States, schemes and disaster management bear cost of fiscal discipline

Farm sector spend took a hit, as PM-KISAN beneficiaries remained largely unidentified

The union government maintained the fiscal deficit to 3.4 per cent of the gross domestic product (GDP) in 2018-19 by rolling over food subsidies and squeezing expenditure on certain schemes or transfers, data released by Controller General of Accounts (CGA) shows. Provisional accounts for FY19 were released last week. The government resorted to cuts to the tune of Rs 21,000 crore in agriculture, Rs 26,000 crore under transfers to states, nearly Rs 7,000 crore in defence among others to stay on the path of fiscal consolidation. 

Revenue expenditure (mainly schemes and subsidies) was nearly Rs 1.32 trillion short of the revised estimates for FY19, under which food subsidies to the tune of Rs 70,000 crore were rolled over to the current financial year (FY20). The cut in capital expenditure (mostly physical assets) was about Rs 13,000 crore.  

Apart from food subsidy, spending by the ministry of agriculture was cut by nearly Rs 21,000 crore. Most of it was under two schemes: PM-KISAN, the income support scheme to farmers, and Pradhan Mantri Fasal Bima Yojana, the comprehensive crop insurance scheme.

More than 120 million farmers form the beneficiary universe of PM-KISAN, of which only 31 million farmers received the first four-monthly installment of Rs 2,000 in FY19. Thus, while Rs 20,000 crore were budgeted for FY19 (revised estimate), the ministry could spend less than Rs 7,000 crore, according to officials.

“Less than half of the beneficiaries were identified and the elections kicked in, so the budgeted money could not be spent,” said a senior official in the agriculture ministry.

“The other scheme where spending was less, was PMFBY,” added another official.

Fiscal transfers to states were shorted too, and by a higher degree. After the devolution of tax revenue to states, the Centre transfers money to states, mainly under revenue deficit grants, disaster management funds centrally sponsored schemes and urban/rural local body grants. The Centre could not transfer nearly Rs 26,000 crore (revenue expenditure) to states under these, in FY19, provisional accounts show.

But it was always the case, and the Comptroller and Auditor General of India (CAG) has been slamming the government for short-funding state transfers. CAG’s financial audit of union government accounts for 2017-18 shows that nearly Rs 28,500 crore were “saved” by not transferring to states.

In addition, transfers to states of the nature of capital expenditure were also cut to the tune of Rs 4200 crore. Telecom and housing ministries cut their capital spend to a small extent to maintain expenditure within limits, to achieve the targeted fiscal deficit.

Who took the hit?

REVENUE EXPENDITURE

Expenditure head	Expenditure squeezed
Department of Food & Public Distribution*	70700
Transfers to States (Revenue)	25858
Department of Agriculture Cooperation	21724
Defence Pensions**	6962
Interest Payments	4894
Department of Economic Affairs	3647
Ministry of Housing and Urban Affairs	2353
Ministry of Women and Child Development	1733

CAPITAL EXPENDITURE

Expenditure head	Expenditure squeezed
Transfers to States (Capital)***	4268
Department of Economic Affairs	3294
Department of Telecommunications	1343
Ministry of Housing and Urban Affairs	1236

Source: CGA

Note: * Majorly food subsidies ** including miscellaneous expenses under defence ministry

*** Additional Central Assistance for Externally Aided Projects (Block Loans)

Transfers to states

• Post-devolution revenue deficit grants
• Finance Commission grants
• Grants to urban and rural local bodies
• Special assistance
• Finances to externally aided projects