The National Institute of Public Finance and Policy (NIPFP) study bears out the bottlenecks in implementation of India's flagship social projects, which undermines the utility of the schemes.
This is even as public expenditure for social and economic development in India as percentage of GDP is much lower as compared to not only most of the developed countries but also some South Asian neighbours.
Out of Rs 24,519 crore unspent balance on the four main rural development schemes in FY12, about Rs 17,673 crore, or 72%, belongs to the popular scheme NREGA, said the study by NIPFP's NR Bhanumurthy. As percentage of outlay, the unspent balance was higher for Indira Awas Yojana (IAY) even though it accounted for only 24% of the total unspent balances of the four schemes studied. Unspent balance in case of IAY was Rs 5,852 crore in FY12 while the budget outlay was Rs 10,000 crore.
The FY 12 budget outlay for NREGA was Rs 40,000 crore, which means 56% utilisation.
This scheme, which was introduced in 2006 and arguably played a crucial role in the UPA being voted back to power in 2009, saw an improvement in utilization level in FY13 with auditors putting the figure at 80%. The allocation in FY13 was Rs 33,000 crore. The actual utilization tends to be lower than than the initial audit figure.
The NIPFP monitored Pradhan Mantri Gram Sadak Yojana and National Rural Livelihood Mission, besides NREGA and IAY.
So, the biggest reason for the low level of spending for social sector schemes is not inadequate budget outlays but inefficiency in implementation. A look at some of the central schemes do not really show inadequacy (of funds), but weak public delivery mechanism and quality of expenditures, the study said.
Recent trends in allocation/utilization in some of the flagship programs suggest that almost all the schemes have high unspent balances. In terms of utilization, divergent trend across states is evident, the study said.
The typically backward states like Bihar, Uttar Pradesh and Orissa showed lower utilization of development scheme funds disbursed to them while states such as Andhra Pradesh, Himachal Pradesh, Uttarakhand, Meghalaya and Sikkim showed higher utilization in at least most of the schemes.
Blaming the state government for lower utilization, a study by Planning Commission in 2011 stated that since NREGA is a demand-based scheme and as funds are released based on labour demands projected by the state, whatever slackness is there in the system is due mainly to the incapacity of the states to prepare the labour budget in line with government of India guidelines in a comprehensive way in time and providing the matching amounts in time.
In poorer states like Bihar and UP, the administrative systems in place are not able to get the wages on time. Most people covered by NREGA get their wages 3 months to a year late in these regions. Also, the government's capacity to formulate the implementation is hampered by a shortage of staff, Dr NC Saxena, member of National Advisory Council and a former bureaucrat, told FE.
There is inefficiency when it comes to measure work and pay to the workers, he added.
NREGA, the Congress-led UPA's most ambitious scheme till the food security Bill comes into force nationwide, has come under heavy fire from CAG for large-scale discrepancies.
The central auditor in its report earlier this year said that only 30% of approved works under the scheme was completed, while work days fell to 43 days in FY12 from 54 days in FY10. It also gave alarming numbers like 95 lakh cases of wrong wage calculation in 18 states.
To boost the scheme, the Planning Commission had recommended that NREGA wages be linked to inflation by linking it to Consumer Price Index (CPI) for agricultural labourers along with technological advances needed to track the utilization of funds.