While the last decade’s fiscal Budgets were rhetorically pronounced as pro-poor, the Asian Development Bank’s social protection index (SPI) has ranked India 23rd in social protection across Asia-Pacific countries, with its spending at 1.7% of GDP. China, ranked 12th, spent 5.4% of its GDP on such measures. Even Mongolia had a better figure of 9.6% of its GDP.
Our fiscal budgets, particularly in the last decade, have focused on tax incentive tinkering and ill-funded welfare schemes, all while the spending on agriculture has declined to Rs 27,041 crore in 2014 from Rs 36,355 crore in 2005, according to the Centre for Budget and Governance Accountability. We have announced grand schemes — the 2013 National Urban Health Mission, for instance — but have provided no budgetary allocations. India’s economic health requires an increase in social investments, with a particular focus on agriculture, education and malnutrition. Targeted spending on social ailments can help build economic confidence and power a double-digit growth rate. A socially progressive Budget, which brings back a social safety net, remains necessary.
Much remains to be done. Agriculture, accounting for 16% of the GDP and employing nearly half the population, faces dismal returns and rising input costs. Labour productivity in India has risen anaemically over the last four decades, held down by limited innovation in agriculture. According to the Groningen Growth and Development Centre, we lag significantly behind South Korea, China and Vietnam. India’s performance, across various social infrastructure indicators, remains unsatisfactory: education (3.35 vs Thailand’s 5.21), employment (3.14 vs Vietnam’s 4.70), etc.
Over half of all agricultural households face an average loan amount of Rs 47,000. This is borrowed heavily from moneylenders — who provide 26% of all rural credit — at usurious rates above 20%, resulting in what the National Sample Survey Organisation in its 2015 study termed as “a life of everlasting penury”. Input costs have risen to 30% of total output, a consequence of rising labour and fertiliser price inflation. Meanwhile, India’s irrigation system is heavily inadequate, with high capital investment costs preventing farmers from adopting better groundwater pumps and drip-irrigation techniques.
Any fiscal budget should bolster the agricultural demand-side management programme, which seeks to replace existing irrigation pumps with energy-efficient models, potentially reducing electricity consumption by 20%. Fiscal incentives for drip irrigation can help improve water coverage, while rainwater harvesting and groundwater recharging initiatives can improve productivity, building extensive resilience to El Niño-like events.
Sow Credit and Insurance
Agriculture remains the key. Our Budget needs to be heavily aligned towards bolstering a long-term rural credit policy, offering flexibility for droughts and flooding events. Crop insurance, as proposed by the government, would be a welcome move to institutionalise the habit of insuring against market and weather volatility. Subsidy policies, particularly in food procurement, should be realigned to incentivise conservation and modernisation, with better support prices for water-efficient crops driving their adoption.
With over 40% of Indian children considered stunted, according to a 2010 study by the International Institute for Population Sciences, and 70% of children under the age of five typically anaemic, the future of our human capital is severely wasted. Pursuing ‘Zero Hunger’ to identify hungry and malnourished households with children under the age of two needs budgetary support for a multipronged strategy that funds counselling and supplementation programmes for behavioural change.
A well-funded multidisciplinary effort, as witnessed in Maharashtra — where child stunting reduced by almost 15% over the six years from 2005-06 to 2012-13 — can work wonders. The Food Corporation of India (FCI) needs to be restructured and modernised, along with decentralising procurement and encouraging local storage. Its procurement policy must be changed to include the 23 items, including pulses and oilseeds, under the minimum support price (MSP) policy. Onions, it is said, are storable for the entirety of the political calendar.
A change in our budgeting process is also called for. Participatory budgeting, a process in which citizens present their civic policy preferences and priorities to negotiate local budget allocations, is fast becoming the norm. In Brazil, since 1989, the city of Porto Alegre has approved budget allocations for public welfare works only after recommendations of public delegates participating in the budgetary process. To initiate such conversations, the city administration shares its economic and financial position with its citizens, offering a forum for popular demands, constrained by its financial resources.
Shifting from a culture of clientelism to one with transparency in city budgeting has enabled accountability in the municipal system. Consequently, Porto Alegre’s budgetary spending is now closely tied to its actual needs. Sewerage connections have doubled, public housing units risen from 1,700 units to 27,000 units during 1986-89, and the number of participants in the budgeting process has jumped to 40,000 over a decade.
People’s, Not Populist, Policy
Long-term local and policy decisions are now markedly influenced by public choices. A five-star hotel plan, for instance, was replaced with one encompassing public parks, a convention hall and other amenities.
Poverty, India’s eternal bane, defined at $2 a day, still remains at 68.7%. A shift in political culture must take place. Responsible welfare economics makes for good politics. Our budgetary allocations should first seek to heavily address the needs of the most desperate among us. The fiscal Budget next month must ensure that social progress is here to stay.