Spending and Saving: Whither Maximum Governance?

Shankkar Aiyar
5 min readJan 7, 2018


The unstated question is how well the government spent tax payers’ monies. Is the tax payer getting a bigger bang for the buck?

By Shankkar Aiyar| Published: 07th January 2018 04:00 AM

Few leaders have captured the angst of the tax paying classes as well as Ronald Reagan. In the eighties, he said memorably, “government always finds a need for whatever money it gets”.

It is that season yet again when governments in India re-craft the narrative to rearrange finances. There is much lather about the fiscal deficit — that headline ratio which informs the gap between government earnings and spending and how well public monies are are managed. Predictably, government of India is spending well beyond its kitty.

The advance estimates of GDP and GVA released on Friday suggest that the economy has grown slower than previous years, that sectors supporting the bulk of employment are lagging and that the fiscal deficit target could be missed.

There is the spectre of the cost of bank recapitalisation, the increased spending on food subsidies, MGNREGS, fertilisers and uncertainty over revenues. In short, the government is running short of money. Ergo, there is also much debate about where else can the government realise revenues from.

Typically, the discourse in the political economy is largely about what the money was spent on, where it was not but rarely how well was it spent. The unstated question, and what is rarely deliberated upon, is how well the government spent tax payers’ monies.

This government came to power riding a powerful concept of minimum government, maximum governance. What would constitute minimum government is a moving goal post and the subject of many debates and definitions. Be that defined as it may, what about maximum governance?

Arguably, this regime has been more focused on efficient use of resources — and this assertion has been made repeatedly — and has claimed to have deployed technology and smarter processes. The budget is but a representation of political sagacity and financial efficiency. Have the line ministries been more efficient?

You would think a regime that has relentlessly chanted the mantra of good governance would consolidate and quantify the savings from new ideas. Prima facie, there has been little effort to consolidate data on how efficient utilisation of resources has been. If there has been an exercise it is a well-kept secret.

There is the much declared data on the Aadhaar impact. Savings due to DBT for LPG, MGNREGS, PDS, and NSAP et al are estimated at Rs 57,029 crore up to 2016–17. Then there is the anecdotal data. Improved coal linkage is expected to deliver Rs 3,000 crore. Pre-painted rails and electrification is expected to save the Railways around Rs 1,500 crore plus Rs 10,000 crore per year. Increased coal output has saved dollars. Ostensibly there has been reduction in interest cost and T&D losses due through implementation of UDAY. What have been the gains till now?

What about the known unknown. Have the public sector units been more profitable, less of a drain on the exchequer? Has end to end computerisation of PDS operations, changes in procurement of paddy, freight movement of grains, in neem coating of urea delivered savings?

Do the pilot projects on elimination of kerosene from PDS reflect savings and hope for expansion? This government has claimed changes in issue of contracts for infrastructure and utilisation of capacities in petro sector. Has there been a study of the savings?

The Modi Sarkar has invested political capital on behavioural change. Has this impacted institutional behaviour across ministries? The CAG’s reports on Union Government Accounts present a revealing picture on allocation and utilisation. Entire provisions of grants have gone unutilised.

The figure for 2016–17 was Rs 125,305.38 crore across 40 sub-heads. The CAG adds, “Savings of entire provision is indicative of the fact that estimates were not prepared after adequate scrutiny of the projects/schemes.”

Then there is underutilisation of allocations — for instance, Rs 228,639.60 crore in 2016–17. Indeed, the CAG report has a section titled ‘persistent savings’ across over 70 ministries/departments. The persistence of deficits despite these ‘savings’ is a reflection of what the CAG defines as ‘excess expenditure’.

As under the UPA, there is the saga of unpaid dues fogging the data picture. The CAG report for 2015–16 says outstanding subsidy claims — payable for food, fertilisers and petroleum — including the past unpaid claims, excluding the 4th quarter claims, amounted to Rs 1,62,529.50 crore.

In its 2016–17 report, the CAG reveals outstanding subsidy claims including past unpaid claims, but excluding the 4th quarter claims amounting to Rs 1,87,863.42 crore.

The recurring postponement of payments suggests the delta between income and expenditure is larger than what is presented.

Articulation of facts is critical for disinfection of alternative narratives. There is a continuing debate on the quantum of windfall gains from the fall in crude oil prices. Depending on who is telling, the amount ranges from Rs 4 lakh crore to Rs 5 lakh crore for a three-year period — in lower import costs and in taxes realised. The big question is how was this shared?

Crude prices are rising and the Indian crude basket price is around $61 per barrel. Regardless of how the final estimates of GDP and revenue growth pan out, the government has its task cut out. The sustainability of future policy action rests on how well the government explains the past actions.

The theology of maximum governance is about efficiency. The credibility of any enterprise depends on how well it is able to balance the terms of trade. It is no different for political parties and the political economy.

There is a need to articulate in words and in numbers how well tax payers’ monies have been managed. Is the tax payer getting a bigger bang for his buck?

Shankkar Aiyar, political economy analyst and Visiting Fellow at IDFC Institute, is author of Aadhaar: A Biometric History of India’s 12 Digit Revolution & Accidental India

You can email him at shankkar.aiyar@gmail.com and follow him on Twitter @ShankkarAiyar. His previous columns can be found here. This column was first published here​.



Shankkar Aiyar

Journalist-Analyst. Author of ‘Accidental India, ‘Áadhaar: A Biometric History’ and ‘The Gated Republic’. Studying how politics rules the economics of people!