Economic Survey: Will Budget fix what India ails from?

The Economic Survey preceding Budget 2021 is in many ways the annual essay on the state of the union.

Published: 31st January 2021 07:40 AM  |   Last Updated: 31st January 2021 11:07 AM   |  A+A-


Budget (Express Illustrations)

The Economic Survey preceding Budget 2021 is in many ways the annual essay on the state of the union. Its arrival at a piquant point when social and economic fault lines are unravelling world over in the wake of the pandemic obliges deeper introspection on the politics of economics.

The morality play of anguish and outrage unfolding across the Atlantic Ocean has got global audiences captivated. The war of Davids against financial Goliaths, playing out on a contextually emblematic platform called Robinhood over the valuation of video games retailer GameStop is surreal. It is also symptomatic of the consequences of unattended issues. The curriculum presented in the episodes hold lessons for the world at large — and for India on how it addresses perceived and real anxieties.

In its opening chapter, the Survey quotes from Thirukkural, Chapter 49/ Verse 482: “Doing the right things at the right time is the rope which binds the wealth, making it boundless.” Whether the profound lesson is being followed is a question open for debate, and the answers depend on who is telling the story. That said the survey does provide an illuminating guide for knowing India and a robust foundation to assess whether Union Budget 2021 addresses the issues haunting 1. 4 billion Indians.

India has one critical surplus and that is the number of people in the political economy. The promise of demographic dividend depends on investment in human capital. No economy has risen to developed status without spending on human development. And yet, historically, India has shied from making the necessary investments. India ranks 131, down from 129 in 2019, among 189 nations, ON the UN human development index and is in the company of smaller and poorer nations.

The pandemic has brought focus on the decrepit state of health care — and I have interrogated and chronicled its history in my book, ‘The Gated Republic’. The Economic Survey blithely and bizarrely declares that ‘Better healthcare infrastructure is no insurance against communicable disease’. Health care is obviously not just about communicable diseases. The fact is a nation of nearly 140 crore people with barely 12.5 lakh allopathic doctors can scarcely afford to waddle in an ‘ifs and buts’ debate.

Be that as it may, consider the state of expenditure for health. On the face of it, expenditure of the Centre and the states on health has gone up from Rs 1.49 lakh crore to Rs 3.51 lakh crore between 2014 and 2021. But as a percentage of total expenditure, it is barely 5.4 per cent and, in relation to the size of the economy (and for a rising population), it continues to be poor at 1.8 per cent of GDP. Unsurprisingly, India ranks 145 among 180 countries on quality of health care as per the Global Burden of Disease report.

It is true that the chasm between need and access is worsened by poor spending by the states which have the onus of last mile delivery. Thanks to the deficit in spending and capacity, India has the highest level of out of pocket expense of health expenditure sending thousands seeking health care into debt and penury. The Survey points out that raising public spend on health care can bring down out of pocket expenses from 65 per cent to 30 per cent.

The broken state of education again is the consequence of poor spending and policy design. The absolute spend on education has gone up from Rs 3.54 lakh crore to Rs 6.75 lakh crore but after decades of slogans and promises to spend 6 per cent to GDP on education, actual spend in relation to size of economy continues to be just 3.5 per cent. What is worse is that the divorce of accountability from allocation, poor policy design and implementation has resulted in millions passing out even as they struggle with words and numbers.

The state of education has a direct bearing on the quality of employment and, therefore, on the multipliers of growth across sectors and national income. The data on the quantum and quality of workforce is instructive. The Survey informs India has over 51.8 crore people in its labour force. Growth demands quantity and quality. Shockingly, only 26 per cent of women are part of the workforce. In an age when algorithm-led automation is rapidly retrenching human interface, the average years of schooling of the labour force is barely 6.5 years.

Of the 51.8 crore workers, only 12.2 crore are on regular salaries, 11.5 crore casual workers and stunningly 25 crore or 52 per cent classified as self-employed. It begs the question if the selfemployed are so by choice and if they are entrepreneurial is the system allowing access to affordable credit. There is much lather about a development finance institution — given the history of IFCI and IDBI one wonders if that is the panacea — but little to enable digital access to speedy credit as available in say Singapore. Policy narrative suggests that frequently the impulse is to solve tomorrow’s problems with yesterday’s solutions.

The crux of the anger over inequality is about access to public services and asymmetry of opportunity. Growth demands nurture of human capital. The question is whether the budget will allocate resources to invest in human capital, to enable its people and to empower its economy.

Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India


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