Indian Public Policy Review

This paper looks at reported subsidy spending in India, in light of ongoing central initiatives to build transparency and accessibility of information related to financial operations and decisions of public expenditure. Subsidies have become a prominent policy tool for public resource allocation in India. However, without a clear definition and reporting of ‘subsidy’, the term tends to be loosely used to encompass many schemes and programs of the Union and state governments, including the recent rise in ‘freebies’, which need to be clearly differentiated. Moreover, many forms of financing through special securities and extra-budgetary resources have been used to finance subsidy spending, making it difficult to comprehensively define and measure subsidy expenditure in the budget and other annual accounts. These issues relate to the existence of data gaps in India’s fiscal reporting and accounts, which are a critical area of concern due to the large financial implications of subsidy expenditures. This paper identifies how subsidy spending has been accounted in India and explains the resultant data gaps that render such fiscal data inconsistent and incomparable across levels of government. The paper seeks to understand whether the present reporting of subsidy spending in the finance accounts and budget documents provide clear and comprehensive information about budget allocations, revenue sources, expenditures, and other related financial matters. It then proposes steps in the way forward to improve their transparency.

The key focus of the study is to assess the role of fiscal transfers from the Union government compared to States’ own revenue in explaining their healthcare spending. The study found that both States’ own revenue and unconditional transfers impact their health spending. However, own revenue was more significant than unconditional fiscal transfers in explaining health spending by economically well-off states. In contrast, unconditional fiscal transfers were the sole factor for health spending by economically weaker states. Generally, States were substituting their non-National Health Mission (NHM) health spending with NHM health spending. However, this substitution was much less pronounced in economically well-off states compared to economically weaker states. Post-NHM, there was a slight increase in horizontal inequalities. The intricate interplay between fiscal transfers and health spending by Indian states underlines the need for nuanced policy changes. A differentiated strategy is essential for economically well-off and economically weaker states to improve healthcare spending in the country. 

Fiscal credibility in India has increased markedly in recent years underpinned by improved transparency (off-budget liabilities coming on budget), conservativeness (in the budgeting of revenues) and marksmanship (in the attainment of deficit targets). Yet, like around the world, India is left with higher public debt levels post-pandemic, and, despite ongoing fiscal consolidation, Combined Debt/GDP again inched up last year. We therefore propose a new, post-pandemic fiscal architecture built on five pillars that is anchored in debt and is holistic (encompassing centre and states), dynamic (responsive to changing macro conditions and market signals), sustainable and conservative  --  so as to help create fiscal space to respond to future shocks.

Trade policy is not gender neutral. As a matter of fact, it cannot be. To counter the inherent disadvantages of social, institutional, and structural constructs, as well as access and capacity constraints specific to women, policy,  including trade policy, needs to actively and continuously neutralize these disadvantages, and create an ecosystem where men and women are on the same playing field in economic activity, and therefore, in trade. It needs to be gender-balancing, at the very least.  It needs to effectively address the inherent gender-specific limitations to access and capacity that women face in participating in trade. This requires better representation from women, effective stakeholder engagement, and continuous collaboration between the public and private sectors, and must leverage the strength, reach, and scale offered by digital technologies and platforms.

“Public Expenditure in India: Policies and Development Outcomes” by Gayithri Karnam, offers an empirical understanding of historical trends and composition of public expenditure in India at the central and the sub-national levels; the effectiveness of public expenditure control systems and accountability issues; the political economy of spending decisions; public expenditure reforms undertaken in India; and international best practices that can guide the course-correction process in India.