Finance Minister Arun Jaitley's maiden Budget on Thursday may change the scope and mandate of social schemes such as the Mahatma Gandhi National Rural Employment guarantee Act, the flagship social security programme of the UPA government, which guarantees at least 100 days of wage employment to every household.
A day before the budget, the Narendra Modi government criticised MGNREGA for "failing to create tangible and meaningful assets and infrastructure" and said a "major revamp and convergence" of social schemes is needed for maximum efficiency gains.
The criticism of social schemes such as MGNREGA is seen in the wider context of a moribund economy and poor state of finance that the new government claims to have inherited from the UPA regime.
Rising government deficit and threats of sovereign downgrade had forced the UPA government to commit to a fiscal roadmap of curtailing deficit at 3 per cent of GDP by 2016-17. The previous government stuck to its deficit reduction target by rolling over subsidy payments to the current year and by cutting planned expenditure.
The Modi government cannot adopt the same approach because productive spending is an important lever for growth for a regime whose mandate is to revive the economy and create millions of jobs.
This has led to speculation that the government will cut back funding to schemes such as MGNREGA and also renege on deficit reduction targets set by the previous government.
Last fiscal, the UPA government allocated Rs 33,000 crore for MGNREGA, which was substantially lower than the peak allocation of nearly Rs 40,000 crore in 2010-11, but Mr Jaitley can bring it down even further.
Analysts expect Mr Jaitley to link MGNREGA expenditure to asset creation to improve outcomes, cut wasteful expenditure and free up fiscal resources for capital allocations.
Analysts say Thursday's budget will target a fiscal deficit of 4.5 per cent of GDP, same as last financial year, and nearly double disinvestment target to raise more funds for productive expenditure such as on building roads, reservoirs and airports to revive growth and jobs.
Some analysts also expect a scaling down of government subsidies on food, fuel and fertiliser, which accounted for 2.2 per cent of GDP in 2013-14.
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