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SOCIAL SECTOR SPENDING IN THE CONTEXT OF FISCAL REFORMS

SOCIAL SECTOR SPENDING IN THE CONTEXT OF FISCAL REFORMS. An Analysis of Orissa (India) Budget during 1990-91 to 2008-09. Pravas Mishra, Programme Manager , CYSD , India pravas@cysd.org. Orissa : a few facts.

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SOCIAL SECTOR SPENDING IN THE CONTEXT OF FISCAL REFORMS

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  1. SOCIAL SECTOR SPENDING IN THE CONTEXT OF FISCAL REFORMS An Analysis of Orissa (India) Budget during 1990-91 to 2008-09 Pravas Mishra, Programme Manager , CYSD , India pravas@cysd.org

  2. Orissa : a few facts • Population: 36 million, 3.57 percent of Indian population (11th most populous state in India) • Nearly 85 percent live in rural areas, 22.1 percent are tribal belonging to 62 ethnic communities; 16.5 percent constitute scheduled castes • The poverty rate is 47.15 percent, in tribal locations the rate is 84 percent • Per capita income: 12,388INR (current prices) • The state ranks 11 in Human Development Index ranking out of 15 major states in India (Value: 0.404)

  3. Orissa : a few facts • Literacy rate : 63.08 percent (M – 76.1 and F – 51) • Literacy rate in tribal districts is 30 – 35 percent • Infant mortality rate is 75 in Orissa contrary to 58 at the national level. • 54.4% of the children are undernourished • 76% depend on agriculture • Agriculture alone provides direct/indirect employment to around 65% of the total workforce (2001 census).

  4. Why Budget tracking ? • Policy Declarations vs. Budget Allocation • Regional Disparity in Fund Allocation and Development Indicators among states • Inadequate Devolution of Resources to Grass root institutions • Lack of Systematic Research on Budgetary Allocation and Expenditure • Absence of Civil Society Participation in Budget Process

  5. CYSD’s journey on Budget Analysis • Development of Data Base of Orissa State Budget • Engagement with the Legislators and Budget Makers of the State • Development of a Preliminary Resource Base on the State Budget Analysis • Created a space for the citizens to have a dialogue with the state

  6. Theme of the presentation • Commitment of the state on macro level fiscal fronts • Implications of the macro level fiscal corrections on the social sector expenditures of the state

  7. METHODOLOGY • Data analysis was made from the secondary sources such as the published budget documents of government of Orissa, Reserve Bank of India, Economic survey of different years. • Pre-reform and post reform phase were considered basing on the initiation of the fiscal reform of the Government. The financial years 2008-09 and 2009-10 were not taken because these two years are having revised and estimated data. • Compounded Annual Growth Rate(CAGR) is calculated by using SPSS i.e. log(Dependent variable) = a + b(Independent variable) CAGR = (Antilog( b) -1) X 100 • Elasticity is calculated by using regression coefficient through SPSS

  8. Fiscal situation during 90’s Revenue deficit was lowest during 1990-91 and highest during 1998-99

  9. Fiscal Deficit and Debt during 90’s The fiscal deficit was also all-time high at during 1998-99 and the debt as a proportion of GSDP was also highest during that period

  10. Reform process • Initiated during 1999 with the advice of the union government of India and 11th and 12th Finance commission of India • Targets were fixed with regard to indicators • Bringing revenue deficit to zero by 2008-09 • Fiscal deficit to 2.5 percent of GSDP • Interest payment as a percentage of Revenue Receipt 18-20 percent

  11. Fiscal Indicators : Post -reform Revenue deficit declined and attained the status of revenue surplus during 2005-06

  12. Interest Rate and GSDP in post- reform

  13. Impact on Expenditure Variables Decreasing public expenditure

  14. COMPOUNDED ANNUAL GROWTH RATE (CAGR) • CAGR of GSDP is less during the post reform in compared to the pre-reform reflecting slow growth of the economy • The growth rate of Total State Expenditure(TSE) lessened during the post reform phase indicating Government’s with drawl from investment activities • Significant fall in the Social Sector Expenditure(SSE) expressing reduced pro-poor allocation

  15. Improvements observed in growth rate of plan, capital as well as revenue receipts • Revenue expenditures significantly reduced during the post reform

  16. Elasticity: Responsiveness of factors • The elasticity of GSDP and Revenue Receipt is more during the post reform in compared to the pre reform implies that the growth of GSDP during the post reform contributed more towards growth in revenue receipt during the post reform. • However, responsiveness of other variables such as the total state expenditure, social sectors expenditure, debt was less during the post reform period. • Thus, though the growth in GSDP was observed during the post reform phase, the contribution towards the social sector expenditure and total state expenditure was less.

  17. TSE as a percentage of GSDP

  18. COMPOUNDED ANNUAL GROWTH RATE (CAGR)

  19. Elasticity of Variables *Elasticity > 1: Elastic, <1: Inelastic, = 1: Unitary elastic

  20. Thank you

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