Overview
The central government’s expenditure is presented and authorised by Parliament through the Union Budget every financial year. Article 113 of the Constitution requires all expenditure (except charged expenditure) to be submitted in the form of Demands for Grants (Ministry-wise) to Lok Sabha. The Demands for Grants are referred to the Ministries’ respective Departmentally-Related Standing Committee for further examination. Following this, they are discussed in Lok Sabha and approved. After Lok Sabha's authorisation of the demands, an Appropriation Bill is introduced and passed to permit expenditure out of the Consolidated Fund of India.
This document contains a short analysis of the Union Budget for 2023-24, and an assessment of the allocations made by 15 ministries, which account for 72% of the total union budget. This includes an analysis of key trends in expenditure, various schemes being implemented, and key sectoral issues.
The Union Budget 2023-24 was presented on February 1, 2023 by the Finance Minister Ms. Nirmala Sitharaman. It proposes to spend Rs 45,03,097 crore in the financial year. Out of the total expenditure, revenue expenditure is estimated to be Rs 35,02,136 crore (1.2% increase from revised estimates of 2022-23). Interest expenditure is 41% of revenue receipts. Capital expenditure is estimated to be Rs 10,00,961 crore, a 37.4% increase from revised estimates of 2022-23. The increase in capital expenditure is driven by higher outlay on transport infrastructure and capital loans to states. Revenue deficit in 2023-24 is targeted at 2.9% of GDP, which is lower than the revised revenue deficit of 4.1% in 2022-23. Fiscal deficit in 2023-24 is targeted at 5.9% of GDP, lower than the revised fiscal deficit of 6.4% in 2022-23.
Under the Finance Bill, 2023, a number of changes have been made to the new tax regime. The income limit to avail a rebate and not pay any taxes has increased from Rs 5 lakh to Rs 7 lakh. Further, the number of tax slabs have been reduced from six to five. The surcharge for the highest slab (income over Rs 5 crore) has been cut from 37% to 25%.
The highlights of expenditure of various ministry/department include the following:
Defence: The Ministry of Defence has been allocated Rs 5,93,538 crore which is the largest across all ministries and accounts for over 13% of the total expenditure of the central government. Over the last decade, the expenditure of the Ministry as a percentage of GDP has reduced. In 2023-24, its allocation is estimated to be marginally lower than 2% of GDP. Since 2014-15, the spending on defence pension has been consistently higher than 20% of the total budget and capital outlay has remained below 30% of the budget.
Road Transport and Highways: The Ministry has been allocated Rs 2,70,435 crore, 25% higher than the revised estimates of 2022-23. Most of the additional allocation (60%) has been earmarked for investment in NHAI. Budgetary allocation has increased since NHAI will not borrow from the market. Construction of roads is primarily done through public funds. Private investment constituted 7% of investment in roads in 2020-21.
Railways: In 2023-24, Railways is projected to have a marginal revenue surplus, which would fund less than 1% of its capital expenditure plan. 92% of capital expenditure will be funded by budgetary support from the central government, and 7% from extra budgetary resources. The operating ratio (expenditures as proportionate to traffic works receipts) is 98.5%, indicating limited surplus for capital investment.
Food and Public Distribution: Allocation for the Department in 2023-24 was 31% lower as compared to the revised estimate of 2022-23. This was due to the discontinuation of the Pradhan Mantri Garib Kalyan Anna Yojana that was announced during the pandemic to provide free foodgrains to eligible beneficiaries. In 2023-24, expenditure on food subsidy is estimated to be Rs 1.97 lakh crore. Updating the coverage of eligible families is an issue as the total number of beneficiaries continues to be based on the 2011 Census.
Home Affairs: The Ministry has been allocated Rs 1,96,035 crore, an increase of 1.1% over the revised estimates for 2022-23. Of the Ministry’s total budget, 65% of the expenditure is on police and 31% is on grants to UTs. 74% of the expenditure on police has been allocated to the Central Armed Police. Issues in the sector include shortages of police personnel and inadequate number of cybercrime cells. 24% of the Indo-Bangladesh border remains unfenced.
