A continued attack on social sectors

Budget allocations are too miserly for good quality delivery of nutrition, health and education services

Despite all the hype about India’s rapid growth in the face of global gloom, it is evident to most observers that all is not well in the Indian economy. Rural distress is growing; public social service delivery is in a state of collapse in many states because of the drastic cuts in central transfers to state governments under these heads; employment growth (especially formal jobs) is simply not picking up; banks are under stress of non-performing loans; and investment rates continue to fall. Clearly, the economy is urgently in need of a demand stimulus as well as more government spending on infrastructure and public services.

In the face of all this, the central government needs to have a clear game plan for putting the economy on a stable and viable footing, recognizing that the headwinds from external forces will continue. Grand promises and high-profile photo-op events to entice investors are no longer enough, especially as they have achieved precious little in the past two years. The chimera that simply bringing in a goods and services tax will somehow generate a massive economic revival has to be put to rest as well, although it can serve as a convenient excuse for the government in case (as is likely) the various problems in the economy remain unaddressed.

This is a period when the government could actually have utilized the facts that wholesale price inflation is actually negative and the economy is the beneficiary of very low global oil prices, to launch a strategy focussed on more employment generation and meting people’s basic needs. So, the continued insistence on fiscal discipline at this time is surprising. All the more so when such discipline is really at the expense of the poor who are bearing the brunt of the indirect tax burden and who lose out from the lack of access to good quality publicly delivered goods and services.

Sadly, the government does not seem to have learned that investing in the social sectors is not about the “welfarism” that it seems to detest, but about creating a pathway for inclusive and sustainable growth. So, its attitude remains miserly, dishing out little portions of money in dribbles that are nowhere near enough to provide even the minimum in terms of decent and good quality delivery of nutrition, health and education services.

Consider the allocations in budget 2016-17 for social expenditures. Despite all the rhetoric about providing health insurance for all (an election promise of the Bharatiya Janata Party that now seems almost insulting to the people), the allocation to the ministry of health and family welfare has increased by a paltry ` 4,240 crore, barely enough to keep the amount at the same abysmally low level of 0.24% of GDP (gross domestic product).

The budget of the ministry of education has increased only slightly. Allocations for school education have increased by a minuscule ` 1,367 crore, hardly sufficient to ensure the much-needed expansion and universalization of good quality secondary education. Meanwhile, the current government anger at universities seems to be reflected in its purse strings, as the budget of the University Grants Commission has been slashed to less than half of the current year’s spending, from ` 9,315 crore to only ` 4,492 crore.

The worst fate is reserved for women and children, despite the florid concerns expressed in the budget speech. The entire ministry will experience a real cut as the increased allocation does not keep pace with projected inflation. But worst of all, the allocation for the Integrated Child Development Services programme (which is still not universalized) has actually been cut in nominal terms, from ` 15,394 crore to ` 14,000 crore. As states are struggling to find ways of even paying the anganwadi workers and helpers who are the backbone of the programme, it is terrible to think what will happen if such a stringent cut is actually implemented.

Arun Jaitley proudly declared that he has increased the Mahatma Gandhi National Rural Employment Guarantee Scheme allocation to the highest ever level of ` 38,500 crore— but that is false, as the spending under this head reached ` 38,552 crore in 2013-14. At only 0.25% of GDP, this would also be much lower than the 0.59% that was achieved in 2009-10. And this also conceals the arrears that must be paid by the centre for this programme. As many as 21 states are still waiting for the money they have already spent that the central government has yet to pay them for the current year, so the final allocation will be around ` 6,500 crore less if that is accounted for.

What is also bizarre is that while the National Democratic Alliance government finally seems to have woken up to the ongoing agrarian crisis, it seems to think that the matter can be addressed by budgetary sleight of hand rather than real action. So, the finance minister declared what at first appears to be an enormous increase in the budget for agriculture, but it turns out that most of that is because of the fact that the interest subsidy on loans to farmers, which was previously under the head of the finance ministry, has simply been moved to the ministry of agriculture. If that ` 15,000 crore is taken out (as it should be), the increase in the budget for agriculture is much more piffling, to the point where it increases from 0.17% of GDP to 0.19% of GDP—hardly enough to make much of a difference to the conditions of farmers.

Sadly, the economic advisers of this government appear to have learned very little from their relative lack of success since mid-2014. Which in turn means that the Indian people will continue to suffer from the state reneging on its responsibility to ensure their social and economic rights.

Source: Mint epaper, 2-03-2016