Thursday, March 28, 2024
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Decoding the Union Budget for North-East

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By Sridhar Kundu

The budgetary allocation for the Ministry of Development of North-East Region (MDONER) in the union budget of the Government of India has not crossed over 1 percent. In 2015-16, the total allocation was Rs. 1986 crores, which was about 0.11 percent of the total union budget. In 2016-17, this share went up to 0.13 percent. Since 2016-17, there is a progressive reduction of budget allocation for MDONER, and it came down to Rs. 1853 crores i.e., about 0.05 percent in 2020-21. During the post-covid19 period, the budget allocation for the ministry went up by small margins. However, a major correction happened in the union budget for 2023-24.
Total budget allocation under the MDONER has increased above 200 percent in 2023-24. In 2022-23(BE), the total allocation was Rs. 2800 crores and it went up to Rs. 5892 crores in 2023-24(BE). The budget share reached 0.13 percent in 2023-24 FY.
Since its formation in 2004, the MDONER carries the responsibility of planning, executing, and monitoring the development schemes and projects in eight northeastern states. Budget allocation under the ministry is used for development purposes in the region. As far as the budget allocation in the union budget 2023-24FY is concerned, a few points attract special attention.
First, in the union budget 2023-24, the composition of budgetary allocation stands different from the previous years. Capital expenditure is given the highest priority in the total budgetary provision under the MDONER.
As per the structure of the budget accounting process, total expenditure is broadly divided into two heads, Revenue Expenditure (Revex) and Capital Expenditure (Capex). Spending under the head of maintenance of existing establishments is known as Revenue Expenditure. For Example, salary, subsidies, interest payment, etc. Spending under the head of the creation of new establishments is known as Capital Expenditure. For example, creating new schools and hospitals, setting up manufacturing units, etc. Capital spending as a result helps in gross value addition to total output and in creating new employment opportunities. Public spending on capital formation helps as a push factor for economic growth and it is needed during an economic slowdown.
As far as the budget allocation under MDONER is concerned, among these two major heads of expenditure, the Capex share in total expenditure in 2023-24FY stands at 70 percent. However, in 2022-23(RE), this share was just 27 percent and in 2021-22, the share was even less i.e. 25 percent.
There is a massive increment in the Capex in 2023-24FY. In 2022-23(BE), the total Capex was only Rs. 659 crores and it increased to Rs. 4094 crores in 2023-24(BE). The growth in Capex for the northeast is above 500 percent in 2023-24 FY.
Second, a major share of the rise in budgetary allocation under MDONER went towards the North-East Special Infrastructure Development Scheme (NESIDS). In 2023-24 (BE), the total budgetary allocation under the scheme is Rs. 2491, the largest allocation since the inception of the scheme in 2018. In 2018-19, the total budgetary allocation under the NESIDS was only Rs.180 crores. In the current year i.e., 2022-23(RE), the total allocation is Rs.1273 crores.
The important aspect of the budgetary allocation under NESIDS is its composition. A larger share of total spending under the scheme is provisioned under the capital head. Total Capex is fixed at Rs.2446 crores which is about 98 percent of the total allocation proposed under the scheme in 2023-24(BE).
Briefly, NESIDS is a development scheme under which financial assistance is provided for projects of physical infrastructure such as road connectivity, supply of power, and drinking water. The scheme also emphasizes on developing social sector infrastructure such as schools, hospitals, etc. A big push for capex under this scheme aims at accelerating the pace of progress of the projects sanctioned across all eight states in the region.
The third but, important allocation is made under the head of the Prime Minister Development Initiative for the North-East Region (PM-DevINE). This scheme was introduced in 2022-23 and the total budgetary allocation under the scheme was Rs. 400 crores out of which the Revex was Rs. 50 crores and the rest Rs.350 crores allocated under Capex.
In 2023-24(BE), total allocation under PM-DevINE increased to Rs.2200 crores with a rise above 500 percent. A major share of total expenditure is allocated under the head of Capex i.e. above 70 percent.
Briefly, PMDevINE is implemented through the North-Eastern Council/ Central administrative Ministries / Departments to fund infrastructure, in the spirit of PM GatiShakti, and social development projects based on the felt needs of the Northeast region. This scheme aims at enabling livelihood activities for youth and women, filling the gaps in various sectors. A higher rise in the Capex aims at building up new infrastructure to get easy access to the rural masses in the hilly areas.
Last but not the least, the budgetary provisions for public sector undertakings (PSUs) such as Northeast Regional Agricultural Marketing Corporation and, Northeast Handloom and Handicrafts Development Corporations do not see any change. In 2023-24(BE), the total budgetary provision for these two PSUs stands at Rs. 9.7 crore which is the same as in 2022-23(RE). However, in 2021-22, the budgetary allocation was a little higher at Rs. 15 crores.
The union budget 2023-24FY is undoubtedly a budget aims at capital formation. Total Capex in the budget for the country went up by 37 percent from its previous year i.e. 2022-23(RE). The broader objective of the government is to lay out a plan for medium- and long-term growth which would take the country forward towards sustainable development. The budgetary provision under MDONER and its composition is certainly a reflection of the overall macroeconomic objective of the government.
(Dr Sridhar Kundu is Senior Analyst, Bharti Institute of Public Policy, Indian School of Business, Mohali)

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