WELFARE SPENDING &

BUDGET IN INDIA
B.Sc Economics (SY)
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Ananya Jalan - 76012000281

Abhinav Jain - 76012000209
Gaurav Agarwal - 76012000278
Rohit Shelar - 76012000207
Surbi Mantri - 76012000070
Srinidhi Iyer - 76012000119
Sanidhya Patni - 76012000165
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Introduction
Welfare Spending includes spending on a range of things, such as looked-after children and
long-term care for the elderly, the sick, and disabled. Unlike other elements of "social protection"
it is not a cash transfer payment and in many ways has more in common with spending on health
than spending on social security benefits.
Public welfare expenditures include cash assistance through Temporary Assistance for Needy
Families (TANF), Supplemental Security Income, and other payments made directly to
individuals as well as payments to physicians and other service providers under programs like
Medicaid.1
Social security and welfare government revenue expenditure India 1990-2018. The budget
estimates of revenue expenditure on social security and welfare of India's central and state
governments amounted to more than 1.6 trillion Indian rupees.
Census does not separate Medicaid spending into its own category. Instead, most Medicaid
spending is accounted for under the public welfare category with some spending counted as
hospital expenditures.
In the last 16 years, the allocation to the Department of Health and Family Welfare has increased
from Rs 11,366 crore in 2006-07 (revised estimate) to Rs 71,269 crore in 2021-22 (budget
estimate). Over the period 2006-22, the Compound Annual Growth Rate (CAGR) has been
13%. CAGR is the annual growth rate over a certain period of time.
The utilization has been over 100% in the last five years, i.e., the Department exceeded its
budget estimates. In 2020-21 (revised estimates), the Department is expected to exceed the
budget estimate by 21%. Overall, the Ministry expected to have additional spending of Rs
15,817 crore at the revised stage in 2020-21. Out of this, Rs 14,217 crore was spent for the
COVID-19 emergency response and health system preparedness package and COVID-19
vaccination for healthcare and frontline workers.
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Composition of Welfare Spending

Table: Composition of Expenditure on Social Services
(Revenue and Capital Accounts)
(Percent to total expenditure on social services)
1990-98 1998-2004 2004-08 2008-10 2010-14
Components Average
Expenditure on
Social Services
(a to k) 100 100 100 100 100
(a) Education,
Sports, Art and
Culture 51.9 52.6 47.3 44.3 46.9
(b) Medical,
public Health
and Family
Welfare 15.7 14.2 12.9 12 12.3
(c) Water
Supply and
Sanitation 7.3 7.6 8.2 6.7 4.6
(d) Housing 2.9 2.9 2.9 3.1 2.9
(e) Urban
Development 2.4 3.2 5.4 8.7 7.3
(f) Welfare of
SCs, ST and
OBCS 6.6 6.3 7 6.9 7.5
(g) Labour and
Labour Welfare 1.4 1.1 1.1 1 1.1
(h) Social
Security and
Welfare 4.4 4.7 6.5 9.4 10.3
(i) Nutrition 2.2 2.2 2.5 3.1 3.3
(j) Expenditure
on Natural
Calamities 2.8 3.3 4 2.7 2.1
(k) Others 2.4 2 2.2 2.2 2
Source: State governments’ budget documents.
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Figure: Composition of Expenditure on Social Services

The above table and graph highlight the major components of welfare spending undertaken by
the government of India. The data shows the average spending on each component over 5 time
periods. One can observe that spending on education, sports art and culture is significant
throughout and that on labor and labor welfare is the least. A constant increase in spending on
Social Security and Welfare schemes can be seen over the years. Urban Development received
high funds during the 2008-10 but lower funds during the next four years.
Upon analysing the expenditure on social services by the government, it is observed that
education has been a priority but at the cost of other social aspects like medical services, water
supply, nutrition, etc., This highlights the skewed distribution of government expenditure on
welfare spending.

