workers. But the government is optimistic of an upturn and a return to normality. The MGNREGA outlay for the coming year is the same as the Budget provision for pre-Covid 2019-20.

Political outreach: The focus is on building more schools for tribal communities (Photo: UN WOMEN ASIA AND PACIFIC)

Food subsidy slashed, pensions remain tokens

The Budget outlay for food subsidy has also been reduced by ₹89,979 crore or 31% from ₹286,979 crore in the revised estimates for this year to ₹197,000 crore. Since January this year, additional free rations for the abjectly poor — 5 kg per person of rice, wheat or millets — have been discontinued. These rations were initiated in April 2020, when people were faced with loss of jobs and income due to the lockdown. They were extended because of continuing distress caused by economic disruptions resulting from periodic surges of the pandemic.

The government has sweetened the withdrawal of this benefit by waiving payments for foodgrains under the National Food Security Act (NFSA). NFSA entitles every BPL (below the poverty line) person to 5 kg a month of rice, wheat or millets at a per kg price of ₹3, ₹2 and ₹1, respectively. But the waiver makes little difference to the monthly household budgets of the recipients. A family of five will save ₹75, ₹50 or ₹25, depending on their grain preference.

The additional entitlement could not have been continued indefinitely. Food stocks are already running low. But Dreze says it should have been prolonged for at least a year, as people are still hurting from Covid-related job and income losses.

Alternatively, the government could have used the money saved on food subsidy to give higher pensions to widows, seniors, and the disabled under the National Social Assistance Programme. Manmohan Singh as finance minister had initiated the Indira Gandhi Old Age Pension Scheme in 1995. At that time only destitute persons in the BPL category aged 65 years and above were eligible for the monthly pension of ₹75. In 2006, the finance minister raised the amount to ₹200 a month and all BPL persons aged 65 and above were covered. Currently, there are 21.94 million such pensioners.

In 2009, the Indira Gandhi Disability Pension Scheme was started. It entitles BPL persons with “severe disability” aged 18 years and above to a monthly pension of ₹200. (Those 80 years and older get ₹500 a month.) BPL widows aged 40 to 64 years became eligible for a monthly pension of ₹300 from 2009.

In the Budget estimates for the coming year, the pension outlays are unchanged. For the old, ₹6,634 crore has been provided. For widows, the allocation is ₹2,207 crore. For those with disability, the outlay is the same as the revised estimates for this year: ₹290 crore.

The Budget outlay for food subsidy has also been reduced by ₹89,979 crore or 31% from ₹286,979 crore in the revised estimates for this year to ₹197,000 crore for 2023-24

Pregnant women and lactating mothers are eligible for a payment of ₹5,000 upon the birth of the first living child in their families. But the payment is restricted to only one child, though India does not have a one-child policy. The same benefit is given for the second child if it happens to be a girl. The National Food Security Act (NFSA), 2013 puts no restriction on the number of children. It also entitles pregnant women and lactating mothers to ₹6,000 upon the birth of a child in addition to free meals in an anganwadi during pregnancy and for six months after childbirth. The Budget outlay for an omnibus programme that subsumes this scheme is ₹2,581 crore. This is lower than the Budget estimate for this year, but higher than the revised estimates.

In bad shape: Many anganwadi centres are in derelict condition across the country (Photo: PIXAHIVE)

Last December, about 50 economists and academicians wrote to the finance minister urging her to raise the pensions to at least ₹500 a month. If she had acted on their request, the allocation for nearly 22 million aged people would have been about ₹13,000 crore. The outlay for 6.7 million widows would have been ₹4,020 crore and for 8.73 disabled persons ₹524 crore. Food subsidy would have easily covered the higher amounts.

Patronage of tribals, but rights diluted

The government has been quite generous to the tribal affairs ministry. The ministry’s allocation for the coming year at ₹12,462 crore is 71% more than the revised estimate for this year. Of the ₹5,160 crore higher outlay, a substantial chunk is being spent on Eklavya Model Residential Schools (EMRSs). They are getting ₹3,940 crore more at ₹5,943 crore.

These schools, with Classes VI to XII, were started in 1997-98 by the Devegowda government. They are residential schools, supposed to be on a par with the Navodaya Vidyalayas and lay emphasis on both co-curricular and extra-curricular activities. The government had decided that by 2025-26, every block with at least 20,000 tribals and 50% tribal population would get an EMRS. In reply to a question in the Lok Sabha in February, the government said 740 EMRSs would be established by 2025-26, of which 690 have been sanctioned and 401 are functional. About 1.13 lakh students are enrolled in them; girls slightly outnumber boys.

State’s largesse: The government will continue providing 5 kg of foodgrains to the poor for one more year from January (Photo: ILO ASIA PACIFIC)

The Centre bears the cost of building these schools. States are required to provide land and concessional water and electricity. The Centre also bears the recurring annual expenditure of ₹109,000 per student. In schools without hostel facilities, the per student cost is ₹85,000.

But the schools are understaffed. The situation does not seem to have changed for more than a decade. Anand Mohan Tiwari says that when he took over as principal secretary of Gujarat’s tribal affairs department in 2006, he found the schools were almost without teachers. So he got reputed schools and corporates (like UPL (formerly United Phosphorus Limited), Sun Pharma and Surya Roshni Foundation) involved in education as part of their societal outreach, to run about 10 of these schools—giving them pretty much a free hand in spending the grants and recruiting teachers. They were made responsible for outcomes. The understaffing continues. Soon after the Budget, the finance minister said 38,500 teachers would be recruited for these schools, according to a Press Information Bureau release.

Pregnant women and lactating mothers are eligible for a payment of ₹5,000 upon the birth of the first living child in their families. But it is restricted to only one child

The tribal outreach fits in with the ruling party’s programme of winning over tribals to its ideology. But it sees them as beneficiaries of patronage rather than as citizens demanding rights. The amendment to the forest conservation rules notified last June allows the government to alienate tribal land for industrial and infrastructural purposes without their consent. This is a dilution of the protections they are supposed to enjoy under the Forest Rights Act.

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He is senior journalist and columnist for several reputed publication. He was formerly with CNBC-Network18 and specializes in the agriculture sector and economy. He has written more 450 articles on agriculture alone.

He is senior journalist and columnist for several reputed publication. He was formerly with CNBC-Network18 and specializes in the agriculture sector and economy. He has written more 450 articles on agriculture alone.

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