S.Mahendra Dev and Jos Mooij: Social Sector Expenditures And Budgeting: An Analysis of patterns and the Budget Making Process in India in the 1990s.

The paper discusses (a) patterns in social sector expenditures at both Central and State levels using central and state budget data (b) official justification of budget allocations analyzing budget speeches (c) the budget making process, largely based on interviews with policy makers, stakeholder groups and external observers, and using secondary material. While trends deal with both Central and State levels of social sector expenditures, the discussion on the budget justification and the budget making process focuses exclusively on the Centre.

The analysis of the trends reveals that not much priority is given in India to social sector expenditure. Since the mid-1990s, a higher proportion of government expenditure has been allocated to the social sector, as compared to the first years of the 1990s. Yet, at the same time, as a proportion of GDP, social sector spending has not increased. The levels in the 1990s were low, as compared to the 1980s, as compared to other developing countries (and certainly as compared to East Asian countries) and in relation to the international standards developed by the UNDP. The performance of the States has been even worse than the performance of the Centre, even though the States have the major responsibility.

The analysis of the budget speeches revealed that the poor are considered very important in the justification of the budgets. The official argumentation is that the poor would benefit from the economic reform process. Nothing however, is said about social inequality and redistribution of wealth.

The analysis of the budget making process reveals that the process is not very participatory or democratic. The role of the Finance Ministry in the process of plan and budget making has increased in the 1990s. Many policy makers and/or economic advisors to the government seem to regard the plan in general, or social sector spending in particular, as residual. The paper concludes that there is a need for stepping up social sector expenditure, but that this is unlikely unless something changes in the budget-making process (Working Paper No. 43).