On its independence India decided to be a social welfare state. Such states by nature take upon themselves extensive functions, to bridge the investment gap created by private sector, for public good. However, such extensive involvement while desirable in a nascent state where private sector footprint is almost absent becomes fatal for economic stability as the nation progresses forward. Apart from this, such extensive involvement results in a less intensive engagement in more desirable sectors.
Indian govt. today has become 'Jack of All Trades, Master of None'.Although the govt. started to pull back on its extensive involvement in the economy on the eve of 1991 reforms, it still has mammoth presence in commercial activities. Govt. sells milk, butter, petroleum, food grains, minerals, electricity and what not. Thank God it no longer sells bread. While the rationale behind such extensive engagement is to male the economy strong and ensure public good. It is doing more harm to economy in general and 'aam aadmi' in particular as ever increasing fiscal deficit is pouring inflation and feeding Current Account deficit. The stability of economy and prospects of growth are thus, hanging by a thread.
On the other hand, such extensive engagement means that several sectors like social infrastructure don't get enough govt. attention. Public expenditure on health care in India is only 1.4% of GDP. This is very low and a reason why out of pocket expenditure (private expenditure on health) was appx. 86% of total expenditure on health. This means that people have to spend a lot out of their pocket for health care. This hurt especially because around 25% of India lives below poverty line. How are they expected to pay from their pocket for healthcare. So, Health care is a sector where govt. should ramp up its spending ensuring both better preventive and curative healthcare. This will not only improve quality of life in country but, will also add to productivity thus, contributing to economic development.
Second sector that needs govt's urgent attention is education. Government's expenditure on education stood at 3.85 per cent of gross domestic product (GDP) in 2009-10. Education is empowerment and it single handed can bring out India's bottom of the pyramid mass from age of darkness and isolation thus, joining them to mainstream of progress. India still is struggling to achieve universal primary education while in order to take benefit of our demographic dividend we need skilled labor force that means not only universal primary education but, widespread professional training and technical education. This is where the govt. needs to focus. Although Education is state subject, central govt. can definitely take facilitating steps, increase financial support, setup better educational institutes and do a lot more. It should ensure that quality education is not a prerogative of elites rather it is available to all.
Indian govt. today has become 'Jack of All Trades, Master of None'.Although the govt. started to pull back on its extensive involvement in the economy on the eve of 1991 reforms, it still has mammoth presence in commercial activities. Govt. sells milk, butter, petroleum, food grains, minerals, electricity and what not. Thank God it no longer sells bread. While the rationale behind such extensive engagement is to male the economy strong and ensure public good. It is doing more harm to economy in general and 'aam aadmi' in particular as ever increasing fiscal deficit is pouring inflation and feeding Current Account deficit. The stability of economy and prospects of growth are thus, hanging by a thread.
On the other hand, such extensive engagement means that several sectors like social infrastructure don't get enough govt. attention. Public expenditure on health care in India is only 1.4% of GDP. This is very low and a reason why out of pocket expenditure (private expenditure on health) was appx. 86% of total expenditure on health. This means that people have to spend a lot out of their pocket for health care. This hurt especially because around 25% of India lives below poverty line. How are they expected to pay from their pocket for healthcare. So, Health care is a sector where govt. should ramp up its spending ensuring both better preventive and curative healthcare. This will not only improve quality of life in country but, will also add to productivity thus, contributing to economic development.
Second sector that needs govt's urgent attention is education. Government's expenditure on education stood at 3.85 per cent of gross domestic product (GDP) in 2009-10. Education is empowerment and it single handed can bring out India's bottom of the pyramid mass from age of darkness and isolation thus, joining them to mainstream of progress. India still is struggling to achieve universal primary education while in order to take benefit of our demographic dividend we need skilled labor force that means not only universal primary education but, widespread professional training and technical education. This is where the govt. needs to focus. Although Education is state subject, central govt. can definitely take facilitating steps, increase financial support, setup better educational institutes and do a lot more. It should ensure that quality education is not a prerogative of elites rather it is available to all.
Third sector that requires govt. immediate attention is infrastructure and this sector has hijacked the limelight for quite a few years now. Still, the attention paid is not proving enough and we have huge infrastructure deficit. Be it transport or power generation and now even communication where we were growing leaps and bounds. These sectors need more than just govt. investment. These are the sectors where private sector will invest but, we need policy clarity and a vision for growth. So, with active private sector involvement govt. can reduce its investment in these sectors and use that money for education and health.
In my opinion what govt. should do is to try to wrap up its extensive involvement in sectors where the private sector is ever ready to fill the deficit like heavy industries, power generation and be more intensively involved in sectors where private sector can't do its due to nation's benefit like health, education, poverty eradication etc.
P.S.Looking forward to the next budget for economic engineering of FM and what he does to balance the need to reduce fiscal deficit with the need to be populist keeping in eye the General Elections 2014.
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