At the global level, social sector services allocate over 15% of their GDP and citizens get access to healthcare, education, pensions, unemployment benefits and other targeted welfare benefits as a right. But in India, these benefits are delivered as schemes and often as sops or appeasement.
For all the social sector services across India, the Union and State budgets allocate around 8% of GDP without any guarantees.
Health gets a little over 1% of GDP, education 3% and other welfare programs including Scheduled Caste and Tribes welfare, women and child welfare, old age pensions, housing for the poor, rural employment etc, and another 4%.
Another 1% is allocated towards food security in India. But all these resources are not adequate to provide universal access to these services.
Further, the larger burden of social sector spending, between 70 to 80% is borne by states. GST introduction centralised tax control and shifted the fiscal power to the Union government resulting in reduced tax-raising powers of the states.
This year’s Union budget is a continuum from the past of inadequate budgetary allocations for these important social sectors.
This time, the FM has ignored social sectors and focused on technology, infrastructure and economic sectors.
For instance, in 2021-22 net social services spending by the Union government accounted for Rs2,60,827 crore (7.5% share of the Budget) but in the 2023-24 budget estimate is Rs2,20,203 crore (merely 5.7% of the budget).
This is only the Centre’s expenditure, excluding grants to the states, which is only 20% of the combined expenditure of all governments on social services across India.
Within the overall budget, health gets 1.9% share, school education 1.5%, water supply and sanitation 1.7% and rural development 3.5%.
This is much below the government’s own policy mandates for these sectors. Shockingly, MGNREGA which was Rs98,468 crores in 2021-22, is Rs60,000 crore, this time.
Similarly, National Health Mission was reduced from Rs37,800 to Rs36,785 this time and National Education Mission from Rs39,553 to Rs38,953 in 2023-24.
Policy mandates for budgetary commitments for health is 2.5% of GDP, and for education 6% but presently less than half of this mandate is fulfilled leading to inadequate and poor quality services.
In order to accomplish this first the Tax:GDP ratio needs to be increased from the current 16% to at least 25%. This is feasible within the economic resources of the country. About 3% of GDP is given as tax expenditures or revenue forgone mostly to the corporate sector.
Due to poor tax administration, nearly 10% of GDP remains uncollected. So with improved efficiency of tax collection and removal of most tax expenditures, we can easily come close to a Tax:GDP ratio of 25%.
Besides this making the tax regime more progressive by reducing indirect tax proportion where the larger burden of taxes falls on the poor and increasing the direct tax proportions by bringing back wealth tax and a 1% to 2% surcharge on the top 5% of the population we can easily reach the goal of universal access to healthcare, education and social security. This will indeed create equity and social justice.
