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Welfare spending has been getting a regular pruning

This year's Union Budget invited criticism from experts due to a decline in budget allocations for welfare schemes in real terms. Welfare spending


  • This year’s Union Budget invited criticism from experts due to a decline in budget allocations for welfare schemes in real terms.
  • For post-pandemic recovery welfare spending should have been a priority but like last year’s budget this budget too focused on capital expenditure at the cost of social spending.

 Understanding Social Spending and Capital Expenditure:-

  • Social Spending
    • Social expenditures are a measure of the extent to which countries assume responsibility for supporting the standard of living of disadvantaged or vulnerable groups.
    • Social expenditure comprises cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes.
    • Government has done well in providing tangible goods like cooking fuel, electricity, and promoting financial inclusion of women. However, there has been a decline in traditional government services like primary education and child nutrition.
    • During pandemic, significance of social security programmes was acknowledged by the government when it raised the Budget allocation for all the social schemes to 4.3% of GDP; but the allocation if again back to just 1.5%.

This year’s Union Budget was criticised by experts over a decline in allocations for welfare schemes in real terms, at a time of post-COVID-19 recovery when welfare spending should have been a priority. Similarly, last year’s Budget too ignored social spending in favour of capital expenditure.

Other Issues:-

  • Migrant workers: MGNREGA expenditure as a share of GDP went from 0.26% in 2014-15 to 0.20% in 2023-24. For NFSA it went to 0.65% this year from 0.94% in 2014-15.
  • Stagnant HDI: India Human Development Index is stagnant at rank of 132 and rising malnutrition levels. It is difficult for India to be a superpower with an uneducated and unhealthy population.
  • Social security: According to the World Social Protection Report by the ILO, only 24.8% of Indians are covered by at least one social security scheme against the Asia-Pacific average of 44%.

Since the 2021-22 Budget, the Union government has steadily pivoted from welfare spending to capital expenditure (capex). The first big push came in FY 2021-22 when allocations for capital expenditure increased from 1.83% of the Gross Domestic Product (GDP) in 2020-21 to 2.49%. This reached 2.91% in FY23, and finally 3.3%, as per Wednesday’s announcement.

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