CHAPTER II

REVIEW OF LITERATURE

Panchmukhi, (1966) in his study, “Measurement of the Effects of Public Expenditure”, presents the applied theory of public expenditure. He brings out the importance of cost-benefit analysis in the process of public expenditure. His study represents a step towards clarifying the economic aspects of the effects of expenditure on education and health, the knowledge of which is essential for making rational decision in these fields.

Madalgi, (1966) in the study, “The Trends and growth in State Governments Expenditure in India since Five Year plans”. The study covered from 1951 to 1966, witnessed the completion of the first three five year plan.” He has analyzed only the Revenue Expenditure and has not considered Capital Expenditure.

Shanmugam, (1977) in his study, “Public Expenditure of the Government of Tamil Nadu from 1965-66 to 1974-75” has presented the facts on the trends of Tamil Nadu Governments Welfare expenditure. The study covered a period of ten years from 1965-66 to 1974-75. The main objectives of the study were: i. To analyse the trends in the Public Expenditure in Tamil Nadu. ii. To analyse the overall growth in Public Expenditure. iii. To analyse the variations in its consumption and Capital Components and, iv. To analyse the trends in the distribution of Public Expenditure among the different sections. The study has adopted a survey method. Secondary data were collected from the Records and Annual Reports of the Tamil Nadu Government for study. By the Formulation of tables and calculation of simple averages, Percentages have been done. Bar and pie diagrams and time-series trend lines have also been drawn to show the structure and growth of the Government Expenditure. The Followings are the finding of the study 1. Total State government expenditure in Tamil Nadu has increased from

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Rs. 24, 142 lakhs in 1965-66 to Rs.58,456 lakhs in 1974-75, with a cumulative growth of 10.6 per cent. 2. A near threefold increase from Rs..15,545 lakhs in 1965-66 to Rs. 42,814 lakhs in 1975-75 has been felt in consumption expenditure of the state government. The increase in consumption expenditure has far outstripped the increase in capital outlay during this reference period with the result the consumption components in the state Budget has sharply risen from 64.4 per cent to 73.3 per cent. The impressive growth in consumption expenditure during the reference period was mainly due to i. additional employment generated in government Administration ii. upward revisions in pay scales and dearness allowances of Government employees and iii. Increased allotment of Government outlay on social welfare activities which were mainly in the form of services. 3. The capital components of the government Budget, on the other hand, declined from 20.6 per cent in 1965-66 to 19.4 per cent in 1974-75. However, in absolute terms, the total expenditure by the state Government for capital formation purpose has increased by 128.7 per cent during this period from Rs. 4, 966 lakhs to Rs. 11, 359 lakhs. Net capital which was defined as gross capital formation – minus expenditure on renewals and replacements, has increased by 61 per cent during the reference period from Rs. 9, 167/- lakhs to Rs. 14,747/- lakhs. However, its share in total budgetary outlay has declined from 39.3 per cent to 28.2 per cent. The factors that have accounted for a decline in the constituent share of capital expenditure in total expenditure as follows: i. Inadequacy of surplus funds available for purpose of capital formation as a result of the sharp increase in consumption expenditure together with the reduced availability of current surplus from departmental, commercial undertakings. ii. Government during the reference period has transferred a number of its capital functions to the State sponsored bodies, like the various Industrial corporations, Transport corporations etc., capital expenditure incurred by these undertakings is not reflected in the general budget and

8 iii. In the present classification, grants given to local bodies for education have been shown as consumption expenditure. If these were to be treated as expenditure meant for human capital formation, capital expenditure by the Government would be substantially higher than what was indicated in the study. In general the declining share of capital expenditure in the state Budget was not really an encouraging feature. There were also wide fluctuations year by year in capital expenditure. Roughly stated that capital expenditure of the state Government was only 2.71 per cent of the State income at current prices in 1974-75.Irrigation and Power have accounted for most of the capital outlay. The sharp increment in the consumption component of the government expenditure indicated that the administrative expenditure incurred by the government has been on the uptrend. The departmental commercial undertaking have regularly contributed a negative surplus to the government current account. The capital component of State expenditure can be increased by adopted the following measures: i. By cutting down wasteful administrative expenditure by the government ii. By improving the operational efficiency of departmental commercial undertakings and iii. By working out a reasonable balance between social services and economic services in the budgetary allocation of funds.

Rao, M. Govinda, (1981) in his study “The determinant of tax revenue and non-plan revenue expenditure of the States”, has chosen the states of Karnataka, Kerala, Orissa and West-Bengal in studying the time series determinant. In this study, both the political and economic determinants have been considered. The effects of various economic and political factors on the fiscal decisions of the four states are also quantified. While discussing the determinants of non-plan revenue expenditure the study summaries that in all the four states except Orissa, the growth of expenditure on various services is of providing them. Only in Orissa the growth in non-plan revenue expenditure is due to increased quantity of public services. The results of the study confirm Down Hypothesis that fiscal decisions are essentially guided by the desire to

9 maximize the length of their tenure by the parties in power and are not influenced by their ideological doctrines.

Madhavachari, (1982) in his study, Wagner’s Law of Public Expenditure - An Emperical Test, Margin, analyses the validity of Wagner’s Law. He concludes the government expenditure under the different components have grown at a faster rate than percapita GNP.

Rajendran, (1987) in this study, “Public Expenditure of the Tamil Nadu Government and its structure and growth during 1980-81 to 1984-85”, has presented the trends of Tamil Nadu governments welfare Expenditure. The study covered a period of five years from 1980-81 to 1984-85. The following were the objectives of the study i. to study the trends of the government expenditure ii. to study the structure of the government expenditure iii. to study the growth of the government expenditure A survey method has been used. Secondary data were collected from the Records and Annual Reports of the Government of Tamil Nadu for study. Formulation of tables, calculation of simple averages, percentages have been done. Bar and pie diagrams and Time-Series trend lines have also been drawn to show the structure and growth of the Tamil Nadu Government Expenditure. The following were the findings of the study. i. In Tamil Nadu during the five year period from 1980-81 to 1984-84 the total Government Expenditure that is current Expenditure, capital Expenditure, Loans and advances(Net) increase from Rs. 1,379.99 crores to Rs. 2,363.66 crores and overall increase of 1,171.23 per cent. ii. The capital Expenditure increased from Rs. 235.45 crores to Rs. 489.60 crores and overall increase of 212.81 percent during the five year period. iii. The Economic expenditure or Services has increased from Rs. 1379.99 crores to Rs.2363.06 crores, an overall increase of Rs.171.23 per cent during the five year period.

10 iv. The social security and welfare expenditure increased from Rs.4,536 lakhs to Rs.13,488 lakhs, an overall increase of Rs. 297.35 per cent. v. Expenditure of other social and community services increased from Rs.1,823 lakhs to Rs. 3,133 lakhs, an overall increase of 171.38 per cent.

Balakrishnan (1990) in his study “Union Budget for 1990-91 (April 21, 1990)” The budget speech refers to the need for employment oriented planning. This system for recognition of the fact that while the largest share of the national product. Prospect for labour absorption within this sector are limited on the other hand, the increasing share in output of manufacturing and services has not been matched by a significant growth of employment in these sectors. This was obviously the concern which has motivated the prime more in this budget as for as direct taxation is concerned. The abolition of investment allowances to the corporate sector combined with a reduction in the corporation tax would appear to be an imaginative stroke. It would appear to be an system a step welcomed a step of another welcomed by industry.

Krishna Kumar, (1990) in his study that was reflected in the growth of enrolment and institution of higher education rose substantially since the late fifties and has remained so through out the, seventies and the early eighties. He interprets this as a growth of higher education at the expense of small elementary education. Which marginalized the weaker sections further. Also, the quality of expenditure on education is poor as the composition of expenditure, especially in elementary education is unbalanced. (World Bank, 1990) The World Bank Study points out that items like libraries, equipment and furniture which add quality and comfort to elementary education and students accounts for only 0.18 per cent while salaries account for 97 per cent of the total expenditure of education departments.