The Rationale of Welfare Spending

Almost 18% of the country’s GDP is spent on welfare. A lot of people have pointed out over the
years that a certain percentage of this sum goes to “the rich” for tax breaks. There is a large
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amount of waste in these programs. Welfare is government money spent on the poor, and it's one
of the types of spending that conservatives are most eager to eliminate. The idea is that welfare
programs represent a transfer of wealth to people who don't deserve it. Food stamps, as they are
commonly known, allow recipients to spend their money on junk food and other luxury items,
which some conservatives have referred to as a form of "welfare for fat cats." In addition, they
say there is too much bureaucracy involved in administering welfare programs, and that people
are taking advantage of them by filing fake tax returns. It's true that some people take advantage
of the welfare system.

The difference between this and the rest of government spending, however, is that in many cases
there is a direct victim. Certain contractors may be scamming the government on a project to
which they are contracted, but if they do, no one else is going to suffer for it. And as far as fake
tax returns go, this is only an issue because people have something to hide. People don't usually
try to cheat their way out of tax liability unless they are trying to conceal their wealth from the
government or others from whom they wish to keep it secret.

Pros of welfare spending:

• It can help to reduce poverty
• Better access to education
• Help in providing food to homeless people
• Access to medical treatment
• Help mitigate the income and wealth inequality problem

Cons of welfare spending:

• Quite costly
• People consider it to be questionable
• Lot of corruption
• Welfare significantly differs across states
• Applying for these programs are very tedious and time consuming
• People may misuse the programs
• Welfare addresses the symptoms, not the causes
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The Proportion of GDP spent in Welfare

The recent global human development index ranked India at 129 among 189 countries
underlining why the country must invest more in the social sector if it seeks to gain from its
demographic bulge.

India’s social sector expenditure has grown in snail pace with just 7.7% of the gross domestic
product (GDP) going to the sector that encompasses crucial areas like education, public health,
sanitation, labour welfare among others, data shared in the economic survey 2019-20. It showed
the slow pace of social sector expenditure in India and counted several central government
schemes in public health, education, and sanitation that it argued is helping the common people
across the socio-economic ladder. Some of the milestones to be achieved in this journey are
access to electricity, a clean cooking facility, and housing for all in the coming years.

Public spending on social sector was increased in 2020-21 to mitigate the hardships caused by
the pandemic and the loss to livelihood due to the lockdown. The development and welfare
schemes implemented by the government over the years together with the relief packages
announced by the government enabled the country to endure the impact of the COVID-19
pandemic and led to a V-shaped economic recovery. During the lockdown, online schooling took
off in a big way and the government introduced several measures to make online education
accessible to all children

Welfare Programs in India

Right from the dawn of independence Indian policymakers have professed to promote equitable
economic development in the country. This has involved balancing economic growth with
reduction in the acceleration of inequality and augmented social protection of the poor. The
nomenclature for this growth strategy has changed and, in its current version, is called “inclusive
growth”. Such a strategy has been enshrined in a number of official documents including the
12th Five Year Plan. Both high economic growth and effectively functioning welfare schemes
are central to the agenda of inclusive economic growth. Indeed there is a symbiotic relationship
between the two. High economic growth both pulls up people from below the poverty line and
generates additional resources for financing welfare schemes and thus provides social protection.
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Welfare schemes protect the poor and disadvantaged and equip the labor force in the lower rungs
of the skill/economic welfare totem pole to better participate in the process of accelerating
economic growth.

Objectives of the Union Government Schemes in India

There are several different schemes launched by the different Ministries of the Union
Government. Each scheme has its own set of objectives. But the main objective of these schemes
is to provide social, financial and economic welfare to the citizens of India. The general
objectives of the social-economic and financial schemes are –
• Provide social security measures such as pensions, insurance, maternity benefits, housing
etc.
• To improve the quality of the life of the people.
• Upliftment of the poor.
• Development of rural and backward areas.
• Reducing the economic inequality between different sections of society.
• Empower women for their better participation in society.
• To provide employment opportunities.
• To provide education and training to the weaker sections of the society.
• To provide financial security to the vulnerable sections of society.
• To provide financial assistance to women, small businesses and weaker sections of
society.

