States not diverting funds from health, education: NITI Aayog

More than half of the states saw fall in expenditure on health and education in 2015-16 compared to 2014-15

The NITI Aayog has sought to counter fears that increased fund devolution to states on recommendations of the 14th Finance Commission had led to diversion from priority sectors like education and health.

The NITI Aayog's study is based on data for 15 states.

However, its own analysis shows that most states spent less than one per cent of their respective gross domestic product (GSDP) on health, even in 2015-16.

Also, more than half of the states studied saw fall in expenditure as proportion to total outlay both on health and education in 2015-16 compared to 2014-15.

The 14th Finance Commission had recommended increasing the share of states in the divisible pool of central taxes to 42 per cent between 2015-16 and 2019-20 from 32 per cent in the previous five years.

The study showed only Andhra Pradesh and West Bengal saw expenditures on health and education declining as a percentage of the gross state domestic product in 2015-16. The expenditure on education in West Bengal fell to 2.3 per cent of the GSDP in 2015-16 from 2.6 per cent in the previous year, and that in health to 0.6 per cent from 0.8 per cent.

Andhra Pradesh saw a reduction in expenditure on education to 2.8 per cent of the GSDP in 2015-16 from 3.2 per cent in the previous year. Its outlay on health fell to 0.8 per cent of the GSDP from 1 per cent.

Also Kerala allocated 2.5 per cent of the GSDP to education in 2015-16 against 2.4 per cent in the previous year and Mizoram allocated 9.8 per cent against 10.2 per cent. Tripura allocated 2.1 per cent of the GSDP to health in 2015-16 against 2.2 per cent in 2014-15.

"In the four states where it (the allocation to education as a per cent of the GSDP) has declined, the change is less than 0.5 percentage points,"the NITI Aayog said.

"Tentatively, it is fair to say the available data do not give any reason for alarm that the states may have acted irresponsibly in the wake of increased flexibility in spending," the study said.

However, there was other side of the story as well.

Health expenditure as a proportion of the GSDP remained below 1 per cent in most states in both these years.

Also, as a proportion of total expenditure, health and education have seen a decline in eight states. Six states have seen a decline in both health and education expenditures. These were Andhra Pradesh, Gujarat, Haryana, Madhya Pradesh, Odisha and West Bengal.

For instance, Andhra Pradesh allocated 4.2 per cent of total expenditure to health in 2015-16, which is lower than 5.1 per cent in the previous year. Similarly, it spent 15.3 per cent of total expenditure on education against 16.2 per cent over this period.

Similarly, Gujarat incurred 5.9 per cent and 6 per cent of total expenditure on health and 16.4 per cent and 16.6 per cent on education over this period.

The 14th Finance Commission's recommendations also led to an increase in capital expenditure as proportion of the GSDP in most states. The only exception was Madhya Pradesh, where capital expenditure declined to 4.4 per cent of the GSDP in 2015-16 from 5.5 per cent in the previous year.