How does India do welfare?

From the post-war development grants of the 1950s to the Integrated Rural Development Programme of the 1980s, (Chaturvedi, 2011) to the flagship health scheme of the present government, Ayushman Bharat, (National Health Agency, 2019) welfare schemes have always been central to India’s development agenda. Many of these are Centrally Sponsored Schemes (CSS) – funded by the Centre and administered by the States. About one-quarter of the total devolutions under the budget for 2019-2020 – nearly INR 33 lakh crores –  were for Centrally Sponsored Schemes.^[1] Another INR 87 lakh crores were allocated for Central Sector Schemes.^[2] However, commentators have noted that notwithstanding the increase in untied central devolutions to States, expenditures on sectors such as health and primary education are confined to the allocation under a Centrally Sponsored Scheme, (Aiyar & Kapur, 2019) and have not resulted in improved allocations on social sector expenditures. (Amarnath & Singh, 2019)

So why do schemes have such a prominent place in Indian development?

Article 246 of the Indian Constitution delineates the legislative competence of the Union and the States – the Union may legislate on items in List I of the Seventh Schedule to the Constitution, the States may legislate on those in List II, and both the Union and the States may legislate on items in the Concurrent List. Many “social welfare” heads occur in the State List, including water and sanitation and public health. Ordinarily, the executive can act on those subjects on which the respective government has legislative competence. (Ram Jawaya Kapur v State of Punjab, 1955)

Article 282,^[3] however, creates an exception to this. It empowers the state or central governments to make grants for “any public purpose,” whether or not the subject of the grant is one on which the state or union may legislate. This provision may be traced to the Government of India Act, 1935, where it was intended to be used for exceptional circumstances such as famines or other natural disasters. (Administrative Reforms Commission, 1968)

Meanwhile, Article 275^[4] provides for grants-in-aid by the Parliament to the States. The quantum of these grants is to be determined by the Finance Commission under Article 280(3).^[5]

Since independence, however, Article 282 has been used to make grants for welfare schemes, many of which were formulated by the Planning Commission. (Administrative Reforms Commission, 1968) The Planning Commission is not a statutory body, having been formed by executive order in 1950. Its role was only to make recommendations to the government. (Paranjape, 1990) In practice, however, the Planning Commission acquired an outsize role in Indian public policy (Rajamannar, 1965) before it was disbanded and replaced by the NITI Aayog in 2015.  (NITI Aayog, 2019) In the first Five Year Plan, the Planning Commission recommended Central funds be allocated for the construction of the Hirakud and Bhakra Nangal projects, observing that even though irrigation is a State subject, States lack the resources to embark on large scale projects. (Planning Commission of India, 1951)

Many centrally sponsored schemes followed. At the end of the Third Five Year Plan, more than 92 schemes were in operation in India. (Chaturvedi, 2011) In 1965, Justice P.V. Rajamannar argued that the Centre was allocating a disproportionate share of funds by way of grants under Article 282, on the recommendations of the Planning Commission. In his view, Article 282 was never intended to be used to provide regular grants to States. (Rajamannar, 1965) This view was echoed by the Study Team on Centre-State Relations in its report to the Administrative Reforms Commission in 1968, (Administrative Reforms Commission, 1968) which also noted that the bulk of central schemes until that point had been for national-level, inter-state purposes.

But this was soon to change.  By 1990, when prominent jurist Nani Palkhivala submitted his opinion to the Ninth Finance Commission that the use of Article 282 as a source of power for regular grants was unconstitutional, (Report of the Ninth Finance Commission of India, 1990)  a large number of schemes were already in operation. These included schemes to provide self-employment and employment guarantees in Indian villages, for drinking water and providing primary health centres. (National Commission to Review the Working of the Constitution, 2001)  These were expanded into several other areas, including old-age pensions in 1995, primary education from 2000 and secondary and tertiary health care in 2008. While the number of Centrally Sponsored Schemes has gradually been reduced, more than 59 centrally sponsored schemes were in operation by 2011. (Chaturvedi, 2011) Meanwhile, the Centre also operates schemes without state intervention. These are known as Central Sector Schemes. Prominent welfare-related Central Sector Schemes include the national LPG subsidy and the PM Fasal Bima Yojana to provide crop insurance. (Open Budgets India, 2018)

Welfare schemes had also become a tool of state-level policy. The Tamil Nadu Noon Meal Scheme was launched in 1982 to provide mid-day meals to school children. (Moses, 1983) This was later adopted by the Centre through the Centrally Sponsored Mid-Day Meal Scheme. (Ministry of Human Resource Development, 2017) Similarly, Maharashtra launched the Employment Guarantee Scheme in 1984. This was later adapted to the National Rural Employment Programme and the National Rural Employment Guarantee Act, 2005. (Planning Commission of India, 1992) (Mahatma Gandhi National Rural Employment Guarantee Act, 2005) Presently, every state continues to operate a number of schemes, which operate in a variety of sectors.

