Budget's size matters

Don't let public spending suffer; government resources need to grow much faster

- NDIA'S FISCAL CONSOLIDATION drive has been sharp and credible after the short-term countercyclical measures during the pandemic period. However, this has come with the cost of a subdued growth of general government expenditure (Centre + states) as a fraction of GDP.The ratio was 27.4% in FY25, marginally lower than 27.8% in FY17.

Turning even further to the past, the ratio improved from 26.6% in FY13-an 80 basis points increase between FY13 and FY25. Even this modest rise is largely due to the increased expenditure by the state governments, although the combined share of the Centre and the companies owned by it would easily exceed that. What this implies at a broader level is that the ongoing fiscal consolidation is spearheaded by expenditure control as much as resource enhancement. While the focus on creating more fiscal space for public capital expenditure by way of savings in ungainful categories of revenue spending is creditworthy, it's clear that productive social infrastructure spending has also suffered in the process.