Government set to overhaul public spending

Government set to overhaul public spending

  • The government is working on a radical recast of its rural social assistance programmes that involves a new definition of poverty, a social registry to identify individual beneficiaries, a new template for allocation of resources, and greater power to panchayats in terms of both spending funds and monitoring the schemes.
  • The current annual budget for various government programmes targeting rural India is around Rs2.5-3 trillion.
  • The immediate aim of the exercise is to move 10 million households across 50,000 panchayats out of poverty by 2019.
  • The recast will overhaul the spending pattern of the Union government—and possibly state governments too—and has the potential to change the entire political economy of developmental expenditure.
  • This will accelerate a shift towards more decentralized spending, initiated first by the 13th Finance Commission and more recently by the 14th Finance Commission, which made states equal stakeholders by giving them more freedom to decide and spend on development programmes.
  • An additional fallout will be a transfer of power in grassroots politics, with the transfer of fiscal powers to the third tier of governance, panchayats. If this does happen, it will result in structural changes in Indian politics.
  • The plan draws from the recommendations of a high-level expert group headed by former finance secretary Sumit Bose.
  • The plan incorporates the new multidimensional definition of poverty, which doesn’t rely only on consumption levels.
  • It draws from the comprehensive data collected from the Socio-Economic Caste Census (SECC) of 2011 to recommend an institutional framework to identify beneficiaries and decide inter-state allocations.
  • Presently, these allocations are based on aggregate poverty levels.
  • The SECC data ranks households based on their socio-economic status and provides names and number of households in each panchayat that needs social assistance, ranking each on deprivation criteria.
  • Of the total 179.7 million households in rural areas, the SECC database has identified 107.3 million as those facing deprivation and hence eligible for social assistance.
  • The panel has proposed creation of a social registry which combines the SECC data and the Temporary Identification Number (TIN), a unique number that helps identify each household, to create a database of the beneficiaries.
  • Capacity of the panchayats varies from state to state. While states like Kerala and Karnataka have strong panchayats, states like Uttar Pradesh, Bihar and Jharkhand have very weak panchayats.

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