Whalesbook
The Modi government has often highlighted its social spending achievements as a key reason for its popularity. However, a recent analysis using official data from the Reserve Bank of India suggests this narrative may be misleading. The share of social spending in the central government's total budget has reportedly fallen from an average of 8.5 per cent under the previous UPA government to 5.3 per cent under the NDA government, with a brief exception during the Covid-19 pandemic.
Instead, State governments have significantly increased their own social spending, outpacing the central government by a wide margin. This has occurred despite fiscal constraints like the Goods and Services Tax (GST) and increased central government reliance on cesses and surcharges, which are not shared with states. Furthermore, per capita nominal social spending under the Modi government has grown by only 76 per cent, which is below the rate of inflation and considerably less than the nearly four-fold increase seen under the UPA. The report also notes a trend towards fiscal centralisation, with reduced transfers for state plan schemes and a shift towards centrally planned schemes with conditions.
Impact:
This news challenges the ruling government's public relations narrative on welfare delivery and could impact public perception of its social welfare agenda. It also raises questions about fiscal federalism and the actual effectiveness of welfare program implementation, potentially influencing policy discussions and voter sentiment.
Rating: 7/10
Difficult Terms Explained:
UPA: United Progressive Alliance, a coalition of centrist and left-leaning political parties in India, which was in power from 2004 to 2014.
NDA: National Democratic Alliance, a coalition of right-leaning political parties in India, led by the Bharatiya Janata Party, which has been in power since 2014.
Aadhaar: A 12-digit unique identification number issued by the Indian government to citizens, based on their biometric and demographic data.
Biometric Identity: A security process that relies on unique biological characteristics, such as fingerprints or iris scans, to verify identity.
Goods and Services Tax (GST): A comprehensive indirect tax levied on the supply of goods and services in India since 2017.
Cesses and Surcharges: Additional taxes levied by the central government on top of existing taxes, often for specific purposes, which are not required to be shared with state governments.
Fiscal Federalism: The division of fiscal powers and responsibilities between different levels of government (central, state, local).
Centrally Sponsored Schemes: Schemes funded by the central government but implemented by state governments, often with specific guidelines.
Devolution: The transfer of power and funds from a central government to regional or local governments.
Fiscal Transfers: The movement of funds from one level of government to another, such as from the central government to state governments.