SOCIAL SECTOR SPENDING IN THE CONTEXT OF FISCAL REFORMS

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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_at_cysd.org
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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)

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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).

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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

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CYSDs 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

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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

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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

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Fiscal situation during 90s
Revenue deficit was lowest during 1990-91 and
highest during 1998-99
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Fiscal Deficit and Debt during 90s
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
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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

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Fiscal Indicators Post -reform
Revenue deficit declined and attained the status
of revenue surplus during 2005-06
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Interest Rate and GSDP in post- reform
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Impact on Expenditure Variables

• Decreasing public expenditure

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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
  Governments with drawl from investment
  activities
• Significant fall in the Social Sector
  Expenditure(SSE) expressing reduced pro-poor
  allocation

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

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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.

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TSE as a percentage of GSDP
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COMPOUNDED ANNUAL GROWTH RATE (CAGR)
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Elasticity of Variables
Elasticity gt 1 Elastic, lt1 Inelastic, 1
Unitary elastic
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Thank you