2012 Budget: Where does the government spend your money?

by Manshu on March 23, 2012

in Economy

Earlier in the week I looked at how the government raises money, and in this post I’m going to look at a few charts on how the government spends its money.

There are two heads of government spending – Non Plan Expenditure and Plan Expenditure. Non Plan Expenditure is money that’s spent on sustaining the country like defense, postal deficit, subsidies etc. and Plan Expenditure is the money that is spent on improving the country like the money spent on dams, roads etc.

It won’t surprise you to learn that a lot more is spent on sustaining ourselves than is spent on improving the infrastructure etc. and here is a pie chart that shows how this ratio is expected to look like in 2012.

Government Expenditure Plan and Non Plan

Government Expenditure Plan and Non Plan

The absolute numbers for this is Rs. 9,69,920.90 crores of Non Plan Expenditure and 5,21,025.00 crores of plan expenditure.

But if the government spends so much on sustaining us – where does that money go?

Here is a pie chart that shows the spending on the major non plan expenditure heads.

Breakup of Non Plan Expenditure

Breakup of Non Plan Expenditure

This chart would probably surprise people who see this break up for the first time, but others would know that a large part of the spending goes in making interest payments of the debt that we’ve accumulated over the years, and the next biggest head is Defense of course.

Here are the absolute numbers.

Heads Rs. In Crores
Interest Payments and Debt Servicing  319,759.43
Defence  193,407.29
Total – Subsidies  190,015.13
General Services  120,086.08
Social Services  20,784.13
Economic Services  20,479.24
Others  105,368.99
Grand Total  969,900.29

Now, let’s move on to plan spending. Here is a pie chart with the break up on the plan spending.

Planned Exp Breakup

Planned Exp Breakup

The big spend here is Social Services and that comprises of a lot of items under broad heads like Education, Health, Housing, Art and Culture, Water Supply etc.

Here are the absolute numbers.

Agriculture and Allied Activities 17692.37
Rural Development 40763.45
Irrigation and Flood Control 1275.00
Energy 154841.94
Industry and Minerals 57226.76
Transport 125357.06
Communications 15411.38
Science Technology & Environment 16591.65
General Economic Services 24777.28
Social Services 188871.69
General Services 8700.67
Grand Ttotal 651509.25

I think perhaps the biggest thing to take away from this post is how nothing is free and how money that’s used to subsidize oil has to be later borrowed which then accrues interest on it and then paying that interest eats up into money that you could use to finance growth.

{ 16 comments… read them below or add one }

bemoneyaware March 23, 2012 at 9:07 am

Insightful post and good graphics -Picture is worth 1000 words!.
As you rightly pointed out Indian Govt is in catch 22 situation and how money that’s used to subsidize oil has to be later borrowed which then accrues interest on it and then paying that interest eats up into money that you could use to finance growth.

Reply

Manshu March 24, 2012 at 11:29 pm

What they need and perhaps the whole country does is to move away from a jugaad mentality and try to come up with real solutions that will solve the problem long term even if they are difficult to implement right away.

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Kant March 23, 2012 at 8:27 pm

Major chunk goes to the Swiss accounts of politicians and under the bed/sofa of bureaucrats. May even reach people involved in anti-social activities. If left, then spent on above mentioned Social Services.

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Manshu March 24, 2012 at 11:25 pm

I like how you wrote “bed / sofa” 🙂

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Rakesh March 23, 2012 at 10:53 pm

@Manshu,

Excellent analysis, appreciate your work.

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Manshu March 24, 2012 at 11:23 pm

Thanks for taking the time out to leave a comment!

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Shirish March 24, 2012 at 4:32 pm

Thanks for responding to my request about infographics on how govt spends money. It may be worthwhile to mention that GDP estimate for FY11-12 is 8912179 crores (about 1.739 trillion US$ @ 51.25 Rs/$) and GDP estimate for FY 12-13 is 10159884 crore (about 1.98 trillion US$ @ 51.25 Rs/$). This represents 14% growth in GDP. Now this may sound very high, but this includes real GDP growth (7.6%) and inflation (6.4%)!
Regards,

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Manshu March 24, 2012 at 11:17 pm

Awesome comment – thanks for that info – didn’t realize India expects to be a 2 trillion economy next year.

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Krunal March 28, 2012 at 3:22 pm

hey Shirish,

can u help me understand what is real GDP and Nominal GDP.. difference btwn the both..pls..
thank you..

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Manshu April 2, 2012 at 4:21 am

Nominal growth is the absolute number, and real is adjusted for inflation.

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Sahil Galhotra April 18, 2012 at 4:46 pm

Dear Manshu
In above part of post you have written that plan expenditure is 5,21,025.00 and in below pie chart it is 651509.25. Can you explain that ?

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Manshu April 23, 2012 at 4:26 pm

Dear Sahil – the plan expenditure 5,21,025.00 is the central plan outlay and the the 651,509 is broken out according to sectors. You can see these numbers here in the files at this page:

http://indiabudget.nic.in/glance.asp

Central Plan Outlay
Central Plan Outlay by Sectors.

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Sahil Galhotra April 24, 2012 at 12:16 pm

Dear Manshu

Thanks for the reply. But my question was plan expenditure and broken according to sector should be same ? because plan expenditure is same what government will spend on different sector like agri, rural etc or . So can you please clarify on it ?

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Manshu April 25, 2012 at 4:38 am

Because it includes a component called Internal and External Budgetary Resources that has money that is raised by PSUs and spent on these sectors. That’s how it appears to be higher. I sent you an email response as well but the email bounced back.

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Deborshi Saharia December 18, 2012 at 8:45 pm

thanks for letting me know the information of the budgetary resources of india

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brijesh kumar May 31, 2013 at 2:12 pm

thanks for sharing the useful knowledge.

Reply

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