On February 26, even before the dust had settled in Parliament, media headlines screamed: "46 per cent of outlays for infrastructure." Based on this headline, commentators, for the next few days, mouthed the common refrain that this Budget was truly weighted towards infrastructure development, and that it marked an epochal shift. Was it?
While the dust was settling, Bidisha Ganguly, economic research head, the Confederation of Indian Industry (CII), made a quick dive for relevant statistics and came up with a few home truths. There evidently is no epochal shift on the 46 per cent of Plan allocation. Infrastructure allocations had touched a high of 48.6 per cent in 2005-06.
But yes, there has been a staggering increase of Rs 0.87 lakh crore for infrastructure, from Rs 0.86 lakh crore in 2007-08 (the first year of the 11th Five Year Plan) to Rs 1.73 lakh crore in 2010-11. This clearly underscores the UPA government's commitment to put its money where its mouth is. To understand the scale, note that this increase of Rs 0.87 lakh crore is equal to what is currently earmarked for paying salaries and other current expenses of the three armed forces of India.
Rural development and infrastructure have clearly been the thrust areas of the UPA's governance plank. The steep rise in allocations for infrastructure in recent years is clear.
|ALLOCATIONS FOR INFRA IN THE UNION BUDGET|
(Rs lakh crore)
|As % of |
|2001 - 02||0.34||33.9|
|2002 - 03||0.36||31.8|
|2003 - 04||0.54||44.9|
|2004 - 05||0.6||41.5|
|2005 - 06||0.7||48.6|
|2006 - 07||0.81||46.9|
|2007 - 08||0.86||41.9|
|2008 - 09||0.97||39.8|
|2009 - 10||1.55||47.7|
|2010 - 11||1.73||46.5|
A few perspectives on this are in order:
Perspective one: The total size of the Union Budget is Rs 11.09 lakh crore. The infrastructure allocation is thus 16 per cent of the Union Budget.
Perspective two: The Union Budget is split between non-Plan and Plan expenditures. An amount of Rs 7.36 lakh crore has been allocated towards the non-Plan expenditure and Rs 3.73 lakh crore are allocated towards the Plan expenditure. Infrastructure development falls into the Plan expenditure category.
Perspective three: Of the Rs 3.73 lakh crore of Plan expenditure, the infrastructure allocation is Rs 1.73 lakh crore. This is the 46 per cent of Plan allocation that is being applauded.
The question then is: What is this Rs 1.73 lakh crore, or 46 per cent, composed of.
|OUTLAYS FOR INFRA UNDER PLAN EXPENDITURE|
|Central Plan Outlay (Budget Support) |
on Infrastructure (including others)
|Ministry of Civil Aviation||200||190||190||2,000|
|Ministry of Communication and IT||2,115||2,655||3,581||5,320|
|Ministry of Housing and Urban Poverty Alleviation||500||850||850||1,000|
|Ministry of Power||5,483||6,000||9,230||10,630|
|Ministry of Road Transport and Highways||12,499||13,450||15,450||18,000|
|Department of Rural Development||27,500||31,500||62,670||66,100|
|Department of Drinking Water Supply||7,560||8,500||9,200||10,580|
|Ministry of Urban Development||2,300||2,500||3,060||5,400|
|Central Assistance for States and UTs |
on Infrastructure (including others)
|MPs Local Area Development Scheme||1,580||1,580||1,580||1,580|
|Accelerated Irrigation Benefit Programme |
and other water source programmes
|Roads & Bridges||1,512||1,606||1,989||1,819|
|Backward Region Grant Fund||5,800||5,800||5,800||7,300|
|Annual capital allowance for other project||0||0||1550||1000|
|Total spending on infrastructure||86,000||96,844||1,55,133||1,73,554|
Some conclusions are in order.
One: At some stage, a certain amount of hair-splitting is indeed required to determine how much of the allocations actually goes into creation of infrastructure assets. For that, we will have to wait till the government gets its act together on collecting and disseminating statistics on gross capital formation in infrastructure. Currently, there exists a certain amount of confusion because "revenue expenditure" and "capital formation" often get blurred in the statistics. For example, the allocation of Rs 40,100 crore for the National Rural Employment Guarantee Scheme (NREGS) in the Rural Development Section, does not all go towards creating infrastructure. But this is the way the finance ministry currently "defines" infrastructure!
Two: The break-up of the outlay across different heads of expenditure provides some interesting insights:
Three: As per the 11th Plan, the nation needs $500 billion (Rs 22.5 lakh crore), or $100 billion per annum. This translates into a requirement of Rs 4.5 lakh crore per annum. Of this Rs 4.5 lakh crore, the Union Budget is able to subscribe to Rs 1.73 lakh crore, or roughly 38 per cent. Well, that is very much in order, considering 30 per cent is slated to come from public private partnerships (PPP), and the balance of 32 per cent from states and off-Budget resources.
Thus, while infrastructure outlays account for 15 per cent of the overall Budget and 46 per cent of Plan outlay, it is roughly 38 per cent of what the nation needs every year to support the Eleventh Plan vision. To this extent, the government needs our whole-hearted appreciation for internal consistency, and requires us to stand firmly for the infrastructure-building imperative.
The infrastructure story is hopefully feeding into the India (gradually) shining story.