Manmohan Singh, (1991) in his study the context that one must turn to the Budget of July 1991 , introduced by making a sharp break with several of the basic objectives and methods of Planned Development and announcing several measures

11 which have come to be called New Economic Policy. This came about in the context of a Balance of Payment Crisis faced by the Govt of India which was attributed to the persistent high fiscal and budgetary deficits of the Union Government and called for fiscal correction to place the economy back on the rails. Viewed in some circles as a successor to the policy on liberalisation initiated in 1984 by the Government of India, the New Economic Policy laid emphasis on action in five policy areas- (1) achievement of macro economic balance with high investment levels (2) reforms & redefinition of the role of public sector (3) reducing and restructuring domestic control over production and investment licensing (4) reducing the degree of protection to Indian Industry (5) Opening up to foreign investment. While the above areas appeared to emphasize liberalization of the economy, the policy makers appeared to be more conscious of the fiscal priorities in the short run, and listed for the first two years of the reforms, measures to bring about (a) Reduced Government expenditure (b) Reduced Defence Expenditure (c) Increase in administered prices like power, fertilizers; (d) Reduction of subsidy, to be followed by restriction of access to the PDS to the needy. (e) Reduction of job in Government Departments, Public Sectors under taking (PSUS). Many of these measures appear to have drawn their inspiration from World Bank Country Economic Memorandum for India presented to the Aid India Consortium Meeting in Paris in May 1990 and reiterated the Country Economic Memorandum for India in 1991. Following the suggestions in 1991 Memorandum of the World Bank Dr.Manmohan Singh wrote to the Managing Director of the International Monetary Fund in August 1991 presenting Govt of India’s Memorandum of Economic Policies . indicating the steps mentioned above . It was only on 16th December 1991 that the Finance Minister placed in the Parliament this Memorandum as an annexure to his statement on Management of the Economic crisis. It is largely for this reason, that analysts view the economic reforms measure as inspired by the International Financial Institutions. An objective analysis may however lead us to understand that ‘Economic Reforms’ had really begun in early eighties, when late Shri Rajiv Gandhi promised a “Government that works faster” and launched a New Economic Policy, with promises to open up the Indian economy for achieving faster growth with a regime of lower direct taxes, expanded role for the private sector,

12 liberalisation of the licensing system, and easing of controls on that and foreign investment. Those set of measures, initiated with some degree of concern over the slow pace of domestic economic growth were really the commencement of the transition from the era of controls to the era of relatively greater freedom from Government in economic operations. The reforms of the Eighties were, domestic in their origin, born out of a perception that the three decades of planning and mixed economy with partial control had resulted in a relatively slower pace of development while nation was striving for larger objectives like growth with social justice, self reliance and balanced regional development. While the New Economic Policy was launched , with claims of the need to improve efficiency in utilisation of resources and improve the quality of Public Expenditure Management , with focus on fiscal consolidation , it soon became apparent that fiscal correction measures , enforced through budgetary instruments could while marginally improve the rate of growth of the Economy , seriously impact on extra economic objectives of equity and balanced regional development. Panchamukhi P.R.(1991) in his study have shown that social sector expenditure as a whole has declined considerably during the first few years of reforms. The per capita expenditure on social services, including education, health, housing and urban development and social welfare, for All States together was lower in the post reform period as compared to 1990-91. Reviewing the social sectors expenditures of the states in the pre-reform and during reform periods noted that the expenditure shares of social sector in total revenue expenditure showed a declining trend education expenditures for all states, he observes decreased from 21.08 per cent (pre reform) to 19.70 per cent of total revenue expenditure during the reform period.

Sen T.K. (1993) he have attributed the worsening of the fiscal position of the states to the increase in expenditure on Quasi Public Goods., subsidies and Transfers following high expenditure growth at the Central level, Proliferation of Centrally sponsored schemes since the early Eighties requiring matching contribution from the states . But as pointed out in the Annual Report of the Reserve Bank of India for 1991- 92, the overall resource gap of the States began to increase mainly on account of

13 worsening deficits on the Revenue Account since 1986-87 and increasing resort to the Financing.

Sanjaya Baru (1993) he has analysed to the awareness in Government circles of the likely deflationary pressure and high costs of social adjustment bound to be faced by the poor in the process of macro level fiscal consolidation by the Government of India. Sanjaya Baru had argued that while the note of the President of the World Bank Louis Pretzel to the Board of Governor, recommending India’s Structural Adjustment loan and India’s Finance Minister, Dr. Manmohan Singh in his speeches on the Parliament had both spoken of possible increases in Financial allocations for certain schemes in social sectors in order to compensate for the iniquitous impact of fiscal adjustment, the actual provisions did not match these words. This is supported with data of provisions for Plan and Non Plan Expenditure in the Union Budgets for indicating that “the share in total Government Expenditure of important sectors like education, health, small scale industries and the Public Distribution Scheme was not very significant .While the aggregate expenditure increased considerably, the share of the Social Sectors in it was 15.4 % in 1991-92 , 15.7% in 1992-93 and 16.2 % in 1993-94. Over the three years the budgetary increase was less than one percent despite claims to the contrary that structural adjustment was being carried with a care for the Human face. Sanjaya Baru has also drawn attention to the impact of the reformist budget on the resources transferred to the states.

Sivakumar, (1993) in his study, “A study of Public Expenditure in Pondicherry”, he has presented the trends of Public Expenditure in Pondicherry. The study covered a period a 25 years from 1966-67 to 1990-91. The following were the objective of this study. i. To study the growth, pattern, causes control and composition of public expenditure. ii. To examine the trends and the pattern of public expenditure for various expenditure functions in the union territory of Pondicherry during 1966-67 to 1990-91 and iii. To identify the constituents of development and non-development expenditure.

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Survey method and purposive sampling method have been used. By the formulation of table, calculation of simple averages, percentages have been done. The study has made use of the Secondary data. They were obtained from, “The Reserve Bank of India Bulletin”, Budget memoranda of Pondicherry government, “Reports of the Finance Commission of Government of India”. “Economic Appraisal of Pondicherry” and Census of India (1971, 1981 and 1991) and abstract of statistics of Pondicherry. Multiple regression technique was used to measure the impact of various explanatory variables on the growth of Public expenditure function wise. The following were the findings of the study, i. The increase in the revenue expenditure is around 62 times between 1966-67 and 1991-92, whereas the increase in revenue receipts is hardly 47 times during the same period. The study finds similar trend in capital expenditure too. For instance, the aggregate capital expenditure increased by 20 times. ii. In the composition of development and non-development expenditure, Expenditure on education tops the list of development expenditure, followed by health and medical welfare which in turn followed by expenditure on water and power. In fact, these three items constitute over 80 per cent of development expenditure. The remaining is accounted by expenditure on agriculture, industry, minerals and social security services. iii. In the composition of non-development expenditure, Expenditure on Administrative services tops the list holding rank I throughout the 25 years. Expenditure on interest and debt services follows this. However, when compare the growth rate between expenditure on Administrative Services and that on debt and interest services, the latter exceeds the former sizably. The expenditure on pension and other services is also on rise registering a 20 fold increase over the study period. Besides, the expenditure on the organs of per cent of overall non-development expenditure. iv. The rate of increase between development and non-development presents a discouraging situation. This clearly reveals that the financial strain for the state and resource to finance the developmental schemes.

15 v. There is a positive association between per capita income and per capita expenditure. vi. In Pondicherry the expenditure on education, administrative services, debt account and interest services and per capita grants-in-aid all account for a sizable share. It is to be noted that Grants-in-aid is a significant non-tax revenue contributors to the state facilitating the growth in expenditure.

Gupta S.P. and A.K.Sarkar (1994) he has pointed out that, “at the Central level genesis of escalating fiscal deficit lies primarily in the burgeoning revenue deficits. The rate of growth of Central Government Expenditure accelerated significantly from 2.6% in the Seventies to 10.8% during the Eighties . The acceleration in Central spending was visible in all the three functional categories – Economic Services, Social Services and General Services. This acceleration in expenditure was the primary cause of increasing fiscal deficits. The soft Budget constraint continued to operate at the Central level during this period.” As regards the expenditure of the states S.P.Gupta and A.K. Sarkar1987 observe that, “akin to Centre the States in the eighties experienced fast enlarging deficit primarily on the revenue account. During this period revenue expenditure of the States grew at the average of 17.6% per annum, much faster than the growth of the revenue receipts. However, as distinct from the Centre, the Budget constraint at the State level hardened by the mid eighties itself. This in part was due to the introduction of the Overdraft Regulation Scheme (ORS) in the mid eighties and also regulation of market borrowing. The Overdraft Regulation Scheme limited the extent to which a state could incur overdrafts during a financial year. This constraint translated into a cut in the expenditure on the capital account of the State Budgets.There was a marked deceleration in the growth of Capital expenditure at the State level from 8.8 percent to 3.9 percent between 1980 and 1987”

Anuradha, (1994) in her study, “Public expenditure an Analysis of Union Budgetary Policy” has presented the budgetary operations of the Central Government over a period of 12 years, starting from 1981-82 to 1992-93. The study covered a

