Union Finance Minister Nirmala Sitharaman compared development expenditure to show that the Narendra Modi-led National Democratic Alliance government has spent far higher on development in the past eight years than the Congress-led United Progressive Alliance’s 10-year rule.
“RBI data shows total developmental expenditure incurred by Modi government in 2014-’22 was Rs 90.9 lakh crore, far higher than is being alleged by some sections of the Opposition. In contrast, only Rs 49.2 lakh crore was spent on this during 2004-’14,” tweeted Sitharaman.
This claim was rebutted by former Finance Minister P Chidambaram a few days later when he, in a series of tweets, highlighted how, instead of the amount, it is more important to check the proportion of any head of expenditure to total expenditure.
“The correct mathematical analysis will require the Finance Minister to compare the ‘proportion’ of any head of expenditure to total expenditure. Such a comparison will reveal that, as a proportion, social services expenditure has plummeted after 2014-’15,” tweeted Chidambaram.
His statement was then countered by Bharatiya Janata Party’s IT cell head Amit Malviya, who claimed that during the NDA regime the proportion of development expenditure, spending on subsidies and capital spending has increased. “Data shows development expenditure as the percentage of total increased from 49.4% in 2013-’14 to 50.1% in 2020-’21. Expenditure on subsidies rose from 16.3% of total expenditure in 2013-’14 to 18.8% in 2020-’21. Capital expenditure as the percentage of total increased from 12% in 2013-’14 to 15.9% in 2021-’22,” tweeted Malviya.
All three statements fail to present the full picture and are misleading. Before expanding on that, let us first learn about what development expenditure is and its components.
What’s development Expenditure?
Development expenditure is directly related to the economic and social development of the country. “Development expenditure includes the development components of revenue expenditure, capital outlay and loans and advances by state governments,” describes the RBI. This translates to three important categories under developmental expenditure: (i) social and community services, (ii) economic services and (iii) grants-in-aid to states and Union territories. The largest component here is economic services.
Spending on social services goes into areas like education, public health, sanitation, housing and economic services comprise agriculture, rural development, energy, transport and more. Development expenditure is meant to generate employment, increase production and bring price stability. Hence, the name “development expenditure”.
Sitharaman’s claim: The Finance Minister drew the comparison based only on the amount spent on development. This is when the Budget amount increases every year, owing to inflation and other reasons, and so the amount of expenditure increases too.
“Looking at just the quantum is not fair since the purchasing power of one Indian rupee has changed over the years,” said Avani Kapur, a Fellow at the Centre for Policy Research, where she leads the Accountability Initiative.
The fair comparison, like Chidambaram said, is looking at the proportion of amount spent on development to the total expenditure. And this proportion has been around the same, said Kapur, as it has been between 45%-55% since UPA-I to now, during NDA-II. This shows that development spending has been almost half of the total expenditure during both regimes.
The proportion was the highest during 2010-’11 (54.71%) and lowest during 2006-’07 (42.83%). In fact, the share dipped three percentage points last year – from 50.08% in 2020-’21 to 46.96% in 2021-’22.
Another aspect missing from this comparison is the pace of growth of development and total expenditure during both regimes. “During 2003-’04 to 2013-’14, development expenditure grew at 15% and total expenditure at 13%,” added Kapur. “This means during these years development expenditure grew faster than the total spending. Between 2004-’05 and 2021-’22, this growth has been at 10% and 11%, respectively, which shows a similar growth.”
Also, the compounded annual growth rate of the expenditure is higher for the 2004-2014 period than the 2015-’22 period, she added.
Chidambaram’s claim: While Chidambaram is correct that proportion matters more since “the size of the Budget is bigger every year”, he only highlights the service sector and not the development expenditure, the proportion of which has remained almost similar during both the regimes.
As mentioned earlier, development expenditure has three components – loans and advances to states and Union territories, social services expenditure and economic services expenditure. Here, Chidambaram cherry picked social services expenditure to show that its share in total spending has dipped.
While spending on social services has not been more than 10% of the total spending during both the regimes, the component Chidambaram omitted from the comparison – Economic services expenditure – constitutes almost a third of the Centre’s spending. And, in fact, it has grown over the years – from 24.07% in 2004’-05 to 30.94% in 2021-’22.
Malviya’s Claim: Malviya, in his tweet, chose only the years that showed growth. While he said that development expenditure grew from 49.4% in 2013-’14 to 50.1% in 2020-’21, the Reserve Bank of India data show that it dipped to 46.96% the next year. In fact, as mentioned earlier, the share of development expenditure was highest in 2010-’11 as 54.71%.
He then mentioned how the expenditure on subsidies has risen from 16.3% in 2013-’14 to 18.8% in 2020-’21, while deciding to exclude how it slumped to 10.62% in 2021-’22.
Lastly, he tweeted about capital expenditure saying it has increased from 12% in 2013-’14 to 15.9% in 2021-’22, which although is true, shows a sudden increase in just the past year as it was 12.73% in 2020-’21. Moreover, the share of capital expenditure has remained steady in the range of 13%-15% since 2005-’06. It was the highest at 22.75% in 2004-’05, the first year of the UPA-I regime.
FactChecker tried contacting the Finance Minister’s and Malviya’s offices for clarification via email and call, but had not received a response by the time of publishing this article. We also contacted Praveen Chakravarty, Chairman, Data Analytics at the Indian National Congress and Saral Patel, National Convener, Indian National Congress, but had not received a response from either of them. We will update the article if and when we do.
This article first appeared on FactChecker.in, a publication of the data-driven and public-interest journalism non-profit IndiaSpend.