A Rise In Education And Health Budget Allocation Is Needed To Achieve The $ 10 Trillion GDP Dream

The country which takes pride in its young demographic dividend is also on the cusp of losing it in a decade or so if steps are not taken to train the workforce and new entrants to a requisite level of proficiency in skill sets which industry has been demanding. Lack of local skilled labour availability can put the brakes on new projects and investment potentials.

At the same time, a healthy workforce is a must to ensure productivity gains which the large-scale adoption of new technology could usher in. 

That is why the first full budget of the new government will be closely watched with interest to see what investments it proposes to make in these two crucial sectors.

Lagging Other Developing Nations In Education And Health Spending

Before the pandemic, India spent 3.9 per cent of GDP on education in 2019 – according to the World Bank data. In comparison, Brazil spent 5.8 per cent in 2020 at the peak of the pandemic and an even higher 6.3 per cent of GDP on education in 2016. South Africa allocated 6.6 per cent of GDP on education in 2023.

Advanced economies like the USA, the UK and France consistently spend more than 5.0 per cent of their respective GDP on education.

The same trend can be observed in health expenditure. While India spent 3.3 per cent of GDP on health in the peak pandemic year of 2021, China, South Africa and Brazil spent 5.4 per cent, 8.3 per cent and 9.9 per cent respectively on health in the same year.

With a reasonably well-functioning public-funded National Health Service (NHS), the UK allocated 11.3 per cent of GDP on health in 2022 and 12.4 per cent in 2021.

Meanwhile, India’s education allocation fell from 3.4 per cent of total budget expenditures in 2019-20 to 2.6 per cent in the interim budget of 2024-25. Health allocation declined from 2.3 per cent of the total budget in 2019-20 to 1.9 per cent in the 2024-25 interim budget.

These allocations are clearly lagging behind other emerging economies and belying India's  ambitions of emerging as a major economic powerhouse.

Absolute Education Allocations Rise But Growth Rates Fluctuate

Budget allocation in absolute terms, however, increased steadily in the last decade. The only exception being the peak pandemic year of 2021-22. Yearly growth in actual spending also slumped during the pandemic years.

However, the worrying aspect is that actual spending on education consistently fell short of budget allocations. This added to the woes of lower allocations.

Health Budget Growth Picked Up In Pandemic Only To Fall Again

The COVID-19 pandemic underlined the lack of health infrastructure that crumbled under pressure during the peak infection period. The reason behind this was the trend of relatively lower health spending, as is evident from both budget allocations and actual spending even during the pre-pandemic phase.

During the pandemic, actual spending exceeded budget allocation for obvious reasons. But after the catastrophe subsided, it was back to the usual long-term trend of not utilising the entire allocation.

The yearly growth rates in actual healthcare spending show a clear downward trend. Strengthening health infrastructure is a prerequisite for an economy which requires a healthy labour force. But budget allocations have ensured that the norm has been more flouted than followed.

Health experts would be keenly watching the upcoming budget to see if a higher percentage of budget expenditures are allocated to healthcare.

Centre-State Tug Of War Results In Unspent Budget Allocations

Health is a state subject, while education is on the concurrent list. In simple words, state governments are primarily responsible for public health, while education is the responsibility of both the state and central governments.

In recent times, there have been continuous centre-state rift on different issues related to education and health. Last year, six states refused to avail funds under the PM Schools for Rising India (PM-SHRI) scheme. The objection stems from a particular condition. The central government stipulated that to avail central funds under this scheme which gives funds to upgrade government schools, the states have to add the prefix, PM-SHRI, to the names of these educational institutions.

The scheme, however, requires state funds amounting to 40 per cent of the total cost. And states point out that since they will both spend money and implement the scheme they should have a say in naming the schools.

With both sides unprepared to tone down, much of the allocated funds remained unutilised. Incidentally, the finance minister allocated Rs 6,050 crores in PM-SHRI in this year’s interim budget, the second largest in all central educational schemes.

Health infrastructure-focused schemes like the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) and PM- Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) had lower utilisation during the pandemic years. As a consequence perhaps, these schemes had allocations in the interim budget that were marginally lower than last year’s budget estimates.

There was an opportunity in the post-pandemic period to bolster the inadequate primary and secondary health infrastructure in the country. However, underutilisation of funds and lower allocations together create barriers to that potential milestone.

As GDP milestones are set periodically, it is imperative that commensurate health and education milestones are also set in order to achieve the targeted GDP. The allocations made to health and education sectors in the first full budget of the new government will be observed in this context, with equal amounts of caution and optimism.