16 period of 12 years from 1981-82 to 1992-93 The following details are the objectives of the study i. To study the review if literature and budgetary theories of central government. ii. To analyse the revenue and capital receipts of the central government from 1981-82 to 1992-93. iii. To analyse the structure of the revenue and capital expenditure. iv. To bring out deficit trends and its various measures. Survey method has been used, Formulation of tables calculation of simple averages, percentages and trend line have been done. The study made use of the secondary data. They were obtained from Government documents, reports and books. For this analytical study, the method of least squares is used to obtain the line of best fit. The following were the findings of the study. i. The income of the Central government is based on revenue receipts rather than capital receipt in the form of borrowing. So it is very essential to improve tax compliance and to mobilize additional resources. In the sphere of revenue, special attention must be paid to increase the Tax Revenue and Non-tax Revenue which have hardly-augmented as a proportion of GDP in recent years. ii. The disquieting feature of the centre’s finance is the phenomenon of growing deficit on the revenue account. The ratio of the revenue deficit is much greater in 1993-94 as compared with 1980-81. iii. The Expenditure on revenue account. The growth of non-development expenditure is at a faster rate than the development expenditure. The increase in revenue expenditure is more than six times in 1990-91 than it was during 1980-81. iv. The analysis of capital expenditure shows an increasing trend but not much when compared to the rise in the revenue expenditure. v. A combined development expenditure by sectors of both capital and revenue shows that grants to States/UTs takes away nearly 12 per cent of the total share and only 4 per cent for general economic services, social and community services respectively. vi. A comparison between the revenue and capital budget clearly shows how the deficits in the former is not compensated by the surplus in the later. All this not only

17 aggregated the problem of resources crunch, also adds to the mounting pressures on debt burden to the centre. vii. Though fiscal adjustment proved successful initially there is persistent deficits in the Governments budget and the resulting growth of Public debt have led to a tendency for fiscal discipline to weaken. The right remedy for containing the deficits is an awareness of the problem and a consensus about which items of expenditure can be cut.

Natarajan. P, (1996) in his study “Expenditure trends of Government of Tamil Nadu – An Economic Analysis”, has presented the trends of Tamil Nadu government. The study covered a period of thirty years from 1965-66 to 1995-96. The following details are the objectives of the study i. To study the trends of the government expenditure ii. To study the trends in per capital Expenditure of the Government of Tamil Nadu. iii. To study the Budgetary Deficits / surplus of the Government of Tamil Nadu. iv. To study the Overdrafts resorted to by the Government of Tamil Nadu.

Guhan (1996) in his study the trends in social services expenditure, excluding food subsidy in the central budget and the total expenditure incurred by all states for the post reform period of 1990-91 to 1995-96, notes that “in the final outcome, what is of concern is that the GDP ratio of outlays at both levels taken together had declined in the first four years of adjustment. Given the magnitude of poverty and deprivation in India, their absolute level at less than 7% of GDP is also grossly inadequate for rural development and the entire study of social services.”

Kurien N.J. and Joseph Abraham (1996) in his study on the financial crisis of Kerala, State, “Salary expenditure on a large number of uneconomic government schools (i.e. schools with a strength of less than 25 per class). Which was 542 in 1995- 96 could be saved by redeployment of the staff of such schools and also by encouraging private schools”. This Retreat of the State on an arbitrary basis of unavailability , in the social sector of school education recommended may impact

18 adversely in the future social development of Kerala. It may be worth while to encourage private investments in terms of sharing in expenditures for available educational facilities created by the State rather than rationalize and regroup or close up existing facilities.

Ramachandran (1997) he has analysed the resources needed to invested for bringing all children within the fold of basic primary education conclude that, at the All India Level, the investment needs to be more than doubled and about 3.1 percent of GDP needs to be allocated to primary education alone to bring every school age child in India into schools in the next five years. Looking at the total expenditure on education (including, sports, art and culture) under revenue account for select states, we find that their proportion to GSDP in (1998-99) itself is much lower than the increase recommended for primary education by Ramachandran Revenue Expenditure of States (1998-99(A/c) on education. Also, the quality of expenditure on education is poor as the composition of expenditure, especially in elementary education is unbalanced. (World Bank,1990) The World Bank Study points out that items like libraries, equipment and furniture which add quality and comfort to elementary education and students accounts for only 0.18 percent while salaries account for 97 per cent of the total expenditure of education departments. Taking the case of Kerala, which has recorded higher social development among states, per capita expenditure on education has been higher than the all states average and in 1996- 97 was Rs. 166.47 (in current prices) higher than the All States average of Rs. 356.78. Also the share of education in total social services expenditure has consistently been high. Many economist feel that this level of social development financing by the State has preempted investments in economic growth which as a consequence has stagna ted in the State, as well as being the root cause for the fiscal crisis in the State.

Tulsidhar (1997) in his study categories of the per capita public expenditure on social services for three different categories of states like- (a) poor states including, Bihar, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh (b) Middle income states including Andhra Pradesh, Assam, Karnataka, Kerala, Tamil Nadu and West Bengal

19 and (c) Rich States including Gujarat, Haryana, Maharashtra and Punjab to assess the differential impact of decline in per capita social services expenditure seem to have suffered more, with social services expenditure, as also the education expenditure, declining considerably in the post reform. Nirupam Bajpai and Jeffrey D. Sachs, (1999) in their study “The study on State Government Finances in India” the financial condition of the state governments in India has been a cause for concern for some time now. Over the years, the consolidated financial position of the state governments has shown a marked deterioration in some of their major deficit indicators. One of the fundamental weaknesses of state government finances in India can be attributed to an increase in non-developmental expenditure, particularly the revenue component of the non- developmental expenditure, and interest payments as a proportion of revenue receipts. In the area of expenditure reduction, we have identified several potential areas for controlling expenditure of the state governments. In our view, by raising user charges on water in accordance with the costs incurred in providing water, and aligning tariff rates of the SEBs in line with their costs, the state governments could significantly cut their budgetary losses. In addition, a freeze on state government employment can help save scarce resources to be used for productive purposes elsewhere in the states.

Baru (1999) he had analysed to the implications of Structural Adjustment Policy on fiscal compression and Social Sector Expenditure have drawn attention to the sectoral implications of decline in budgetary outlays for social services in several states . There has been a debate whether this decline commenced in the Eighties or much latter . Several of the sectoral issues covering food nutrition, health and housing, education , employment and income security , impact on vulnerable groups have been addressed as part of a study of a holistic perspective of social and economic security in India.

Deshpande R. S. and Shri. A. Narayanamurthy (1999) in his study the core problems faced by the irrigation sector in most of the states are common and the most prominent among these are: (i)River basinwise proper assessment of water

20 resources and its utilisation. Inter-basin transfers of water resources (at least within the state and under small catchments). (ii) Problems of scarcity areas and irrigation backlog across regions. (iii) Financial performance of the irrigation sector especially in comparison with the same in the other states (iv) Policy towards water rates. (v) Trends in actual development expenditure on command area development as against the establishment costs. (vi) Beneficiary participation in irrigation management (vii) Drip and sprinkler irrigation (viii) The expected pattern of future development of irrigation in the state. Hattery and Wilcox, (1999). in their study the capital budgets, there has been a proliferation of borrowing avenues, or resort to borrowing without due consideration of the sustainability aspects (or intergenerational equity), and inadequate maintenance of assets and an overall poor management and performance of major projects. Other capital budget procedures specify how long the plan will cover, usually five to six fiscal years, a definition of what a capital project is, and the policy should include the construction of a capital budget that clearly demonstrates expectations of the administrators to each of the departments in the organizational structure. Below in the budget from the Village of Spring Lake, Michigan.

Kurien N.J. (1999) he has analysed the reasonable to presume that the resource constraints have affected the expenditure on development and in particular plan expenditure, far more specifically the Social Sector Expenditure. In a survey of Recent Trends in State Government Finances. while the overall impact of Fiscal Reforms initiated at the Centre since 1991 have not been encouraging with the Tax /GDP ratio in the nineties dropping lower than in the eighties, and that pay revision of Central Government employees had nullified what ever gains that were achieved in the Expenditure Management by the Centre. According to him, the State’s Finances were marked by a sharp deterioration on account of the failure of State Governments to contain wasteful expenditure, reluctance to raise additional resources, competitive populism practised by different political parties, substantial and still growing explicit and implicit subsidies passed on to influential segments of the society through State Budgets and the continued losses of the State Electricity Board and other public

21 undertakings. On the basis of analysis of data on demographic indicators, State domestic product, development and non development expenditure of State Governments, shares in plan outlay investments, banking activities and infrastructural development, Dr. Kurien asserted that the “on going economic reforms since 1991, with stabilization and deregulation policies as their prime instruments and a very significant role for the private sector seem to have aggravated the inter state disparities. Vathsala Ramji (2000) in her study of the actual pattern of Budgetary provisions and public expenditure during the nineties indicate that (a) the envisaged careful balancing of the role of the State and the Market did not materialise and permeate the planning process of the Centre and the State (b) the Budgetary constraints and fiscal deficit reduction objectives had led to compression of public investment and Government expenditure leading to a slowing down of the process of Economic Growth. The Capital Receipts increased from 164.64 crores in 1951-52 to Rs. 21868 crores in 1990-91 and Rs. 101612 crores in 1999-2000 and capital expenditure during the same period increased from Rs. 189.47 crores in 1951-52 to Rs. 18025 crores.in 1990-91 and Rs.54023 crores in 1999-2000.