Benefits of Union Government Schemes for Individuals

There are many schemes launched by different Ministries of the Union Government for the
benefit of the citizens of India. The schemes for individuals mainly focus on the vulnerable
sections of the society such as rural and urban poor households, women, SC and ST, senior
citizens, domestic workers etc. Each scheme concentrates on providing different socio-economic
or financial welfare to the people.
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The government schemes are beneficial to individuals for obtaining training and employment
opportunities. Some schemes help in availing loans at a minimum rate of interest, opening a bank
account for individuals, availing financial assistance to meet expenses of an individual, obtaining
insurance and enrolling for pension by paying a minimum amount.

Some of the schemes concentrate on development and empowerment of woman. It provides

financial assistance to the woman for starting their own business. There are schemes which
provide basic education to the woman, maternity benefits and rehabilitation facilities.

Some schemes for the individuals concentrate on providing basic necessities to the individuals
such as LED lights, drinking water, distribution of food grains, housing, clean environment etc.
Benefits of Union Government Schemes for Businesses
The Union Government has launched many schemes specifically to help the businesses in India.
These schemes allow for ease of business and in turn, strengthen the economy. The schemes
launched for businesses helps them by providing financial assistance and technical assistance for
their growth.

Many schemes for businesses provide benefits for obtaining loans at subsidised rates, obtaining
credit guarantee on loans, subsidy for technological upgradation, support through venture capital
etc.

Many recent schemes promote starting own businesses on a small scale basis by providing
entrepreneurial and training facilities, building manufacturing infrastructure, incentives for
women and economically backward sections to start their own business, a digital platform for
accessing global markets and digital documentation etc.

The Pradhan Mantri Jan Dhan Yojna:

It offers unbanked persons easy access to banking services and awareness about financial
products through financial literacy programmes. In addition, they receive a RuPay debit card,
with inbuilt accident insurance cover of Rs. 2 lakh, and access to overdraft facility upon
satisfactory operation of account or credit history of six months. Census 2011 estimated that out
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of 24.67 crore households in the country, 14.48 crore (58.7%) had access to banking services. As
on 27.3.2019, the number of accounts has grown to 35.27 crore.
For creating a universal social security system for all Indians, especially the poor and the
under-privileged, three Social Security Schemes in the Insurance and Pension sectors were
launched in May, 2015.- Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha
Bima Yojana, Atal Pension Yojana.
PMJDBY- 0.01CR BE 2021-22

The Jan Dhan Yojna:

It aims to help such persons and make sure they can get affordable financial products like bank
accounts, remittances, credit services, pensions and insurance. Announced by Prime Minister
Narendra Modi on 15th August 2014, the scheme saw a record number of newly opened bank
accounts on the first day of its launch.
Pradhan Mantri Mudra Yojana: Under the scheme a loan of upto Rs. 50,000 is given under
sub-scheme ‘Shishu’; between Rs. 50,000 to 5.0 Lakhs under sub-scheme ‘Kishore’; and
between 5.0 Lakhs to 10.0 Lakhs under sub-scheme ‘Tarun’. Loans taken do not require
collaterals. These measures are aimed at increasing the confidence of young, educated or skilled
workers who would now be able to aspire to become first generation entrepreneurs; existing
small businesses, too, will be able to expand their activates. As on 31.03.2019, Rs. 3,21,722
crores sanctioned (Rs. 142,345 cr. - Shishu, Rs. 104,386 cr. Kishore and Rs. 74,991 cr. - Tarun
category), in 5.99 crores accounts
PMMY- 2500CR BE 2021-22

Pradhan Mantri Vaya Vandana Yojana:

