Finance minister Nirmala Sitharaman will be presenting her last full budget for this government the day after tomorrow. It is quite likely that much of the big-picture details and minutiae would have been worked out, finalized and sent for printing. Given that the finance minister’s speech is almost baked, is there anything else left to discuss 48 hours before it is read out?
The answer probably lies in one word: governance. This is difficult to budget for but needs to be one of the core pillars in the budget exercise. This becomes especially significant in two critical areas where the government’s social contract with citizens is in danger of being hollowed out.
The first is healthcare. The National Health Policy of 2017 set a target for government spending on healthcare—2.5% of gross domestic product (GDP) by both the Centre and states—to be achieved by 2025. But the budgetary outlay for healthcare has been range-bound between 1.2% and 1.4% in the period 2014-20. Thereafter, the covid pandemic saw it rising to 1.8% in 2020-21, and 2.1% for 2021-22; preliminary indicators suggest that healthcare expenditure is likely to be 1.3-1.4% of GDP in 2022-23.
Low government spending on a vital part of the social sector has led to major flaws in this industry’s structure, leading to governance gaps. According to public health research organization Center for Disease Dynamics and Economic Policy, India had 69,265 hospitals in 2019, which translates roughly to one hospital for every 20,350 Indians. This leaves a wide chasm between demand and supply of healthcare capacity. The problem gets compounded by the fact that there are only 25,778 public hospitals against 43,487 private ones. There is another way of seeing this: of the roughly 1.9 million hospital beds in India, there are only 0.71 million beds in public hospitals against 1.18 million in the private sector.
This points to growing inequality in access to healthcare. Various research studies (including Economic Survey 2020-21) have shown that the cost of treatment in private hospitals is in multiples of that in public hospitals. Given that a large number of Indians reside in rural and semi-rural areas, it is clear that the number of public hospitals is inadequate. Worse, over 80% of India’s population is not covered by health insurance, forcing patients to pay for expensive treatment from their own pockets. But the government, which has a duty to provide affordable healthcare to citizens, has ceded this space and responsibility to private hospitals. This is not to say that private hospitals should not exist; they should be available to those who can afford them.
The health sector is a shared space between the Centre and states, with the burden of expenditure split 25:75. The economic shock of the past four years decrees that the Centre increase its share, especially since better health indicators are unequivocally linked with higher productivity and economic growth. Meanwhile, till additional money is made available, the Centre can effectively contribute much more by creating a regulatory framework that lays down strict treatment guidelines and discourages price gouging by the private sector. It is also necessary to rationalize the sprawling, maze-like legal framework in the sector by gutting unnecessary laws while enacting some vital ones which are currently missing.
Education is another sector where both the Centre and states share responsibility. Again, regulation in the sector has focused largely on higher education and elementary and secondary school stages. Regulation for the two other stages—pre-primary and tertiary (10+2) levels—is largely a grey area, leading to multiple unethical practices. For example, many premier 10+2 institutions outsource their pedagogy—especially in the science stream—to coaching outfits and charge exorbitant fees, thereby fulfilling the dual functions of providing students with a formal school certificate as well as preparation for competitive entrance exams. In fact, edtech and coaching classes are two other categories that require stricter regulation.
The combined Centre-state expenditure on education, as per Economic Survey 2021-22, has remained at 2.8% of GDP through 2014-20. Subsequently, in the wake of the pandemic, the bill increased to 3.1% for both 2020-21 and 2021-22. The expenditure ratio between the Centre and states works out to 23:77. In the current financial year, the combined spend is likely to end up between 2.8% and 3.1% of GDP. This is a far cry from the 6% of GDP promised in the 1968 education policy, which was re-affirmed in the 1986 policy and its 1992 review, and was further revalidated as a worthwhile target in the 2020 National Education Policy. Interestingly, a 2022 study by the ministry of education found that close to 61% of the Centre’s spending is focused on elementary and secondary education.
Admittedly, regulating the healthcare and education sectors is not easy, since it entails close coordination with states and their various institutions. Occasionally, politics also gets in the way. It can also be argued that perhaps a budget is not the ideal vehicle to accomplish the complex task of improving regulatory structures, though regulatory announcements for other sectors have frequently found mention in previous budgets. But a start has to be made and any time during the next 12-16 months seems like a good time to initiate some changes.
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