Sujatha Suresh (2000) in her study the State Budgets recorded more revenue surpluses than deficits during the first six five year plans and deficits if any during this period was relatively small, but from the mid eighties ES-4 onwards, the revenue deficits became regular feature of the State Budgets increasing from Rs. 4582.4 crores in 1989-90to Rs. 56801 crores 1999-2000 The reduction of subsidies for agricultural inputs like fertilisers and uncertain seasonal conditions affected agricultural production. The impact of varying growth rates in different sectors of the economy could not be properly met by Public Expenditure programmes which were guided mainly by fiscal consolidation objective aiming at reduction in revenue and fiscal deficit both at the centre and the states , apart from a series of reforms constricting the supports provided by the reserve bank of India to the state governments Dealing with the same issue interest payments defence expenditure and General Services and reduction in expenditure on subsidies for food fertilisers and other items.

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Siva Kumar S.N.V and V.V.N.Somayajulu (2000) in their study mentioned the efforts of the Planning Commission and the Finance Commission to bring about better balance in the levels of development among the states. Indicating the per capita aggregate revenue and capital expenditures of the states between 1956 and 1997, the authors have pointed out that the per capita aggregate revenue and capital expenditures increased from Rs. 180 during the Second Plan to Rs. 1102 during the Fifth Plan and further to Rs.2058 in 1991 and Rs. 4332 in 1997 . The authors had taken the actual expenditures of the states during the nineties and divided them by their population .Analysing the per capita SDP at constant prices for the period 1980-81 to 1994-95, and the details of Tax Revenue , Non Tax Revenue, Capital Expenditure , Expenditure on Social Sector , Expenditure on Economic sector.

Srinivasan V.K. (2000) in his study Capital Account depicted fluctuations between small surpluses and deficits until the fourth plan period but from the mid - eighties, the capital account started recording increasing surpluses. In the financing of GFD of the states , loans from the Centre, market loans and small savings and others (including PR fund etc) increased significantly from the eighties to the nineties . Loans from the centre increased from Rs. 1567 crores in 1980-81 to Rs. 9978 crores in 1990-91 and to Rs. 39879 crores in 1999-2000 (RE) Market Borrowing (net) increased from Rs. 198 crores in 1980-81 to Rs. 2556 crores in 1990-91 and to Rs. 11829 crores in 1999-2000 (RE).Small savings and others increased from Rs. 1948 crores in 1980- 81 to Rs. 6253 crores in 1990-91 and further to Rs. 43031 crores in 1999-2000 (RE). Consequently, the total outstanding liabilities of the States increased from Rs. 23959 crores in 1980-81 to Rs. 110289 crores in 1990-91 and further to Rs. 41852 crores in 1999-2000 ES-5 (RE) and Gross interest payments increased from Rs. 1225 crores in 1980-81 to Rs. 8655 crores in 1990-91 and further to Rs. 45526 crores in 1999-2000 (RE) Review of the actual pattern of Budgetary provisions and public expenditure during the nineties indicate that (a) the envisaged careful balancing of the rolls of the State and the Market did not materialise and permit the planning process of the Centre and the State (b) the Budgetary constraints and fiscal deficit reduction

23 comparison objectives had led to compression of public investment and Government expenditure leading to a slowing down of the process of Economic Growth.

Premchand .A. (2000). In his study “Capital Budgets: Theory and Practice”, capital budgets have multiple objectives-as instruments of compensatory fiscal policy, as windows on the net worth of public bodies, and as vehicles of development, particularly in the area of economic infrastructure (1). The capital budget is the “blueprint” of needed spending for the current or first year in the capital plan as part of the municipality’s annual budget based on current revenue projections for the municipality. This brings capital planning into reality. The capital budget was first developed in the 1940s and has slowly spread to local governments in the United States, which in recent surveys, administrators have said that 56 per cent of cities in this country use a separate capital budget. So, why are capital budgets created or needed? Annual budgets in local governments are usually made using a short-term perspective, reacting to the current economic situation, state and federal government funding assistance, which can become problematic for capital expenditures. Capital expenditures and assets are irreversible and require difficult decisions and approvals in order to reduce their risks and increase their success towards a municipality’s economic development opportunities. Many politicians also provide input in the decision making process for capital budgets because these investments rarely find their way on the politician’s accomplishment list, which allow them to get re-elected, as quoted in Newsweek by E.S. Savas, former assistant secretary for Housing and Urban Development “Have you ever seen a politician presiding over a ribbon cutting ceremony for the improvement of a sewer line. Capital expenditures for local municipalities are long-term commitments, which require analysis using a long-term perspective by administrators, and should provide benefits for multiple years. A capital expenditure results in the acquisition or increased value of a capital asset (e.g. land, land improvements, infrastructure, equipment) and usually involves projects with expenditures over a certain amount, usually $2,000, that will provide benefits for more than a certain period of time, which is typically one year (Hattery and Wilcox, 6). As shown in Appendix B, examples of the Village of Spring Lake’s capital

24 expenditures include the River Street Sidewalk project, the way-finding sign program, and the Skate Park at Central Park. These projects usually provide benefits to all citizens of the municipality, which make it easier to fund using property taxes or when requesting a tax increase to fund Wendorf /Capital Budget them. So, where does the money come from to fund capital projects? Most local governments structure their capital budget so that taxes levied on property are included in capital receipts, as well as income from natural resources, such as marina use, as in the case of the Village of Spring Lake, which can be earmarked for capital projects. Proceeds of borrowing, estate and death duties, depreciation allowances, sales of property, capital gains, and surpluses from the current budget are all other sources of capital receipts as well .The various methods to finance a capital budget project can be found later in this analysis as well.

Montek Ahluwalia (2000) In his study that the average plan expenditure as a percentage of SDP for the period 1980- 81 to 1990-91 was 5.69% and that the average for the decade was only 4.5% In a paper estimating Trend Growth of Government Expenditure in Social Services, particularly on Education and Health in 15 major Indian States, over the period 1974-75 to 1995-96.

Ghosh(2000) in his study on this gap in public expenditure on education note that the share of public expenditure on education on education in India’s GNP shows a declining trend in the nineties and an increase in the share of plan expenditure in the total Government Expenditure on education is essential for further development of education. Another important aspect of education expenditure is the pattern of expenditure with in the education sectors. Despite abundant research to support the fact that investment in lower levels of education contributes more to income redistribution and reduction in poverty, besides contributing to economic growth than investment in higher levels, (Tilak, 1989), elementary education has not received its due. Commenting on this Shri. Krishna Kumar (Education and Society in Post Independence India: Looking Towards the Future, said that there is a preponderance of higher education in India. At the time of independence, despite the high priority

25 accorded to primary education, the vary first commission on education appointed after independence was asked to focus on University Education and the Second Commission appointed a few years states, was asked to focus on secondary education.

Abu Saleh Shariff and P.K. Ghosh (2000) in his study on this gap in public expenditure on education note that the share of public expenditure on education on education in India’s GNP shows a declining trend in the nineties and an increase in the share of plan expenditure in the total Government Expenditure on education is essential for further development of education. Another important aspect of education expenditure is the pattern of expenditure with in the education sectors. Despite abundant research to support the fact that investment in lower levels of education contributes more to income redistribution and reduction in poverty, besides contributing to economic growth than investment in higher levels, elementary education has not received its due.

