(Contributed by Mikky)
Back in 2011, during my amateur-eyed, junior year of post graduation in Economics, I had attended a seminar in my department on certain issues of inclusive development. One of the delegates from the Madras Institute of Development who had been instrumental in promoting cash crop cultivation among the tribals in the Araku Valley region in South Eastern India raised a point regarding the subsidy programmes the government resolutes itself into provision. I was enthralled at the humanism of his query. He said ” How wonderful would it be if those 100 rupees the Govt. spent on land giving subsidies were actually the 100 rupees invested into the same piece of land.” The harshness of life in poor hamlets and how this economist proposed a change had taken me to be a democratic socialist for about a year.
If you are following our blog for sometime now, you would’ve known that India just had its budget sessions. Any avid reader in my country has gone through a rough analysis of it. I went through a thorough reading of the whole document, the speech etc, and I made some analysis out of the budget from a certain angle, but what disturbed me was that it was everything about expenditure and subsidization and I was a Schumpeterian . This aspect of the general budgeting takes us back to the question,
“Should it be an expenditure budget or an investment budget as unfailingly the multiplier effect of investment is greater than expenditure.”
After a general discussion with the professors, I got an answer. The government’s budget is a necessitated expenditure budget. It is not the aim as perceived by people that expenditures can be pocketed by the hierarchy and as I said above, it is a “necessitated expenditure budget”.
WHAT HAPPENS IF THE GOVERNMENT INVESTS RATHER THAN EXPENDS
Expenditures that Govt. undertakes are nothing but subsidies in provision. The public distribution system (PDS) that provides the basic necessities to the public is largely influenced by the subsidies the Govt. provides. Same goes with the subsidies in seeds, fertilizer, loans and other miscellany the policy makers provide, which is what the union budget aims for. Funds of this kind percolates to the base level farmers who look up for help from the public sector. When the small farmer gains access to what he needs in concrete, the goodness of the expenditure is well justified.