Prepared By Centre for Budget and Governance Accountability, New Delhi

17 February 2009

The UPA Government had made several crucial promises to step up public investment in rural development, agriculture and the social sector. During its term, several important programmes and schemes were introduced and Union Budget allocations for the social sector were increased as compared to the previous years. The introduction of National Rural Employment Guarantee Act, Right to Information Act, National Rural Health Mission and Bharat Nirman were some major steps in positive direction which could transform the rural economy had they been implemented in right earnest.

The UPA Government also showed willingness to be accountable and transparent through introduction of some progressive steps in budgetary practices. Introduction of statements pertaining to Gender Budgeting, Child Budgeting and SCSP & TSP are steps in this regard. However, a lot more needs to be done as regards deepening of these efforts.

The Interim Budget for 2009-10 has been presented at a crucial juncture. The spectre of the deepest recession in history of capitalism is looming large on Indian economy. The votaries of free market are low on confidence by now. On the other hand, there is the need to beat popular refrain as the fifteenth Lok Sabha Elections is to commence in about two months.

Defying the corporate expectations, the government has not introduced any new stimulus package in the Interim Budget 2009-10. Need for the third stimulus package was very high because the magnitudes of previous two fiscal stimulus packages were inadequate and largely based on supply side measures. Instead of significantly stepping up public spending to generate demand, the government has focused more on bailing out the private sector with the hope that it will contribute to the growth in medium term. The analysis carried out by CBGA further points out that the government has relied mainly on infrastructure projects and a significant number of these being through Public Private Partnership (PPP). The PPP mode investment cannot be expected to safeguard the interests of the marginalised sections.

The UPA has cleverly dumped the FRBM Act targets (and rightly so!), to cope with the huge decline in revenue collections for the financial year 2008-09. This is in complete contrast to their eagerness to implement FRBM targets at a time when there was huge buoyancy of revenue collections and spending on social sectors could have been stepped up substantially. Many progressive economists and organisations like CBGA had earlier pointed out to the arbitrariness of the targets set under FRBM and sought to scrap the Act.

Another disturbing aspect of the UPA tenure was its tendency to undermine issues of fiscal federalism. During the period 2004-05 to 2007-08, the Gross Devolution and Transfers from

Centre to States have not shown any significant increase; on the other hand, conditional grants and transfers have been on the rise. In addition, States were severely stressed to meet the FRBM targets, resulting in limited space for their fiscal autonomy.

The Interim Budget has made no effort to increase spending on social sectors. The allocation on flagship schemes like SSA, NRHM and NREGA has remained stagnant as compared to 2008-09 RE. Rural employment generation could have been used as a shield to reduce the impact of recession on the rural population. In this context, it was crucial that the government increase the spending on NREGA substantially.

There have been substantive reductions in the already meager allocations for women in the Budget 2009-10. Allocations for schemes on ‘women’s welfare’ under the Ministry of Women and Child Development (MWCD) in 2009-10 are lesser than even the 2008-09 and overall these schemes have seen a reduction as steep as 50 per cent.

The UPA government needs to do a lot more to keep its promises made to the religious minorities in India. The overall allocations made under the Ministry of Minority Affairs (MMA) for implementing various schemes has declined steeply by 35 per cent in 2008-09 RE against the 2008- 09 BE. Further the 2009-10 Union Budget has only marginally increased the allocations for MMA by Rs. 3 crore.

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