Arjun Sengupta (2001) in his study the Ninth Plan Period was marked by unusually large short falls in the Annual Plan outlays, Reviewing the impact of tax measures and expenditure patterns, as compared with the Budget estimates, and said that the “root cause of Industrial recession experienced during the entire Ninth Plan has something to do with the unrealised expectations of Annual Plan outlays”. This may not be acceptable to votaries of Economic Reform who have been arguing that Economic Reforms , particularly measures of liberalisation have speeded up the rate of growth of the Economy. The debate has been continuing , and light if any can be obtained only by , analysing the varying growth rates in different sectors of the Economy , and in particular examine whether the fiscal consolidation measures taken in the form of budgetary measures had any impact on the rate and direction of Economic Growth. A balanced view could be taken , if one investigates the impact of liberalisation of procedures and decontrol in the industrial sector , and the impact of import restrictions removal on Indian agriculture and industry. The gains claimed in this sector may have to be measured against the impact of budgetary conservatism on the Social Sector. Analysis of the Govt of India Budget show that while aggregate

26 budgetary expenditure increased from Rs. 143872 crores in 1993-94 to Rs. 335522 crores in 2000-2001 RE , as a percentage of GDP it fluctuated around 12 per cent of GDP .But the allocations for all Social Services and Poverty alleviation programmes , while increasing from Rs. 17851 crores in 1993-94 to Rs. 42455 crores in 2000-2001 RE , its proportion to the GDP had come down from 2.08 per cent to 1.87 per cent , this lending some measure of credibility to the critics who total that Economic Reforms , have adversely affected the Social Sector Expenditure. It is in the context of State government Expenditure exceeding that of the Centre in aggregate terms even while their share in Plan Expenditure declining relative to Centre’s Expenditure that one must look at the quantum and quality of Public Expenditure in the States and take note of the increasing attention paid by the Centre to Economic reforms at the State level . It may be relevant to note that the states have begun in the late nineties, to realise the importance of expenditure control and took important policy initiatives towards fiscal reforms. This will be dealt with later.

Sarkar P.C. and K. Seethaprabhu (2001) he have analysed, there is a deceleration in social sector expenditure in 13 Indian States, including those with low levels of human development since the mid 1990’s. According to their analysis, 14 out of 15 states registered a deceleration, in respect of health sector with 9 States recording negative growth rates. In respect of education the deceleration was noticed only in 6 States

Prabir K Ghosh (2002) in his Analysis the Indian National Budgets on Social Sector and Poverty Alleviation allocations and expenditure of the 1990s is not simple. An analysis of the annual budget in isolation is meaningless unless the State scenarios are simultaneously analysed. This paper presents State adjusted expenditure on, and allocations to the social and poverty-alleviation sectors in India. While the National Budget contributes about one half of the total combined public expenditure of States and Centre, a disproportionately high share of expenditure on social sector and poverty alleviation is provided by the State Governments. This is so because the social and poverty alleviation sectors are either placed in the Concurrent or State Lists of the

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Indian Constitution making it the States’ responsibility to make such investments. The States use both their own resources and those transferred by the Central Government according to the recommendations of the Finance and Annual Planning Commission allocations. Often the States are also expected to share substantially in newly introduced plan programmes as a part of the national budget exercise. The net effect results in the States bearing over 80% of the burden of expenditure on the social sector, and around 60% of that on poverty-alleviation programmes but this is increasing over time. The following discussion only presents the trends, direction, and extent of change in State-adjusted budgetary allocations and expenditure in the social and poverty alleviation sectors. It does not dwell on the positive developmental effects of expenditure, as the efficiency of reallocations has not been analysed. The following explanations might help to the terms used.

Baru (2002) In his study that the Centre –State dimension of the Union Budget were biased against the States as evidenced by the disparity on the Budget support for Central Plan and for Plan Assistance to the States. Between 1992-93 and 1993-94 Total Budgetary support for the Central Plan had gone up by 18.4 % while the Total Central Assistance to the State had gone up only by 2.8 % further examination of the trends in the Budgetary support to the Central Plans and Central assistance to the State Plan reveal that Plan Expenditure as a percentage of Aggregate Expenditure had come down from 29.9% in 1992-1993 to 25.7% in 2000-2001, marked by a fall in the Budget support for Central Plan, as a share in Total Expenditure from 16.1% in 1992-93 to 14.4% in 2000-01.Central Assistance to the State Plan during the same period has also been marked by a similar fall from 12.8 % to 10.9 % of the Centre’s Aggregate Expenditure. This confirms that the fiscal consolidation objective of the Union Budget has adversely affected Budget support for Plan Expenditure of the Centre and Central assistance to the State Plans. Between 92- 93 and 2000-01 the Non Plan Expenditure, as a percent of total expenditure had gone up from 70.1% to 74.3% mainly on account of increase in the share of interest payments (25.3% to 30% ) Defence Expenditure from 14.3% to 16.2% and General Services, including police and pension, from 7.2% to 8.4% .The share of subsidies for

28 food, fertilizers and other items has gone down slightly from 8.9% to 8.0%. A significant point to be noted in the context of Management of State Government Finances is that, the net resource transfers from centre to the states excluding interest payments had , as a percentage of gross domestic product come down from 5.7 per cent in 1990-91 to 4.7 per cent in 2000-2001 , and total assistance to state and Union Territory Plans from 2.4 per cent in 1991-92 to 1.7 per cent in 2000-2001 . This is dealt in greater detail elsewhere. For a perspective view at macro economic level obtaining a clear view of increasing total Government Expenditures , their distribution into Plan and Non Plan Categories and also Development and Non-Development Categories and the changes in the relative roles of the Centre and States and the Union territories in bearing Plan and Development Expenditure. After taking into account inter governmental adjustments, in 1980-81, the total expenditure of Centre amounted to Rs. 23,194 crores and that of the State Rs. 22,770 crores, total 37,879 crores. By 1990-91, the Central Expenditure had increased by nearly 5 times to Rs. 1,07,995 crores and the corresponding figures for the states was Rs. 91,242 crores total Rs. 1,63,673 crores. During 1999-2000 the Development and Non-Development Expenditure of the Central and the States combined accounted for a total of Rs. 5,55,458 crores, or 28.4 Percent of the GDP. As pointed out in the Study of the Finances of State Government 15, by 1999-2000 “the total expenditure of State Government (Rs. 3,25,634 crores) 16.6% of GDP have even over taken those of the centre (Rs. 3,13,258) 16% of the GDP in 1999-2000(R.E)” However when we review the trends in Plan Expenditure with reference to shares of Centre and the States, it is seen that, while the States had accounted for 63.52% of total plan outlay, during the I FYP, their share had come down to 45.27% in the II FYP, 49.28% in III FYP, 48.64% in IV FYP before rising to 50.77 % in the V FYP and again coming down to 45.25% in VI FYP, 40% in VII FYP, further to 38.71% in VIII FYP.On the other hand the share of the Centre which was 36.02% of total Plan Expenditure during the First FYP period had increased to 59.52% during the VIII FYP The relative shares of the Centre and the States in Total Plan Expenditure from the First Plan to the Eighth Five Year Plan has been brought out in. For the Ninth Five Year Plan a total outlay of Rs. 8,59,500 crores has been indicated , with the Centre accounting for Rs. 489361 crores

29 and the States Rs. 3,69,839 crores . It emerges from the review of the actual pattern of budget provisions and public expenditure during the nineties, that the envisaged careful balancing of the role of the State and the Market did not materialise and permeate the planning process at the Centre and in the States, and that a certain degree of philosophic confusion and policy haziness, as also budgetary constraints had marked the implementation of the various developmental programmes during the nineties.

Govinda Rao. M, (2002) in his study “State Finances in India: issues and Challenges”, studies, the areas of reform the states should focus on to impart efficiency and improve revenue productivity and prioritisation and compression of unproductive expenditures. In the planning commission report “The strategies and objectives of the plan period”. The First Plan aimed at creating the base for a rapid economic and industrial development, the main emphasis of the Second Plan was on widening and strengthening the industrial base of the State through power development and increasing the food production to attain self-sufficiency. In the third five year plan, studies is an the stagnation in the agricultural sector due to drought conditions in the latter half of the Plan brought down the overall rate of growth of the economy in this five-year period. The three annual plans an emphasis was laid on stepping up agricultural production through quick yielding schemes and completion of the spillover schemes in sectors like irrigation and power. Strategy was to correct regional imbalances through balanced regional development and dispersal of economic activity and to reduce disparities of income and wealth through fiscal and educational measures. The State's fourth plan envisaged a minimum growth rate of 5 to 6 per cent in the State Domestic Product during 1969-74. The fifth plan of the State was doubling the per capita, Decentralizing planning, development and resource mobilization. In the sixth five year plan 1980-85 of the Union Planning Commission, the following objectives were proposed, reduction of economic and social inequalities in opportunities and income, reduction of unemployment. The basic priorities for the Seventh Plan were on food, work and productivity. This required a strategy built around higher agricultural growth and creation of employment, improvement in

