India is among the world champions of social underspending. Without enlightened social policies, growth mania is unlikely to deliver more under the new government than it did under the previous one
Few people today remember the letter written on August 7, 2013 by Mr. Narendra Modi, then Chief Minister of Gujarat, to Prime Minister Manmohan Singh. In this letter, available on the Bharatiya Janata Party (BJP) website, Mr. Modi criticised the National Food Security Act (more precisely, the Ordinance) for providing too little. He felt “pained to note that the food security ordinance does not assure an individual of having two meals a day,” and pointed out that “[the] proposed entitlement of 5 kg per month per person … is hardly 20 per cent of his [sic] daily calorie requirements.” Similar sentiments were expressed in Parliament on August 27, 2013, during the Lok Sabha debate on food security, when one BJP speaker after another criticised the Act for being measly and restrictive — “half baked” as Ms. Sushma Swaraj put it.
Facts and fiction
One reason why these and related facts tend to be forgotten is that they are at odds with the mythology of social policy cultivated by some sections of the media. This mythology involves a number of fallacies. First, India is in danger of becoming a nanny state, with lavish and unsustainable levels of social spending. Second, social spending is largely a waste — unproductive “handouts” that don’t even reach the poor due to corruption and inefficiency. Third, this wasteful extravaganza is the work of a bunch of old-fashioned Nehruvian socialists and assorted jholawalas who led the country down the garden path during the United Progressive Alliance (UPA) years. Fourth, the electorate has rejected this entire approach — people want growth, not entitlements. Fifth, the BJP-led government is all set to reverse these follies and rollback the welfare state.
These five claims have acquired an aura of plausibility by sheer repetition, yet they have no factual basis. Let us examine them one by one.
The idea that social spending in India is too high would be amusing if it were not so harmful. According to the latest World Development Indicators (WDI) data, public spending on health and education is just 4.7 per cent of GDP in India, compared with 7 per cent in sub-Saharan Africa, 7.2 per cent in East Asia, 8.5 per cent in Latin America and 13.3 per cent in OECD countries. Even the corresponding figure for “least developed countries,” 6.4 per cent, is much higher than India’s. The WDI database does not include social security spending, but the recent Asia Development Bank report on social protection in Asia suggests that India is also an outlier in that respect, with only 1.7 per cent of GDP being spent on social support compared with an average of 3.4 per cent for Asia’s lower-middle income countries, 5.4 per cent in China, 10.2 per cent in Asia’s high-income countries and a cool 19.2 per cent in Japan. If anything, India is among the world champions of social underspending. The view that social spending is a waste has no factual basis either. The critical importance of mass education for economic development and the quality of life is one of the most robust findings of economic research. From Kerala to Bangladesh, simple public health interventions have brought down mortality and fertility rates. India’s midday meal programme has well-documented effects on school attendance, child nutrition and even pupil achievements. Social security pensions, meagre as they are, bring some relief in the harsh lives of millions of widowed, elderly or disabled persons. The Public Distribution System has become an invaluable source of economic security for poor households, not just in showcase States like Tamil Nadu but even in States like Bihar and Jharkhand where it used to be non-functional. Of course, there is some waste in the social sector, just as there is much waste in (say) universities. In both cases, the lesson is not to dismantle the system but to improve it — there is plenty of evidence that this can be done.
The expansion of public services and social support in India, such as it is, has little to do with any nostalgia of Nehruvian socialism. It is a natural development in a country with a modicum of democracy. A similar expansion, on a much larger scale, happened during the 20th century in all industrialised democracies (with the partial exception of the United States). It also happened in communist countries, for different reasons. Many developing countries, especially in Latin America and East Asia, have gone through a similar transition in recent decades. So have Indian States where the underprivileged have some sort of political voice, such as Kerala and Tamil Nadu. Many other States, including Gujarat, are now learning from these experiences at varying speed.
Did the UPA lose the recent election because voters were fed up with “handouts”? This is an odd idea in many ways, starting with the fact that there were few handouts to be fed up with. The UPA did launch the National Rural Employment Guarantee Act (NREGA is not exactly a “handout”), but that was in 2005, and if anything, it helped rather than hindered the UPA in the 2009 election. After that, there were no major social policy initiatives on the part of the UPA, except for the National Food Security Act which is yet to be implemented. By 2014, the UPA-II government had little to claim credit for, and plenty to be blamed for — scams, ineptitude, food inflation, the “direct benefit transfer” fiasco and more. Meanwhile, the BJP had the three things that really matter in an election (money, organisation and rhetoric) — is it a surprise that three voters out of 10 decided to give it a chance?
The expansion of public services and social support in India, such as it is, has little to do with any nostalgia of Nehruvian socialism. It is a natural development in a country with a modicum of democracy
Coming to the fifth claim, there is little evidence that a rollback of social programmes is part of the BJP’s core agenda. As mentioned earlier, many BJP leaders (including Mr. Modi as well as the new Finance Minister, Mr. Arun Jaitley) have vociferously demanded a more ambitious National Food Security Act. Some of this is posturing of course, but the BJP’s willingness to support food security initiatives is already well demonstrated in Chhattisgarh. Nothing prevents it from doing the same at the national level. Similar remarks apply to the National Employment Guarantee Act: some BJP-led State governments did a relatively good job of implementing it, and the late Gopinath Munde clearly expressed his support for the Act as soon as he was appointed Minister for Rural Development.
Having said this, there are also ominous signs of a possible backlash against these and other social programmes. Some overenthusiastic advisers of the new government have already put forward explicit proposals to wind up the Employment Guarantee Act and the Food Security Act within 10 years, along with accelerated privatisation of health and education services. As if on cue, Rajasthan Chief Minister Vasundhara Raje recently sent a letter to the Prime Minister questioning the need for an Employment Guarantee Act. The corporate sector also tends to be hostile to social spending, if only because it means higher taxes, or higher interest rates, or fewer handouts (“incentives” as they are called) for business. Corporate lobbies, already influential under the UPA government (remember the person who said that the Congress was his dukaan?) are all the more gung-ho now that their man, Mr. Modi, is at the helm. Even a casual reading of recent editorials in the business media suggests that they have high expectations of devastating “reforms” in the social sector. That is what the mythology of social policy is really about.
This is not to deny the need for constructive reform in health, education and social security. If one thing has been learnt in the last 10 years, it is the possibility of improving public services, whether by expanding the right to information, or introducing eggs in school meals, or computerising the Public Distribution System, or ensuring a reliable supply of free drugs at primary health centres. But these small steps always begin with an appreciation of the fundamental importance of social support in poor people’s lives.
The forthcoming budget is an opportunity for the new government to clarify its stand on these issues. Without enlightened social policies, growth mania is unlikely to deliver more under the new government than it did under the previous one.
(Jean Drèze is visiting professor at the Department of Economics, Ranchi University.)