Q1. Examine the pattern and trend of public expenditure on social services in the post-reform period in India. To what extent has this been in consonance with achieving the objective of inclusive growth?

Approach

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Introduction

Public expenditure in India has been remarkably stable over the last two decades at around 26–28% of GDP. Over the years, the shares of interest payments, subsidies, and transfers have shown a steady increase, while expenditures on basic economic and social services have stagnated.

Body

‍Public expenditure on social services in post reforms period:

• Education:
  • Since the economic reforms of 1991, public expenditure on education in India has fluctuated, generally remaining between 3-4% of GDP, but still below the international average of 6%.
  • However, the 2000s saw a modest rise, driven by initiatives like Sarva Shiksha Abhiyan and the Right to Education Act.
• Health:
  • Since the 1991 economic reforms, public expenditure on health in India has remained low, generally between 0.9% and 1.5% of GDP.
  • The 2000s saw a slight increase, especially with the launch of the National Rural Health Mission (NRHM) in 2005.
  • In 2023-24, India's government health expenditure was 1.9% of GDP owing to initiatives like Ayushman Bharat, but it still remains insufficient to address the country’s health challenges.
• Rural Development: 
  • Since 1991, public expenditure on rural development in India has fluctuated, generally ranging between 1% and 2.5% of GDP.
  • However, the 2000s saw a significant increase, driven by flagship programs like the Pradhan Mantri Gram Sadak Yojana (PMGSY) and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
• Food security and social welfare:
  • After the 1991 economic reforms, spending on food security and social welfare was low, averaging 1.0% to 1.5% of GDP, but currently is around 1.9% of GDP, emphasizing efficiency through direct benefit transfers
  • The 2000s saw a significant shift with flagship programs like MGNREGA and the National Food Security Act (NFSA) introduced in 2013.
• Social Security:
  • Post-reform, the focus was more on economic liberalization and fiscal stability rather than extensive social safety nets.
  • Introduction of key programs like MGNREGA, National Social Assistance Program and various direct benefit transfer schemes resulted in increased expenditure on social security.

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Accessing the extent of Inclusive Growth:

• India's overall literacy rate increased from 52% to 74%. But it is still below the world average of 86%.
• Access to basic services like health has increased resulting in over 500 million individuals being covered under various health insurance schemes.
• Significant decline in multidimensional poverty in India from 29% in 2013-14 to 11% in 2022-23 i.e. a reduction of 18%.

Conclusion

The pattern of public expenditure on social services in the postreform period reflects a growing acknowledgment of the importance of inclusive growth. However, the extent to which this has been achieved is limited by the challenges of regional disparities, insufficient healthcare spending, and rising inequality.

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