Thus, when the Constitution Bench of the Supreme Court had occasion to decide on whether regular grants could be made under Article 282, welfare schemes were well-entrenched in Indian policymaking. In Bhim Singh v. Union of India, (2010) the court found nothing in the text of Article 282, which could limit the power of the Central or State governments to make grants for any public purpose. The petitioner, in this case, had challenged the grant of funds to the MP Local Area Development Scheme, a central sector scheme whereby Members of Parliament were provided funds to carry out public works in their constituencies. The court was not the appropriate place to contest the wisdom of these schemes. Pertinently, the Court noted that the “[i]t is not in dispute that several welfare schemes were sponsored and are being formulated by the Union of India in implementing Directive Principles of the State Policy. Though they may essentially fall within the legislative competence of the State and some of the schemes are monitored by this Court, the said schemes are implemented through grants out of the Consolidated Fund of India by resorting to Article 282.” (emphasis mine). Thus, Article 282 and the expression “public purpose” should receive the widest possible construction. 

With respect, this interpretation of Article 282 is problematic. The Court reasoned that, on a plain reading of Article 282, there was no limit on the powers of the Centre or States to make grants. However, Article 275(1) of the constitution provides for grants-in-aid from the Centre to the States, in such quantum as may be determined by Parliament. The quantum of these grants-in-aid is to be determined by the Finance Commission under Article 280(3). The provision for grants under Article 275(1) read with Article 280(3)(b) is inconsistent with an unrestrained power to make grants under Article 282. The mere fact that the grants were used for a public purpose or in furtherance of the Directive Principles would not make them constitutional.

Post ­Bhim Singh, however, there was little debate on whether schemes were the correct means by which to deliver welfare to Indian citizens. It is perhaps telling that the Unorganised Workers Social Security Act, 2008 empowered the government to frame schemes for the welfare of the unorganised sector but did not provide any substantive rights in the text of the statute. Welfare schemes have now become central to our conceptualisation of welfare. Conversations on welfare policy now pertain to the need to “rationalise” these schemes. The BK Chaturvedi Committee, which submitted its report to the Planning Commission in 2011, recommended that the number of schemes in operation be reduced from 147 to 59. The Committee also noticed that only 9 flagship schemes were allocated close to 80% of the central allocation on schemes. Many other schemes were, consequently, underfunded. These concerns were echoed in 2015 by the Sub-Committee of Chief Ministers in their consultations with the NITI Aayog, which noted that 12 schemes had an allocation of less than Rs. 200 crore each. (NITI Aayog, 2015)

Most recently, the Sub-Group of Chief Ministers, (NITI Aayog, 2015) recommended that the states’ share of central taxes be increased and that Centrally Sponsored Schemes be categorised into “Core of Core”, “Core” and “Optional” categories. Yet, at no point has the wisdom of scheme-based allocation been questioned, nor has the state dependence on central schemes reduced.

The reliance on schemes to dispense welfare raises some concerns. Schemes are announced and withdrawn in an ad hoc manner by the state. This means that for citizens, welfare becomes an aspect of the state’s largesse, to be dispensed at the state’s discretion, rather than a citizen’s entitlement.  This is deeply problematic with respect to social security, which ought to be treated as the right of every Indian. As the Budget for 2020-21 approaches, it is time to reconsider scheme-based, ad hoc welfare measures and move towards a more comprehensive, statute-based provision of social security.

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(1990). Report of the Ninth Finance Commission of India. Retrieved from Meanwhile, the Centre also operated schemes without state intervention. These are known as Central Sector Schemes. Prominent welfare related Central Sector Schemes include the national LPG subsidy and the PM Fasal Bima Yojana to provide crop insurance. (O

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[1] https://www.indiabudget.gov.in/doc/eb/stat4a.pdf

[2] India Budget

[3] Article 282 reads: “Expenditure defrayable by the Union or a State out of its revenues The Union or a State may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws”

[4] Article  275 reads:

Grants from the Union to certain States

(1) Such sums as Parliament may by law provide shall be charged on the Consolidated Fund of India in each year as grants in aid of the revenues of such States as Parliament may determine to be in need of assistance, and different sums may be fixed for different States: Provided that there shall be paid out of the Consolidated Fund of India as grants in aid of the revenues of a State such capital and recurring sums as may be necessary to enable that State to meet the costs of such schemes of development as may be undertaken by the State with the approval of the Scheduled Tribes in that State or raising the level of administration of the Scheduled Areas therein to that of the administration of the rest of the areas of that State…

[5] Article 280(3)(a) reads: “It shall be the duty of the Commission to make recommendations to the President as to—(a) the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds…”