How Social Sector Important For Economic Growth
Higher public investment in the social sector, including education and health is critical for a country that is struggling to improve its human development index.
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Balancing Social and Economic growth for Human Capital Development
India moved up one spot to 129 among 189 countries in Human Development Index (HDI)1 released in December 2019. With a mix of rapid economic growth combined with social policies, the country’s gross national income per capita has more than doubled since 2005 and the number of multi-dimensionally poor people has fallen more than 271 million as per 2018 global Multidimensional Poverty Index (MPI) released by United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI). However, India remains home to nearly 364 million (or 28%) of the global population of 1.3 billion.
Staring into our face are - Real GDP growth below 5%; Unemployment rate at a 45-year high at 6.1% as per Draft NSSO report; the 147th rank among 157 in the Oxfam World Inequality Index 2018. It is thus important to note that a nation’s progress is a combination of both social and economic progress. Today the citizens do not want their economies to be just on a wealth creation track. In their view, a successful economy should be able to provide them with state-of-the-art health facilities; world-class educational landscape; and strong property rights, apart from delivering sustainable economic growth. It is heartening to note that keenly and gradually our government is realising this as the choice for holistic and sustained development. The Annual Financial budgets are an indicator.
The total amount allocated for the social services sector, which includes nutrition and social security and welfare increased from Rs 2551 crore in 2018-19 to Rs 4178 crore in fiscal 2019-20. The budget brought relief for the middle-class taxpayers and farmers. It was a pro-growth, pro-farmer budget which looked to strengthen the purchasing power of the Indian middle class.
The Way Forward Social Push to Continue
The focus on economic rejuvenation needs to continue in this year’s budget. Continued push in the health, water and sanitation sector will help build a strong social fabric that will take forward the government’s development agenda. Robust crop insurance schemes; local up-gradation of treatment facilities for sludge and solid waste management; capacity building initiatives; emphasis on research and innovation and behaviour change could be a few proposed measures to consider in the upcoming budget. However, any progress on this front will not give the desired results unless there is an economic revival of India Inc.
SSE & similar platforms for catalysing funds into Social Sector space
Social Stock Exchange proposed in the India Union Budget 2019 would help channelize more funds into the social sector space. This could also be linked to CSR funding as companies in India are expected to put 2-3% of profit into CSR. With the setting up SSE panel, there needs a set of clear SEBI guidelines that cover sectors which are a priority for the government and, are aligned to their overall development policies. Globally, there is a huge amount of funding available in the ESG (Environment, Social and Governance) space which, along with Social sector Impact Bonds and leveraging of funds through other sources could help achieve the Sustainable Development Goals 2030.
Inclusive Job Creation
India’s strength is its vast entrepreneurial ecosystem which has the potential to leapfrog job creation, innovation and inclusive economic growth. It needs to be pushed further by the government with enabling policies, regulatory framework and by creating a level playing field. Women are essential stakeholders in the development process. The pre-requisite to ensuring gender equality is to formulate gender-aware and evidence-based policies with a conscious emphasis on gender-friendly workplace practices. The Government could consider making gender audit mandatory and certain indicators may need to be reported as part of the Annual Report.
Skilling for improved Employment
Education is the passport to the future, for tomorrow belongs to those who prepare today. Nearly 50% of India’s population is under 25 and the level of youth illiteracy is about 15% indicating that even the literate lack skills required for employment. Budget 2019 announced major investments in education and skills (especially new-age skills). Continued focus on youth education, skill development will be critical factors in building a talented pool of resources for India Inc.
Making Social Goals intrinsic to Economic Revival
Measures such as corporate tax rate cuts, bank re-capitalisation, infrastructure spending plans, support to the auto sector etc. have not really helped in increasing the consumption levels. The government could increase expenditure to create demand for consumption. This could be done through linking specific infrastructure creation with social sector schemes like NREGA. In times like the present, more social sector schemes directly relating to the poor would have a greater impact and increase consumption levels than corporate tax cuts etc.
While the role of the government in framing coordinated policy measures for a conducive economic growth is crucial, as citizens we need to be equally proactive and participatory. Only our combined efforts will help make India a $ 5tn economy by 2030 with a consistent 8% growth in line with NITI Aayog’s ‘Strategy for New India @75’.
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