30 efficiency and in quality of production, and technological upgradation in industry and infrastructure, the use of less capital intensive and more labour intensive techniques and shift in investment priorities towards items of mass consumption and measures to improve the quality of life. The State's Eighth Plan accorded priority to i. Generation of adequate employment to achieve near full employment by the turn of the century. ii. Curtailment of population growth through active people's cooperation and effective scheme of incentives and disincentives iii. Universalisation of elementary education and complete eradication of illiteracy among the people in the age group of 15 to 35 years iv. Provision of safe drinking water and primary health care facilities, including immunization, accessible to all the villages and the entire population, and complete elimination of scavenging v. Growth and diversification of agriculture to achieve self sufficiency in food and generate surpluses for export and vi. Strengthening the infrastructure in order to support the growth process on a sustainable basis. The State's ninth plan spelt out more explicitly the following strategies to be adopted in major sectors in the light of past performance, present circumstances and future aspirations i. Priority to agriculture and rural development with a view to generating adequate productive employment and eradication of poverty; ii. Accelerating the growth rate of the economy with stable prices; iii. Ensuring food and nutritional security for all, particularly, the vulnerable sections of Society; iv. Providing the Basic Minimum Services of safe drinking water, primary health care facilities, universal primary education, shelter and connectivity to all in a time bound manner; v. Containing the growth rate of population;

31 vi. Ensuring the environmental sustainability of the development process through social mobilisation and participation of people at all levels; vii. Empowerment of women and socially disadvantaged groups, such as Scheduled Castes, Scheduled Tribes and other Backward Classes and Minorities as agents of socio-economic change and development; viii. Promoting and developing peoples‟ participatory institutions like Panchayat Raj Institutions, co-operatives and self help groups and ix. Strengthening efforts to build self-reliance. In concord with the National Plan. The Tamil Nadu's tenth plan has been drawn envisaging the same 8% growth rate as for national economy. The goal is to make Tamil Nadu the numero uno State among all 37 the States in the country during the tenth five year plan. The aim is to provide opportunities for a healthy and productive life for all. The Chief Minister's 15 Point Programme is the road map for development during the Tenth Plan.

Edward B. Sennoga (2003) in his study “Local Government Revenues and Expenditures in Uganda”, empirically tests the temporal relationship between local government revenues and expenditures in Uganda, a low income developing country. The importance of aligning both local and central government expenditures with revenue mobilization capacity. Such alignment will also improve the efficiency in the allocation of resources particularly to the growth-enhancing categories including infrastructure, health and education. The resulting control over expenditures rather than an increase in tax revenues will enhance Uganda’s fiscal discipline consequently fostering an effective medium term budgeting framework.

Robert W. Johnson, (2004) in his study the “Capital Budgeting,” there are five basic steps to the administration of capital investments which includes planning, evaluation, decision making, control and examination. But, before any of these steps can be implemented, a well-thought out process and policy must be put in place by the organization to lay the ground work for a successful capital investment programme. This includes establishing a procedure and policy, a facility master plan, and a capital improvement plan, which is part of the planning stage. An organization must first

32 need to define who is responsible for developing the capital budget and who is involved in the decision making process. In local municipalities, this usually falls on the City Manager or the City Treasurer. Key financial policies need to be developed that affect the capital budget which include the percent of the annual budget to be committed to capital improvements, limits on the size of annual debt service, and limits on total debt outstanding.

Souza. D (2006) in his study, “Investment Credit to Agriculture”, examines the report of the Reserve Bank of India's expert group on investment credit to agriculture. The expert group seems to have overlooked the "complementarity" of public expenditure on the capital and revenue accounts, emphasising only public capital expenditure and institutional investment credit to farmers.

Bhargava A, Chatterjee B. (2007) in his studies Chikungunya of the network of public health care facilities to provide effective treatment. Soon after independence a network of primary health care centres, taluk hospitals, district hospitals and medical college hospitals was put into place. Some states like Tamilnadu and Kerala did better than the rest, but nowhere has this system been really successful. The reasons are many, but foremost of them is that the government has not been committed to make the system truly effective by providing sufficient money and managerial input. Instead, starting as long back as the 1960s, it has encouraged the private sector through various concessions to take the place that should be played by the public sector By the 1990s the system was near defunct. This is in line with the recommendations of the World Bank in its 1993 World Development Report.

Vaidhyanathan (2009) in his study that the definition of the scheme can apply only to those who have outstanding loans with institutions, nearly there –fourths of all rural households and 60 per cent of farm households report that they do not have outstanding institutional debt. All household with outstanding debt may not have outstanding institutional debt. Thus, a large majority of even farmers will not benefit from the waiver. If only farmers’ loans are eligible, the proportion of beneficiaries

33 will be even smaller. Both, access institutional credit and the proportion of outstanding debt are skewed in favour of large farmers. Cultivator households with less than two hectares a account for 85 per cent of all farm household and report a lower incidence of debt (46 per cent) and of outstanding debt (30 per cent) than the overall average. Institutional loans include direct lending ( to meet needs production as well as consumption ) and indirect lending for allied activities ( such as input distribution, trading, transport and processing of farm produce ) The latter comprise about half of outstanding loan of co operatives 55 per cent in regional rural banks and a little under half in scheduled commercial banks. There is hardly any justification for waiver on indirect loans. The basis of the estimate that the waiver will cost 60,000 crore is for from clear. There is good reason to believer that a generalized. Waiver of all over dues will benefit non- rural borrowers to a considerable extent, that the large majority of rural households, including those in the below two hectars category will not benefit and that the magnitudes of benefit accruing to them will be considerably less than Rs. 60,000 crores. Supporters of the scheme argue that this one time relief is a necessary measure to address the current agrarian crisis and that it would enable farmers to restart on a clean slate. But this has been said every time in the past when such waivers were announced. Experience shows that waiver encouraged borrowers to presume that they can sooner or later get away without repayment. It reinforces the culture of willful default, which has resulted in large overdue and defaults in all segments of organized financial institutions. The deterioration in the co operative credit system is, in large measure, due to the conscious state policy of interference in the grant and recovery of loans. The task force appointed by the central government suggested radical changes in the legal and institutional framework essential to enable and induce co operatives to function as autonomous and self regulating entities. It emphasized the need to eliminate government interference in grant of loans, recovery process, and waiving of dues from borrowers. The central government accepted the recommendation and state also agreed to implement the reform package.

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Viswanathan (2009) in his study the instead of announcing the loan waiver scheme, the union government should have announced viable minimum support price to farm produce, which would help farmers. According to him, these loan waiver will benefit willful defaulters and there is no incentive to promote payers of the loan and the state government has already announced loan waiver on farm loans. The liquidity crunch of co operative societies will be affected and their capacity to lend fresh loan will also reduce. Loan waiver are only temporary palliatives and they could not be solutions for rural development. Sustained improvement and faster growth of agricultural income should be undertaken on the production side and marketing of agricultural products. Infrastructural support to the farming community is very essential. Instead of loan – waiver scheme, production and input subsidies and attractive support prices would bring better and sustaining results in the long run.

Pandu (2009) in his study the first budget of UPA Government presented by the Finance Minister Pranab Mukherjee is likely and discusses the focus specifically the area covered and omitted on agricultural sector. That is extension of debt waiver scheme, helping hand for farmers, irrigation programme, Loan and subsidy, and challenges of Government at the farm sector. The farmers have been given six months extension December 31 so that they can pay 75 per cent of their over dues under the agriculture debt relief scheme 2008. The extension has been given in the wake of delay in the arrival of monsoons. According to the budget, farmers are repaying their loans on schedule will get fresh loan at 6 per cent interest rate. The government has made additional 1 per cent subsidy, the government offers farmers another opportunity to mobilize resources to avail themselves of benefits under the onetime scheme. The settlement will make them eligible for fresh loan from banks. The onetime bank loan waiver of nearly rupees 71,000 crore to cover an estimated 40 million farmers was one of the major highlights of the last budget. Under the agriculture debt waiver and debt relief scheme farmers having more than two hectares of land were given time up to june 30 to pay 75 per cent of their over dues.

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Das-Gupta (2010) in his study entitled “The 13th Finance Commission and improving Fiscal Outcomes: An Assessment” It has been suggested in the discussion here that the THFC has not chosen the best possible route to meet its mandate of recommending ways to make public expenditure more outcome oriented. However, elsewhere in its Report, it has a number of important suggestions that should help achieve output-oriented outlays, though these do not add up to a comprehensive reform package for output-oriented expenditure reform. Two major problems with its approach, according to this writer, are not noting the importance of unit costs of public outputs and inadequately treating the distinction between outputs and outcomes. The latter is a problem also found in central government output budgets.