Rural Development: The Ministry of Rural Development was allocated around Rs 1.6 lakh crore for 2023-24, 12% less than the revised estimates of 2022-23. This is largely due to the decrease in allocation towards the Mahatma Gandhi National Rural Employment Guarantee Scheme (Rs 60,000 crore), which is 33% less than revised estimate for 2022-23. Demand for work under MGNREGS could decrease this year, as the rural economy returns to normal after the pandemic. Allocation towards rural housing increased by 13% in 2023-24, while allocation towards rural roads remained unchanged.
Agriculture: The Ministry has been allocated Rs 1,25,036 crore in 2023-24, a 5% increase over the revised estimates of 2022-23. 77% of the Ministry's estimated expenditure is towards three schemes that provide cash transfer, interest subsidy, and crop insurance. The amount of institutional credit to farmers has risen (7.8% over the past ten years), but loans are primarily being used to meet revenue expenditure in farming or recurring household expenditure.
Education: In 2023-24, the estimated expenditure of the Ministry of Education is Rs 1,12,899 crore, a 13% increase from revised estimates for 2022-23. Of this, the Department of School Education and Literacy has been allocated 61% and the Department of Higher Education has been allocated the remaining 39%. 33% of the Ministry’s budget has been allocated to Samagra Shiksha Abhiyan. Since 2015, overall allocation towards education has been around 2.8% of the GDP.
Telecommunications: Rs 59,740 crore (56% of the allocation) in 2023-24 is towards the revival package for BSNL and MTNL. No funds were disbursed under the PLI scheme in 2021-22. In 2022-23 also, no funds will be spent towards this scheme as per revised estimates. Bharatnet and Network for Defence projects have seen significant delays.
Jal Shakti: The Ministry of Jal Shakti was allocated Rs 97,278 crore for 2023-24, a 31% increase over the revised estimates for 2022-23. The Jal Jeevan Mission received the highest allocation (Rs 70,000 crore). River Interlinking saw an increase in allocation due to the implementation of the Ken-Betwa Link Project. Funds have remained underutilised in schemes such as the Swachh Bharat Mission- Gramin, Atal Bhujal Yojana, and Namami Gange.
Health and Family Welfare: In 2023-24, the expenditure of the Ministry of Health and Family Welfare is estimated to be Rs 89,155 crore, a 13% increase from revised estimates for 2022-23. The National Health Mission is its largest component, accounting for 33% of the Ministry's budget and medical colleges and hospitals account for 27% of the budget. High out-of-pocket expenditure and shortage of healthcare personnel remain major issues.
Housing and Urban Affairs: In 2023-24, the Ministry of Housing and Urban Affairs has been allocated Rs 76,432 crore, an increase of 2.5% over the revised estimates for 2022-23. The major items are urban housing (PMAY-U) at Rs 25,103 crore and metro projects at Rs 23,175 crore. Several metro systems are not able to generate required ridership to breakeven.
Petroleum and Natural Gas: The Ministry has been allocated Rs 41,008 crore, which is a 21% increase over the revised estimates for 2022-23. This includes Rs 30,000 crore towards capital support to Oil Marketing Companies via equity infusions. There has been a decrease in allocation towards the LPG subsidy and no allocation has been made towards the kerosene subsidy. There has been an increase in capital outlay towards the creation of caverns and purchase of oil for the Strategic Petroleum Reserves.
Women and Child Development: The Ministry has been allocated Rs 25,449 crore in 2023-24, a 6% increase over the revised estimates of 2022-23. This is spent across three centrally sponsored schemes: Saksham Anganwadi and POSHAN 2.0, Mission Shakti, and Mission Vatsalya. In the past five years between 2016-17 and 2021-22, the Ministry has underutilised its funds.
Environment, Forests, and Climate Change: In 2023-24, the Ministry of Environment, Forests and Climate Change has been allocated Rs 3,079 crore, a 24% increase over the revised estimates of 2022-23. While India has set targets to transition to renewable energy to tackle climate change, availability of adequate finance is a key challenge. According to experts the overall cost required for India to adapt to climate change by 2030 is expected to be around Rs 86 lakh crore (at 2012 base price).