Spending

Why Modi’s government needs to reconsider spending on physical rather than social infrastructure

IIt is stark testimony to the medium-term havoc wrought by the Covid pandemic that many countries, including India, suffered setbacks in 2020 and 2021 in their Human Development Index (HDI) – a composite of indicators health, education and income.

After steady, if somewhat slow, progress over the decades, India has seen a setback on life expectancy as well as on the education front. Interestingly, the drop in its HDI score happened more in 2021 than in 2020. India’s index is now only slightly higher than it was in 2015.

Some damage can be repaired quickly. Absent the surge in the death toll from Covid, life expectancy could recoup its two-year loss. It may be more difficult to quickly return to the level of studies reached earlier.

While some of the decline in index value will therefore survive in the future, it does not necessarily affect the country’s index ranking relative to other countries, which fell only one point on the six years to 2021, falling from 131 to 132. This suggests that the decline in index values ​​is normal for the price. Many countries have resisted Covid better, others have not.

Two other points should be noted. First, countries like Bangladesh rank higher on non-income indicators, unlike India which does the opposite. So, although Bangladesh has lower incomes, it has a better overall index. Bangladesh is also notable for having suffered no setback in its human development indicators during the Covid years.

By comparison, if India were ranked on health and education alone, not including income, its ranking would be six notches lower. That is, the country’s levels of health and education are lower than they should be at its income level. This has been true for some time.

Secondly, it is a sobering thought that while India continues to be a typical “medium human development” country, Vietnam has recently moved into the “high” human development category, while Asian neighbors such as Malaysia and Thailand moved to “very high” achievement. Category. If India were to improve its indicators at the pre-Covid rate, it would probably take until 2030 to move from “Medium” to “High”. Seen from another angle, India’s index is roughly that of China at the turn of the century, that is, with a lag of about two decades. India’s distance from its main strategic rival is now so great on so many fronts that the two countries are effectively in different orbits.


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SSo far, it might make sense to focus on closing the income gap in health and education – and therefore broaden the main goals to encompass more than just growth economic. For while India is now the fastest growing major economy, its health and education indicators do not show the greatest year-on-year improvement. In this context, Amartya Sen’s description of development as capacity building is worth bearing in mind.

The debate on the subject has long pointed to the lack of public spending on both health and education. India is an exception in both cases, insofar as private spending greatly exceeds public spending, which disadvantages the less well-off. The other point to note is the regional dimension – so-called Bimaru States continue to languish and drive down the national average. Infant mortality in Bihar, for example, is two and a half times that of Tamil Nadu.

Recent initiatives such as the introduction of health insurance for all those who cannot afford it should make a difference, but are not enough. Thus, the preference of the Narendra Modi government in terms of public spending, to focus on physical rather than social infrastructure, must be reviewed. Investment in physical infrastructure has increased by 1% of gross domestic product in recent years.

That’s great, but it’s not an investment in social infrastructure. While India needs to improve its physical infrastructure, this is no less true of social infrastructure. Capacity building must be understood and addressed in all its meaning.

By special arrangement with Business Standard


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