Editorial: Spend More Wisely

The latest Report of the Comptroller Auditor General of India for the Government of Sikkim [for the year ended 31 March 2011] stresses that the State needs to accord higher priority to its developmental expenditure. 
Developmental Expenditure, as the name suggests, constitutes that part of the annual budget invested on education, medical care, public health, labour and employment, agriculture, cooperation, irrigation, transport, communication etc., making this expenditure the main focus of planning since it directly addresses the aspirations of the citizens. Although this expenditure has leapfrogged from Rs. 944.80 crore in 2006-07 to Rs. 1,708.44 crore in 2010-11, its aggregate share of government expenditure has come down from 72.62% [in 2006-07] to 69.20% in 2010-11. The other direct investment the State makes towards boosting the economy is Capital Expenditure which is the investment made towards acquiring or creating assets of material character, infrastructure creation in other words. In 2010-11, this segment was a slim 18.27% of the total expenditure, with Revenue Expenditure [expenses towards normal running of government departments and various services, debt servicing etc; broadly speaking, expenditure which does not result in creation of assets] constituting 81.5% of the total budget, burgeoning by Rs. 182.90 crore in the financial year when capital expenditure fell by Rs. 197.46 crore. Economic terms can be confusing, and when it comes to outlining the budgetary allocations in this manner, they become even more so because the different heads overlap into each other. So here’s one more which could either clear the picture or confound the projection even more. 66.44% of the State’s expenditure in 2010-11 was in the Non-Plan segment. To understand Non-Plan expenditure, one needs to understand Plan first. Plan expenditure refers to the expenditure incurred by the government on new and continuing programmes and projects [usually begun on the recommendations of the Planning Commission]. Non-plan expenditure is everything else, a generic term used to cover all the expenses which are obligatory in nature like debt servicing, pension payments, law and order and generally classified to include expenses required to keep the government running. As mentioned earlier, these are not watertight segments and overlap into each other, but even as ballpark figures, provide a general idea of how the government spends and what its priority sectors are. Before one begins speculating that part of the Non-Plan expenditure might have gone towards development, hold no such aspersions- committed expenditure [interest payments, salaries & wages, pensions and subsidies] comprised 92.56% of Non-Plan expenditure.
For all the data one might crunch or economic theories one may throw, the bottom line is that the test of public expenditure is the amount of satisfaction it gives to the people with the quantity or quality of services it makes possible. Substantial crores flow out of the state exchequer towards payment of salaries and wages, so let’s see how far the buck travels on that count. Revenue Expenditure [expenses towards normal running of government departments and various services, debt servicing etc; broadly speaking, expenditure which does not result in creation of assets] had a predominant share of the total expenditure in 2010-11 at Rs. 2,011 crore - 81.50% of the total expenditure. Salaries and wages, at Rs. 882.31 crore, constituted 43.85% of the entire revenue expenditure bill, significantly higher than the norm of 35% recommended by the Twelfth Finance Commission. Many already begrudge the handsome salaries and wages the government pays out to its employees, but maybe it is time to make a different approach. While this confounding economic model - of the government paying more than the investment to its employees to oversee implementation - may be the one there is no escaping from anymore, what could be possible is to demand and achieve better services. For example, of the Rs. 451 crore invested by the State Government by way of Capital Expenditure in 2010-11 to create assets, Rs, 294.16 crore was blocked in 138 incomplete projects as on 31 March 2011. With the Non-Plan component, including revenue expenditure, already eating into the funds available to invest in sectors and infrastructure which directly affect the people, it is important that what is left over is handled judiciously and projects completed in time to avoid time and cost overruns. On its part, the government can take the first step by establishing a system of proper accounting and monitoring and the people by insisting on more accountability.