India's interim budgets: A woeful tale of inconsistency the past 20 years

While development priorities have taken the back seat, govts' own housekeeping, such as police and pensions, has held on to the purse; even higher defence spending has been on wages and pension bills

Data from India's four interim budgets of the past 20 years show no consistent direction of policies among the outgoing governments. So, issues like trimming of the fiscal deficit, raising of investment in the agriculture sector, or policing expenses have swung up and down over the years. 

In every budget of the Central Government, the finance minister presents a list of items in which there would be the largest change in expenditure in the forthcoming year. 

In an election year, this display of numbers is significant since it shows the hand with which the incumbent government expects to face the electorate. In India, given the low per capita income of the population, one would expect that the development priorities would be more or less consistent even in a time span of two decades. They ought to be consistent even across party lines. Sectors such as health, education or capital expenditure ought to receive progressively larger allocation with peaks centred around the pre-election budgets. 

But an analysis of the budget numbers of the two NDA and UPA governments show, instead, that there has been no such long-term trend. Instead, priorities even on a long-term basis have changed. The only consistent ones to have risen over the four interim budgets are the spending on interest and debt servicing at double-digit levels, followed by expenditure on central police forces. The rise in the latter is not surprising. Central police forces have progressively replaced the role of state police even for routine law and order issues. From an expenditure of about Rs 8,000 crore at the beginning of this century, it is now ten times more at Rs 85,100 crore (2019-20 budget estimates).

The two NDA governments left office promising to hugely raise expenditure for the agriculture and allied sectors, almost doubling it, as the table shows. The promises were clearly a response to the under-funding of the sector. But surprisingly, instead of keeping up the promised level of expenditure, in between the UPA-I government planned to reduce the spend on the sector by almost half. 

A measure of the consequent mismanagement of the sector is the massive rise in the bill for food subsidy. It has risen from Rs 25,200 crore in the year when the Vajpayee government left office to Rs 1.84 trillion in (budget estimates for 2019-20). A commensurate expenditure in the agriculture sector could have been far more rewarding for the economy.  

A similar tale is visible in petroleum subsidy. The NDA government left on a high note, with an almost halving of the bill. But the UPA government walked back on reforms in the sector and left with a projected 25 per cent rise in petroleum subsidy by 2014. 

The three major subsidies of food, fertiliser and petroleum have played favourites in the list of priorities of the four governments, as the table shows. Reforms in their management have been flagged repeatedly by economists, but each has managed to make a comeback at some stage. 

Similarly the spending on the education sector has also defied logic. The first NDA government had not listed it among its spending priorities to attract voters, even though a year earlier, it had launched the Sarva Shikha Abhiyan. It took its eye off the ball and it was left to the UPA government to promise a vastly raised allocation before the 2009 general elections. But once voted into power again, the spending on education plateaued. The outgoing government in the second term saw no need to include it among their priorities, and it is only now that the second NDA government has picked up the slack. 

Instead of development priorities, the sectors that have held on to the purse are, therefore, mostly the governments’s own housekeeping like police and pensions. Even the consistently higher spending on defence has been on the wages and pension bills of the defence personnel.