Dr. Ratna Vadra, (2010) in his study “Fiscal Refoms of States in India” see whether fiscal reforms taken by the states for resources mobilization led to reduction in deficits .The present study level fiscal Reforms in India is to test the hypothesis that: Fiscal Reforms have helped the states in improving their fiscal health. The study aims to test the hypothesis on macro level.

Dr. Ratna vadra (2010) in his study “State Finances in India: problem and prospects” stress on, the areas of reform the States should focus on to impart efficiency and improve revenue productivity of revenues and prioritization and compression of unproductive expenditures. These, however, require a strong political will and administrative competence and involvement of the public in the reform process. Pranab Mokherjee (2012) in his study 2012-13 Budget speech of union minister of finance. I rise to present the union budget for 2012-13. For the Indian Economy this was a year of recovery interrupted. When one year ago. I rise to present the budget, the challenges were many but there turned out to be different. The sovereign debt crisis in the Euro zone intensified political turmoil in middle east injection wide spread uncertainly crude oil price rose an earthquake struck Japan and the overall glow refused to lift. The implementation of the fiscal responsibility and budget management act 2003 (FRBM) at centre and the corresponding acts at state

36 level was the pivot in the successful consolidation of our fiscal balance prior to the global financial crisis of 2008. The out break of the crisis coincided with the year when the mandated targets of 3 per cent fiscal deficit and elimination of revenue deficit were to be achieved.

Natarajan.P. and Sujatha.P., (2012) in the study “Reform perspective of Public Expenditure of the Government of Tamil Nadu: An Economic Analysis -1990- 91 to 2009-10”, analyze the following trends in Public Expenditure, Revenue Expenditure and Capital Expenditure. 1. The Public Expenditure of the Government of Tamil Nadu in absolute amount has increased from Rs.7,74,722 lakhs to Rs. 69,72,637 lakhs for the years 1990-91 to 2009-10. It represents an increase of 9 times. 2. The Revenue Expenditure of the Government of Tamil Nadu has increased from Rs. 5,63,822 lakhs to Rs.58,93,852 lakhs for the years 1990-91 to 2009-10. It represents an increase of 10.45 times. 3. The overall growth rate and annual average growth rate in Revenue Expenditure of the Government of Tamil Nadu for the years 1990-91 to 2009-10 in terms of percentage comes to 945.34 and 47.27 respectively. 4. The Capital Expenditure of the Government of Tamil Nadu has increased from Rs. 2,10,900 lakhs to Rs. 10,78,785 lakhs for the years 1990-91 to 2009-10. It represents an increase of 5.12 times. 5. The overall growth rate and average growth rate in Capital Expenditure of the Government of Tamil Nadu for the years 1990-91 to 2009-10 in terms of percentage comes to 411.51 and 20.58 respectively. Research gap 1. Period-wise, the present study has covered a longer period of 20 years from 1990- 91 to 2009-10 for the analysis than the earlier studies. 3. Statistically, beside the usual statistical tools like average, percentage, growth rate, the study has employed the test of significance including correlation analysis and „t‟ test to analyse the trends in the incremental increase in Development and Non-

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Development Expenditure on both Revenue and Capital Accounts of the Government of Tamil Nadu over the years. Having completed a brief review of the existing literature on Public Expenditure, the next three chapters deal with data analysis related to the Public Expenditure of the Government of Tamil Nadu. 2. Methodologically the study has presented a comprehensive analysis of the Expenditure trends of the Government of Tamil Nadu, the trends in the Public Expenditure of the Government of Tamil Nadu, both in terms of current and constant prices, Development and Non-Development Expenditure both in Current and constant prices, Revenue and Capital Account both in current and constant prices have been presented while the earlier studies have carried out only one or other of these aspects. Again, this study has uniquely presented the analysis of the trends in Discharge of Public Debt of the Government of Tamil Nadu, which has not been attempted in earlier studies. The recognition of the Discharge of Public Debt has enabled the study to present a realistic estimate of the trends in Development and Non-Development Expenditure of the Government of Tamil Nadu over the years. Again the study has presented the analysis of the trends in the Expenditure of the Government of Tamil Nadu under different political regimes and different plan periods which come under the study period.

Vetrivel (2013) in his study “ Evaluation of Indian Union Budget 2013-14 an overview” A budget is a financial plan and a list of all planned expenses and revenues It is a plan for savings, borrowings and spending. It is an important concept in Macro economics which uses a budget line to illustrate the tradeoff between two or more goods, In other terms, a budget is an organizational plan stated in monetary terms. The union budget of India also called the general India budget is presented every year on the last working day of February. The budget is presented by the finance minister of India in parliament Budget is most economic event in the country which outlines all the economic planning of the government of India for the next year. It is not only important for corporate but for individual from all sections of the society.

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Valliammai (2013) in her study, budget and budgetary procedure. Budget without doubt is the most important economic initiatives of government for the next year but also comes out with the rates for both indirect taxes as well as direct taxes. It is not only important for corporate but for individual from all section of the society. Budget is the systematic allocation of one’s sources or income to the various requirements which are nothing but expenses. Budgeting can have different connotation for different people it is process of keeping the monthly savings aside and then utilizing the left over amount for every day expenses.

Vaiko(2013) he said that the budget has not accommodated the interests of farmers through there were some welcome announcements like food subsidy and health insurance for srilanka Tamil refugees. In a statement he said that the budget has not taken into account the demands of farmers for a compensation of Rs.25,000 per area of land where crop had failed due to drought and Rs.15,000 per area to those who could not take up cultivation due to scarcity of water. The demand for enhancing the procurement price of sugar to Rs. 3,500 per tonne and paddy to Rs. 1,500 per quintal was also not considered.

Sudha Ramamoorthy(2013) she said change that the Government has also not considered demands from the disability sector towards skill development, inclusiveness in higher education, and reasonable accommodation. Other areas that have been ignored are transition from institutional living to community living awareness and sensitization of implementing and monitoring authorities, research and development supply of devices, aids and appliances. “The state budget 2013-14 has allocated Rs.263 crores. for the department of the which Rs.131.05 crores has been earmarked for maintenance allowance specifically for people with severe disabilities, mental retardation and muscular dystrophy.”

Stalin (2013) in his statement many as 25 announcements were made several crores of rupees, including buildings for Adidravidar Deportment, fishing harbour in poompuhar and IT park and horticulture farm in srirangam. Recalling his statements

39 two days questioning the status of announcements two days before the presentation of the last budget, He said the chief minister in her replay had said announcements made in the 2011-12 budget were issued as government orders at the fag end of the fiscal on 22 March 2012 Similarly, she had said the government orders of announcements made in the collectors’ conference in 2011 were issued two days ahead of the 2012-13 budget presentation. Therefore the public would be able to know the details of the announcements in the current budget only after government orders are issued probably a year later. “The budgets presented by this regime are not time bound and exist only on paper. It is neither useful nor helpful. Sakthivel (2013) Exporter Association, he said that the decision of the government to unveil a special package to micro, small and medium enterprises (MSME) sector for 2013-14 would trigger development of clusters like Tirupur that were dominated by micro, small and medium level industrial units. The industrialist had landed the thrust given in the budget for better management and improvement of road quality as speedier transportation was the need of the hour for industrial development. He said welcomed the allocation of funds for large- scale combined water schemes in eight districts including Tirupur.

Ranganathan(2013) he said every aspect of the need of the people had been taken care of in the state budget. “ This is a good budget.” Several schemes had been announced for the agriculture sector. The allocation for agriculture was Rs.5,189 crore and Rs. 39,145 crore had been allocated for rejuvenation of tanks. This was a welcome more. However, a special scheme could be implemented for removing silt from the mettur dam. “ The dam has to cleaned and the capacity is shrinking. Removing silt will help in getting an additional storage of 10 to 15 TMC ft. It can be taken up as a special scheme.” Thurst was on precision farming and power generation (CMP) area of Thanjavur district. Power generation project should be treated on priority. Ramya Kannan(2013) she said that it was mixed bag for the welfare sector in the Budget that while established lobbies expressed disappointment , some other group of people were surprised with positive announcements in the assembly. The

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Tamil Nadu Government Nutritious Meal Employees union has thanked the chief minister for wide ranging changes to be made to the noon meal programme in addition to providing funds for additional infrastructure for kitchens and store rooms an announced that 14130 kitchens would be constructed during the year at a cost of Rs.359.70 crores . They have further petitioned that anganwadi workers’ jobs to be regularized, and providing a solatium of Rs.50,000 to the families of retired nutritious meal employees. In the disability sector, there is some appreciation for setting up a high level committee to ensure that the three per cent reservation for the differently abled in government jobs is implemented. However, there is also much disappointment that the sector has been assigned just a para in the budget speech. According to the Disability Rights Alliance (DRA) Tamil Nadu group representatives, “The state has not considered the need to allocate for the promises made by the government towards promoting accessibility and universal design in public buildings and spaces, and the 12th plan mandate to allocate reasonable amounts by all the departments of the state government, district and local administration.

