Budget 2024: How shares of centrally funded schemes in spending kitty have changed

Fully central funded schemes' share rising

The share of central sector schemes in the government's total expenditure has risen after the pandemic, while that of centrally sponsored schemes has declined in this period.

The share of central sector schemes increased to 32.2 percent in FY24 from 27.4 percent in FY18, while the share of centrally sponsored schemes went down to 10.5 percent from 13.3 percent earlier, a Moneycontrol analysis of the past few year’s budgets shows.

Central sector schemes are 100 percent funded by the Union government and include subsidies and direct benefit transfers like Pradhan Mantri Kisan Samman Nidhi Yojana.

While the increase in central sector schemes is primarily driven by a rise in subsidy programmes and the inclusion of PM-KISAN, a Moneycontrol analysis shows that even after discounting for these programmes, their share has risen in the government's spending kitty.

On the other hand, the share of centrally sponsored schemes, which have a state component, have declined even after discounting for big-ticket spends like MGNREGA, which have risen post-pandemic.

Within centrally sponsored schemes, the decline in core schemes has been greater than the decline in core of core programmes.

The share of core programmes in the Centre’s total spending declined to 7.4 percent in FY24, compared with 9.7 percent in FY18. On the other hand, the share in the core of core schemes shrank to 2.4 percent from 3.6 percent earlier.

Core programmes include schemes like Awas Yojana, Jal Jeevan Mission and Gram Sadak Yojana. The core of core schemes comprise MGNREGA and umbrella programmes for the development of vulnerable social groups.

Experts indicate that the ratio of centrally sponsored schemes has declined as the share of unconditional transfers has risen through devolution since 2015-16.

“The decline in centrally sponsored schemes happens when you have fiscal pressure and transfers to that extent get reduced, so the states' comparable commitments too get reduced,” said M Govinda Rao, a former member of Fourteenth Finance Commission.

Experts indicate that the focus on central schemes standardises spending, impacting productivity and delivering diminishing returns.

There is also a clamour for improving the design of schemes. “They should reduce the number of centrally sponsored schemes. The schemes should define a level of service,” Rao noted.

NR Bhanumurthy, professor at the National Institute of Public Finance and Policy, believes that another reason for the reduced share may be the states’ inability to secure funds.

“A few schemes need a matching grant from the state governments, some states are not able to get the matching grant,” he pointed out.

Bhanumurthy notes that while there is room for improvement in such schemes, their evaluation has improved drastically. “These schemes are always a work-in-progress.”

The government has at present 37 major centrally sponsored schemes in operation.