The ‘Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been launched by the Government to
protect elderly persons aged 60 years and above against a future fall in their interest income due
to uncertain market conditions, as also to provide social security during old age. The scheme is
implemented through the Life Insurance Corporation of India (LIC) and open for subscription up
to 31st March, 2023.
PMVVY offers an assured rate of return 7.40% per annum for the financial year 2020-21 for
policy duration of 10 years. In subsequent years, while the scheme is in operation, there will be
annual reset of assured rate of return with effect from April 1st of the financial year in line with
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applicable rate of return of Senior Citizens Saving Scheme (SCSS) up to a ceiling of 7.75% with
fresh appraisal of the scheme on breach of this threshold at any point.
PMVVY- 345.02CR for 2021-22

The Stand-Up India scheme:

Stand Up India scheme caters to promoting entrepreneurship amongst women, SC & ST category
i.e. those sections of the population facing significant hurdles due to lack of advice/mentorship as
well as inadequate and delayed credit. The scheme intends to leverage the institutional credit
structure to reach out to these underserved sectors of the population in starting greenfield
enterprises. It caters to both ready and trainee borrowers.
The scheme theoretically provides benefits to the SCs and STs but research has established that
around 20% of the funds allocated for the welfare of SCs between 2017-18 and 2020-21 were
left unused by Multiple union ministries and departments. This has led to a proposal for a change
in the framework governing allocation, one where uniform distribution across
ministries/departments is switched with investments in high-priority areas.
STANDUP- 100CR BE 2021-22
Policy Detail:
Stand Up India aims to empower every Indian and enable them to be independent. The
programme recognises challenges faced by the Scheduled Caste (SC), Scheduled Tribe (ST) and
women entrepreneurs in setting up enterprises, obtaining loans and other support needed from
time to time for succeeding in business. The programme, consequently, aims to create an
ecosystem that facilitates and continues to provide a supportive environment for doing business.

The Ministry of Skill Development & Entrepreneurship

It was set up to drive the ‘Skill India’ agenda in a ‘Mission Mode’ in order to converge the
existing skill training initiatives and combine scale and quality of skilling efforts with speed.
Under the National Skill Development Program, the Ministry of Skill Development &
Entrepreneurship is responsible for the Skill India initiative.
The important initiatives are:
• National Skill Development Scheme
• Pradhan Mantri Kaushal Vikas Yojana
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• National Policy for Skill Development & Entrepreneurship

• Skill Loan Scheme
This mission was launched for creating convergence across various sectors and States in terms of
activities related to skill development training. Along with consolidating & coordinating skilling
efforts, the mission expedites decision making across sectors to achieve quality skilling on a
large scale.

Objectives of National Skill Development Mission

• Implementing the National Skills Qualifications Framework will allow long-term

opportunities and short-term training, lead to productive employment and career improvement.
• Using a framework to maintain the balance between industry and employer demand and
lead the workforce to a sustainable livelihood because of determined training.
• Providing facilities for re-skilling and up-skilling to the workforce of the unorganized
sectors of the industry.
• It ensures high-quality training standards through high-quality teaching and benchmarked
institutions according to national and international standards, resulting in a highly-skilled
workforce and global job opportunities.
• It supports the weaker and disadvantaged people of society through focused outreach
programs and targeted skill development activities.
• It enables pathways for transitioning between a vocational training system and the formal
educational system by a credit transfer system.
• It maintains a national database, known as the Labour Market Information System
(LMIS), which will act as a portal for matching the country’s demand and supply of skilled
workforce.
• On the other, it will also serve as a platform for monitoring the performance of existing
skill development programs running in every Indian state.
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Overtime Budget Responses

In her Budget speech, finance minister Nirmala Sitharaman said the Centre is focusing on
“boosting spending and enhancing consumer spending”.
Like last year, her long speech didn’t contain too much detail on how much the government was
actually planning to spend under different heads in the coming year, or how much it spent from
the allocated amount from the previous financial year.
Here, in charts, break downs show how much the Centre promised to spend on certain flagship
welfare schemes last year, how much it actually expects to spend, and how much it has promised
to spend in the year ahead.

