Plea To Reverse Downward Trend In Capital Expenditure

Primary concern of the forthcoming Union budget should be to reverse the downward trend in government capital expenditure, according to Jawaharlal Nehru University professor Jayati Ghosh.

"This needs to be done urgently. Every time there is a fiscal crunch, the government cuts down on productive investment and the country is paying for it in the form of power crises at ports and other infrastructure areas," says Ghosh.

She argues that interest payments on government debt and defence expenditure are accounting for too large a chunk of government spending. Infrastructure needs in rural areas are critically important, she says.

The second issue that must be tackled, in her view, is the sharp increase in rural poverty - which has shot up in the 1990s vis a vis the 1980s. This rise is associated with a decline in rural non-agricultural income. This is primarily because there are no productive employment and income options in the rural areas.

 

A study done by her along with Dr Abhijit Sen shows that there has been a direct correlation between government expenditure in rural areas and the rise in rural non agricultural employment. She points out that the per capita spending on heads like health, sanitation, housing, hospitals etc has been on the decline. For instance, in the health sector spending-per-capita has fallen from Rs 11 per capita per year in 1983 to Rs 2.95 per capita per year in 1993.

"This has to be reversed by increasing spending in rural areas. This can be done by giving more money to the states since many of these heads are under state care," she adds.

Ghosh argues that the way to raise funds is by ensuring better tax compliance. She is not in favour of increasing tax rates but improved enforcement and putting in place systems to ensure that people pay the taxes.

Ghosh is opposed to cutting subsidies in the coming budget. She argues that if anything, the food subsidy needs to be increased.

The fertiliser subsidy too, in her view, must continue since agricultural production is dependent on it.

"There is a need to rethink on these subsidies. But I am against targeting these subsidies," adds Ghosh. She argues that targeting denies those who need it most, given the power structures in India. The subsidies must be universal for them to benefit the maximum, she says.

The last point, according to Ghosh, with relation to the budget is that there have been huge shortfalls in spending on rural development and other such schemes.

She says there have been shortfalls of up to 40 per cent in actual spending against the planned investment and spending in these sectors in BJP government budgets. "It is time the government fulfils its intentions by actual spending," she adds.