Strengthen the social sector

The persistence of low levels of human development is one of the paradoxes of India’s development experience. A substantial boost for the social sector in the next budget will ensure that the government will carry forward the inclusive growth agenda effectively. The increased policy focus on the social sector in recent times is yet to be reflected strikingly in a key indicator: the country’s social sector expenditure as a percentage of its Gross Domestic Produc t. For instance, the Economic Survey (2007-08) shows that the combined expenditure by the Central and State governments increased from Rs.1,41,740 crore in 2002-03 to Rs.2,94,412 crore in 2007-08 (budget estimates), but as a percentage of the GDP, this was a rise of just one half of one percentage point — from 5.77 per cent to 6.27 per cent. The official statistics are even more telling at a disaggregated level. Expenditure on education, one of the key areas of social sector spending, fell from 2.90 per cent of the GDP in 2002-03 to 2.84 per cent in 2007-08, although in absolute terms it climbed from Rs.71,298 crore to Rs. 1,33,284 crore. And, as a proportion of social sector expenditure, it fell from 50.3 per cent to 45.3 per cent.



The President’s address to Parliament which set out the new government’s agenda indicates that the government is keen on continuing with its inclusive growth agenda. There is a strong case for substantially increasing India’s public investments to bridge the huge shortfalls in the provision of public goods that improve the quality of life. Although the link between human and social capital and economic growth has for long been recognised, public investments have fallen woefully short of the growing requirements. The forthcoming budget offers the UPA government an opportunity to step up the resources for key social sector programmes. Some of the critical areas in which it can intervene effectively, apart from its stated intention to expand its flagship National Rural Employment Guarantee Scheme, are basic social services, education, and economic infrastructure. Substantial increase in resource allocation is also called for in rural electrification, which was one of the under-performers in the past few years, urban poverty alleviation programmes, skills development, and rural health. With nearly 77 per cent of the population still being deprived and vulnerable, a strong infusion of public expenditure in the social sector is imperative to improve their capabilities.