Prabhu(2013) former chairman, builders association of India, Thanjavur welcomed the move by the government to provide rice at Rs. 20 per Kg in the open market by procuring one lakh tones of rice and selling through shops under co operation sector.

Karunanidhi (2013) In his statement here, in his reaction to the budget proposals, said an announcements were being made on a daily basis in the chief minister’s this robbed the budget and its financial projections for the year ahead of their efficacy. He also said farmers across the state would be disappointed that no relief packages were announced for them. He was also scathing on the government for ignoring relief measures for small and medium industries that had suffered the most because of the power outages – ranging from 15 to 18 hours in some districts. Despite having governed for two years,the AIADMK government had not shown any improvement in the power scenario. He said the announcement that Udangudi power project would commence work only in 2013-14 was disappointing. He also noted that

41 the AIADMK government had announced that they declared in the budget that less than 3000 buses had been procured for both year put together. Experts have already announced that the current year will be a drought year for the entire state. But the budget had not refered to it conspicuously, he added.

Naik (2013) in his study, the budget of 2013-14 presented by Chidambaram is really a budget which is specifically designed to meet the needs of the poor and downtrodden in the countryside in general and for urban poor in particular. Budgetary proposal of Rs.15260 crore for the development of drinking water and for maintaining hygienic condition will go a long way to meet the long awaiting demands of the ruralities. Mr.Chidambaram knows it very well that without developing the village roads it is hardly possible to realize the dream of our bloved Bapu. For that matter he has extended Rs.27000 crores. Eventhe proposal made by the exchequer worth Rs. 80194 crores, for rural development is praiseworthy. As a supplementary to rural development a sum of Rs. 33000 crores have been allotted for rural Employment Grantee Programme. And Finance Minister is very selective to sanction Rs.300 crore for nutritious food on the one hand and Rs. 13215 crore for Rural Employment Grantee Programme. It will go a long way to improve the health and efficiency of the workers. Sanctioning of Rs.4727 crore for medical Education will help a lot to improve the quality of the Medical Education. He has not given any stress on the control of urban unemployment problem. He has made hard effort to establish a balance in the matter of bringing regional development on the one hand and to provide benefit to the people at the grass root.

Nagarajan(2013) president of dyers Association of Tirupur, told that the focus given on the budget to improve power generation and the decision not to impose any new taxes on the common man/ industry were welcome. “ The move not like any of existing tax rate slabs is a boon to the poor and middle class,” The knitwear manufacturers were also delighted that Rs. 2,000 crore was allocated towards speedy infrastructure development across the state.

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Mohan Rao (2013) in his study has not brought in any major changes regarding the income tax and other taxes affecting the public especially the middle class. The budget about the graphic figures on fiscal consolidation based on increase in revenues, but is stock silent on cut in expenditure. Finance minister proposed to boost foreign investment , FDI and ECB flows which could bring down the current account deficit. The budget is also silent on export promotion and import substitution which form the basis of reduction of current account deficit. The plan expenditure has been boosted with an allocation of Rs. 555322 crore which work out to an increase of 29.4% over the last fiscal 2013. The Non plan expenditure is expected to increase by 10.8% to Rs. 1109975 crore. The subsidy is budgeted to decrease by 10.3 per cent during fiscal 2014 when compared to revised estimates of 2013 fiscal is expected to increase by over 21.6% over budget estimate of 2013 fiscal. The budget proposal appears to be positive for agriculture, social sector and infrastructure. The sharp increase in food prices effecting the consumer has necessitated for the government to give more emphasis to the agriculture sector by way of increase allocation for creation of a vibrant agricultural market.

Mathivanan(2013) genral secretary of Tamil Nadu Government transport corporation employee union, he said to the transport Rs.500 crore in the budget for meeting fuel expenses by transport corporations, and “for presenting a tax free budget” he said the appealed to the government to take up the pension benefits of employees.

Meenakshi (2013) in her study “How can the government extend full support for inclusiveness with just Rs. 800 per person (apart from maintenance allowance). This is entire amount that is available for implementing the remaining 54 schemes for persons with disabilities.” The allocation for health is Rs.6511.76 crores, a substantial increase over last years’ Rs. 5,569.28 crores of this a sum of Rs. 750 crore will go to wards the chief minister comprehensive Health Insurance Scheme. Two new regional cancer centers are to be set up in Thanjavur and Tirunelveli and a sum of Rs. 20crore has been allotted to strengthen operation theatres at medical college, and district head

43 quarters hospitals. The speech also contained a further promise that special measures to promote and popularize Indian systems of medicine would be announced by the chief minister at a later date. The government has also proposed to launch a separate health insurance scheme for pensioners, in order to reduce their burden of health expenditure. Further the assistance given to each bereaved family and under the Tamil Nadu pensioners’ Family security fund scheme will be enhanced from Rs. 35,000 to Rs. 50,000. from the fresh financial year the coverage under the chief minister’s comprehensive health insurance scheme will be extended to the srilanka Tamils living outside the refugee camps also.

Gnanadesikan (2013) he said that the cenral Government had awarded a subsidy of over Rs.1,80,000 crore on the sale of petroleum products to ensure that the cost burden did not fall on the common man. He welcomes the state’s announcement to procure and sell rice at the cost of Rs. 20 per kilogram even if it increased the cost burden on the central government. Even through the state government had presented a ‘ tax free’ budget, questions remain on how the AIADMK government would raise finances for its schemes, the Tamil Nadu unit of the BJP has asked.

Ammannaya (2013) in his study Finance minister can be considered a good beginning in the direction of attempting and finding solutions for india’s most acute economic problems. Indian economy is now challenged and has indicated that the solution in growth and high twin- deficits namely high fiscal deficit and very high current account deficit apart from tackling elevated levels of inflation. The finance minister has adopted a credible path of fiscal consolidation by budgeting for reduction in fiscal deficit to 4.8 per cent of GDP in 2013-14 as against the revised estimate of 5.2 per cent in 2012-13. A rebound of export and increased foreign investment inflows are required for addressing the problem of growing current account deficit. The foreign trade policy must also be reviewed for this purpose. The step is the investment allowance for new high value investments. Any company investing more than Rs. 100 crore in plant and machinery during the period from 01.04.2013 to 31.03.2014 will be entile to deduct, an investment allowances of 15 per cent of the investment in addition

44 to the permissible depreciation. Finance Minister has announced that funds used for technology incubators located with in academic institutions will quality as CSR expenditure. As regards growth a significant impetus is provided by increasing plan expenditure by 29 per cent in fiscal 2014 over that of fiscal 2013. The plan outlay has been increased across sectors such as agricultural development, HRD and education, skill development, health care etc.

Shanmugham (2014) he said that the post Budget press briefing. The Budget was without fresh taxes and squarely blamed the centre for its failure to stimulate growth and economic stagnation. He said through three were signs of revival with the state economic growth expected to exceed five per cent during 2013-14, massive of forts were needed to stimulate the economy to put it back on the path of accelerated growth.

Panneerselvam (2014) he said while the state Government had been striving hard to ensure equitable growth the centre’s failure to stimulate growth and to improve the falling macro-economic environment continued to adversely impact investments consecutively for that the second year. “The continued economic stagnation has also caused a substantial shortfall in the state’s projected tax revenues,” he said it had become a “ daunting task” for the state Government to adhere to the Tamil Nadu Fiscal Responsibility (TNFR) act target without impinging on the state’s ability to invest in critical “But a positive sign is that the power situation has already improved significantly in the state and industrial growth is showing recovery.

Kolappan (2014) he said that the economic slowdown that marred the state’s own tax revenues notwith standing, the Tamil Nadu Budget for 2014-15 has said aside a major share for the social sector. The Budget presented by finance minister O.Panneerselvam, on also laid considerable emphasis on development of agriculture, MSMEs (Micro, Small and Medium enterprises) and infrastructure sectors, as much as 37 per cent of the allocation is towards the social sector.

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Mohan Daniel (2014) in his statement interim railway budget is a disappointment, more than a few new trains, the nation expected a higher allocation for line doubling, electrification, modernization of stations and most important the maintenance of coaches. With eight central ministers from kerala , the poor deal accorded to kerala- which has been sidelined for year – speaks volumes of their bargaining power to get the state’s due share.

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