1. Ayushman Bharat
This is the Narendra Modi government’s flagship health scheme, launched with much fanfare in
September 2018. It has two components: the Pradhan Mantri Jan Arogya Yojana, which is
supposed to provide health insurance cover of Rs 5 lakh to 10 crore families, and the creation of
“health and wellness centres”.
Though the government planned to spend Rs 6,556 crore on Ayushman Bharat in 2019-20, it
ended up spending only Rs 3,314 crore. For the year ahead, the Budget allocates Rs 6,429 crore.

2. PM Kisan
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That PM Kisan spending would not keep up with the allocation was clear from last year. Under
the scheme, farming families were promised Rs 6,000 per year as income support from the
Central government. It was launched in February 2019, in the run up to the Lok Sabha elections.
While the government had set aside Rs 75,000 crore for the scheme in FY’19, it spent only Rs
54,370 crore. This year again, the government has allocated Rs 75,000 crore for the scheme.

3. Pradhan Mantri Fasal Bima Yojana

The other much-touted Modi government scheme for farmers is the Pradhan Mantri Fasal Bima
Yojana (PMFBY) or crop insurance scheme. The government spent almost all of the money
allocated under the scheme last year, and has increased the spending for the year ahead.
But is the scheme working? Reportage and analysis showed Insurance companies have missed
the deadline to recognise and pay claims worth over Rs 5,000 crore made by farmers, and 40%
of claims went unpaid. While increasing the spending, finance minister Nirmala Sitharaman
made no mention of what the government would do to make the scheme more effective.
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4. Swachh Bharat Mission

The Swachh Bharat Mission, focused on sanitation, is what the Modi government calls one of its
success stories. While it allocated Rs 12,644 crore for the scheme (if you add the rural and urban
components) in 2019-20, the revised expenditure stands at Rs 9,638 crore. The government plans
to boost spending in the coming year, at Rs 12,294 crore, although it is possible that expenditure
will wind down as its progress improves.
The government’s “successes” under the SBM have been questioned, however. In a series of
reports from Uttar Pradesh, for instance, it was found that several toilets existed only on paper,
numbers were being fudged and households excluded.

5. Pradhan Mantri Awas Yojana

Under the Pradhan Mantri Awas Yojana (PMAY), launched in 2015, the Modi government says it
will build 20 million affordable houses by 2022. According to the government, 3.2 million
houses have been built in urban areas and 4.73 million in rural areas.
The Centre’s revised expenditure under the scheme matches the budgeted expenditure almost
exactly. This year’s budgeted expenditure has been increased to Rs 27,500 crore.
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6. AMRUT and Smart Cities

The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Smart Cities
Mission, which have been clubbed together in the Budget documents, are the Modi government’s
flagship urban development programmes. In her Budget speech on Saturday, Sitharaman said the
government will be designating five more Smart Cities in the country.
This year’s budget allocation is exactly the same as last year’s. It is much more, though, than the
revised estimate for last year – instead of Rs 13,750 crore, the government has brought the
estimate for 2019-20 down to Rs 9,842 crore.

7. MGNREGA
Even though activists have been repeating that current allocations for the Mahatma Gandhi
National Rural Employment Guarantee Scheme are far from enough and need to be increased,
the government has allocated less money to the scheme this year than last year’s revised
estimates.
The revised estimates from last year, it should be noted, is Rs 11,002 crore more than what was
originally budgeted.
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Conclusion
The case for a major role for the state in welfare depends both on facts and on value judgements.
In India a very large sum of the budget is spent on welfare schemes. Education and healthcare
are of primary concern which in return is helping the country’s economy to grow. The
government is launching new schemes for the needy frequently but the main problem arises in
the execution of these schemes. The promised amount of funds allocated towards a certain
welfare scheme is not used, rather just a fraction of that sum is actually put into use. Apart from
this, awareness amongst citizens is highly concerning. People are not aware about the benefits
they can avail and as a result these benefits are enjoyed by corrupt politicians in terms of
monetary gains. Even though the government is trying its best to improve the condition of the
needy, red taping and lack of awareness are the biggest hurdle this country needs to get past.