Pre-Budget analysis: The need to focus on health and education

By Disha Rawal

The Modi government is often hailed as being pro-business. While that might actually be true, it certainly has more to do in order to be pro-market. A recent Oxfam study concluded that the wealthiest 1 percent of Indians corner 73 percent of the nation’s wealth. That is probably because a vast majority of the Indian population is simply not equipped to participate in the free markets. They lack the necessary skills and facilities that can allow them to compete. Bridging this gap and thus bringing about equity is essential to ensure that the market works well.

In this context, there are a lot of expectations pegged to Modi government’s last full budget this year. India’s dismal social spending awaits a much-needed boost. However, keeping in mind the lacklustre growth last year, spending on capital expenditure can serve to heat up the economy a little. However, long-term needs of the economy will also need attention in the face of rising immediate pressures.

Need to focus on health

The government spends one percent of its GDP on healthcare, while the entire country spends about four percent of GDP on the same. Thus the out-of-pocket expenditure is quite high. The growing costs of healthcare provided by private players have led to adverse trends like the falling immunisation cover among the richest. Diseases like tuberculosis are still claiming a large number of lives. Specifically, in the case of TB, India loses 1150 lives every day even as patients become irresponsive to antibiotic medicines. The National Health Policy approved in 2017 also demands higher expenditure on health.

However, India lies far below the OECD average of around nine percent of GDP spent on healthcare. The US spends about 17 percent on the same. India’s poor health network needs significant government intervention.

Impetus to education

A slew of reports has claimed how children in India fail to perform basic tasks like reading the time on a wall clock and do simple addition. Yet, little seems to move with time. Expenditure on education is the lowest in China and India among OECD countries. India spends about four percent of the GDP on education and only one percent on research and development. This is far below the six percent ratio recommended by the Kothari Education Commission. Even if the government fails to provide for a comprehensive education system, it needs to put in place systems to give incentives to the private sector to enter the domain of rural education.

With the onset of the Fourth Industrial Revolution, the premium placed on skills will be higher than ever before. Since the well-educated will be in a better position to acquire these skills, the gulf between the rich and poor will increase even more.

Can cash transfers work?

There is an increasing emphasis on replacing in-kind benefits by cash benefits in all social schemes. However, as Jean Dreze points out, that system will only work if people have access to facilities to spend the money on. While cash transfers work exceedingly well in Latin American countries and the like, they would be rendered unworkable in India since the provision of facilities in itself does not exist. However, since inefficient government systems occupy the markets, there are no incentives for private enterprises either. Ambitious schemes like the Universal Basic Income need adequate social spending, to begin with, and in their absence, are likely to end up being an ill-utilised government expenditure.

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