Will the Budget Do Justice to the Social Sector?

According to a recent report by Oxfam at Davos, billionaire fortunes increased by 35% last year, while 13.6 crore Indian have been indebted since 2004.  India has the second highest income inequality in the world, lower than only South Africa. This ever-increasing wealth gap is a symptom of a poorly developed social sector. In terms of human development, India ranked 130 out of 187 countries in 2017. Poor attainments in health and education are largely to blame for this widening inequality. 

Despite this, the central government, irrespective of the ruling party, has always been stingy in terms of making allocations for the social sector. The United Progressive Alliance followed a conservative fiscal policy because it was unable to set up the tax-Gros Domestic Product (GDP) ratio necessary to provide the social sector with the allocations it needs. The National Democratic Alliance (NDA) too, followed this policy when it came to power. 

Spending time in talking about schemes planned for developing the social sector seems to have become a public relations exercise for the present government. An examination of the actual allocations made in the last few years plainly shows that the policies for social security in India have been designed to support corporate capitalism and private interests. 

In this reading list, we examine how the social sector was treated by the budgets made in the last few years. 

Not Enough Taxes

In the context of the first budget drafted by the NDA-government in 2014-15, Subrat Das, argued that the government failed to acknowledge that the budgetary policies towards the social sectors have grown worse over time. A part of the reason that the social sector has been largely neglected by the budget, Das wrote, was because of India’s tax-GDP ratio, which has restricted the government’s ability to provide adequate resources for developing the social sector.   

We find that the highest incremental allocation has gone to the Ministry of Defence (Rs 6,000 crore), followed by the Ministry of Road Transport and Highways (roughly Rs 3,000 crore). The ministries of Rural Development, Human Resource Development, and Agriculture have got incremental outlays of around Rs 1,600 crore, Rs 1,300 crore, and Rs 1,100 crore, respectively. A few other ministries such as Urban Development, Health and Family Welfare, Youth Affairs and Sports, and New and Renewable Energy have been given additional budgets of roughly Rs 500 crore each. The ministries of Women and Child Development, and Tribal Affairs have got incremental allocations of only Rs 100 crore each. Thus, defence and road transport and highways seem to have got the highest priority in the limited budgetary manoeuvrability exercised by the new government in the short time it had for preparing the budget for 2014-15. 

Corporate Capitalism 

While analysing the budget speech for 2015, K P Kannan pointed out that the then Finance Minister Arun Jaitley had spent a significant amount of time discussing schemes that were categorised as social security. However, Kannan argued that a quick examination would reveal the extremely limited benefits of these schemes, since the budget seemed to be bolstering corporate capitalism by weaving into it the schemes that were designed for social security. Insurance, pension and tax concessions for healthcare were announced in the 2015 budget, but the responsibility of providing these services themselves were outsourced to the private sector. In the same budget, corporate taxes were cut from 30% to 25%, which would have made the tax-GDP ratio worse. 

The overwhelming message is that the central government is on a course reversal as far as basic social security provisioning is concerned. Its plans for providing some small and discreet contingent social security will clearly be linked to market-based solutions. All these will be a further boost to the process of what may be called predatory capitalism, led by the private corporate sector and protected by the state.

No Longer News

In  2016, T Sundararaman, Indranil Mukhopadhyay and V R Muraleedharan pointed out that since 2005-06, the union government’s spending on health, as a percentage of GDP, had been the lowest. They argued that since 2012, there existed a systematic policy incongruence between budget allocations and government policy, particularly in the health and education sector which seem to be bearing the burden of fiscal consolidation. These aspects are not highlighted by the media very often, they wrote, perhaps because it is now no longer new. 

The only context when any pro-poor public expenditure in social sectors seems acceptable in this economic regime is when they are routed through the private sector—giving further fi llip to the runaway growth story of the private healthcare industry—unmindful of the serious adverse consequences this has had in increasing inequity and impoverishment. 

The Biggest Inequality

Even the 2019 budget did not address the problem of inadequate allocations to the social sector. As S Mahendra Dev wrote, “the biggest inequality in India has been the slow progress in social indicators and human development in spite of high economic growth. It is known that India’s progress in the social sector has been much slower compared to its GDP growth.” He argued that the expenditures in the social sector have been wholly inadequate, given the chronically low status of India’s human development indicators.  Furthermore, progress has been slow in addressing the significant regional, social and gender disparities. Public expenditures have not grown fast enough and the delivery systems for social services have remained poor. Privatisation of health and education have worsened these problems over time. 

In the last few years the share of the expenditures on social services rose from 6.6% of the GDP in 2013–14 to 7.3% in 2018–19 (Table 2, p 44). During the same period, the share of expenditure on education was, however, stagnant at around 2.8% to 3% of the GDP. The expenditure on health sector/services, too, barely changed from 1.2% to 1.5% of the GDP. This is lower than the required 2% of GDP. Similar trends can be seen for the social services expenditure as percentage of total expenditure. India spends about one quarter of its total expenditure on social services and around 10%– 11% on education.