In 2014, the Bharatiya Janata Party (BJP) became India’s governing party after winning an absolute majority of the seats in lower house of the Indian parliament, the Lok Sabha. Its nationalistic religious socio-cultural based (Hindutva) electoral platform has always been controversial. Its leader, Narendra Modi, was prevented entry to the US after his alleged complicity in the 2002 killing of 2,000 Muslims during communal riots. But, as Union prime minister, he has eagerly availed himself of opportunities to bestride the world stage, basking in his international superstar, rather than his past pariah, standing. In January 2018, for instance he addressed the annual economic gathering in Davos, Switzerland where he enjoyed the company of the western financial and political elite. He began his life’s journey as a lower middle-class tea seller, then deserted his wife to become a monk, before working his way up the party apparatus by dint of sheer single-minded focus and ability to become chief minister in his home state of Gujarat, one of India’s most economically advanced states.
Indeed the BJP’s overarching Hinduvta platform is sometimes tempered, more often paralleled, by its development one. In the Budget that the Union Finance Minister, Arun Jaitley, presented to the Lok Sabha on the 1st February 2018, the latter development driver tended to overshadow Hindutva, although as it will be the last one covering a full year before the next Union election takes place in May 2019, preceded by a number of State Assembly elections, the electoral dimension also loomed large. And, BJP deployment of Hindutva still continued, with, for instance, the Union Home Minister waving off yet another BJP-promoted religious march or ‘Rath Yatra’ later in the same month: this time to collect water and soil from all four ‘holy’ corners of the nation.
The BJP’s 2014 platform included pushing up India’s real GDP growth performance back again to beyond the 8% per annum achieved between 2003-11, when the post-1992 liberalisation of the licence-quota-control Raj really began to bear fruit. During earlier decades this had evolved into economic calling card of the hegemonic post-independence dynastic, but ostensibly secular and socialistic, Congress Party. But by the eighties, the party began slowly to embrace market reform, responding to annual growth rates that in the 60’s and 70’s were sometimes barely above the rate of population increase. The watershed was the 1991 crisis, when India nearly ran out of foreign exchange, after which reform became a driving force, with both the BJP and Congress, as well as other parties aspiring to political power, competing to become holder of the development mantle. Congress remains the BJP’s main electoral rival under the fresh leadership of Rahul Gandhi, son and grandson of former prime ministers, Rajiv and Indira Gandhi, respectively, and the great-grandson of Nehru, India’s first and renowned post-independence leader.
In practice, post-2014 economic performance under BJP stewardship has continued to be relatively sluggish. 6.5% growth was registered in 2016-17, amidst fears that the delayed result of the November 2016 demonetisation measure could continue to hinder growth into 2017-18. Investment levels remain stuck at levels below the near 35-40% of GDP that were recorded pre-Global Financial Crash (GFC).
Job creation and rural incomes, especially in the rural areas, have also stagnated under the BJP watch. This has led some rural caste groups wielding vote banks significant at the local and state levels, such as the Patidars (one who owns a strip of land) in Modi’s home state, becoming politically unsettled, see, https://economictimes.indiatimes.com/news/politics-and-nation/the-day-of-the-patidars-why-their-votes-matter-in-gujarat-election/articleshow/61994403.cms.
Against that backdrop, Jaitley’s budget measures were focused across three main inter-related areas, in agricultural and rural development, in extending access to universal healthcare, and in improving infrastructure.
Agriculture and rural development
Two thirds of the 1.3 billion Indian population still live in villages or rural areas, despite urbanisation proceeding steadily and the urban population rising to 380 million.
Agriculture remains India’s largest economic sector in terms of the number of people who rely on it for income and employment, in contrast to value-added. Most villagers still eke out a precarious and uncertain living from agriculture or related occupations. 50% of crops grown remain rain-based: a failed summer monsoon can mean no crops to sell; while a good one can lead to over-supply, which then pushes down prices and incomes. Rural incomes therefore are still highly dependent on the climate or ‘the gods’, and, unsurprisingly have lagged post-reform urban incomes. in the early post-1991 reform period to the mid-2000’s rural incomes stagnated, as they done since 2014. Such cold reality provides the sobering backdrop to the BJP’s promise to double rural incomes by 2022 from their 2017 level, while increasing rural employment.
It provides the political context to Jaitley’s budget announcement to increase the minimum price support (MSP) for Kharif crops (those largely sown in the summer monsoon, such as rice) to a level of 150% of their production cost, mirroring the support levels already prevailing on other Rani crops. He also unveiled measures to support the development of employment-generating food processing industries, the further rolling-out of institutional credit and marketing infrastructure, and of the lifting of restrictions on agricultural exports.
In addition, his budget included a commitment to build one crore (10m) new homes, under the banner of “a home for all ‘poor and homeless’ households”, along with an additional 4 crore electricity connections. And, in a country where only c30% of the rural population is estimated to have access to an in-situ toilet, an additional 20m toilet connections were also announced.
These proposed measures reflect the electoral significance of rural voters, as well as the lobbying strength of organised farmer lobbies. With respect to the latter, the BJP continues to face pressure from organised farming lobbies to maintain not only price support for agricultural goods, but also untargeted subsidies on inputs, such as on fertiliser, on farm machinery, on irrigation, as well as on electrical power.
On the debit side, farm price MSP support can encourage corrupt rent-seeking activity by agents best placed to exploit the system for their own, rather than officially defined, ends. Setting administrative, rather than market-based, prices apart from pushing up food prices and hence inflation, can incentivise farmers to grow supported crops, leading to over-dependence and an ‘eggs in one basket’ exposure that risks future loss of livelihood.
Its distributional impact is unclear, although it can be expected that the more productive framers cultivating intensively larger landholdings for market distribution will benefit most through higher profits, with some gains trickling down to increased wages. A stated aim of the government is to encourage consolidation and higher productivity agriculture. That, however, implies the exit of more marginal smallholders, the further capitalisation of the agricultural sector, with the pace of migration of the rural poor to the urban centres, consequently, quickening.
Although about one-third of India’s population is urban, two-thirds of gross value-added (GVA) within the economy is urban-based. Construction is India’s second largest economic sector in terms of its contribution to GDP. It also is employment-intensive, employing around 52m people in 2017.
Smart investment in productive infrastructure that improves connectivity by reducing the costs imposed on capital and labour by congested city streets, by inadequate and antiquated railway, road, and aviation links, and by patchy and unreliable digital services, should help to push-up the growth rate, as is desired by the government.
The official national education aim is to ensure inclusive and quality education for all and to promote life-long learning. In that light education is slated to receive an additional one lakh crore rupees until 2022 with up to 13 lakh new teachers trained with blackboard and digital skills, referenced to a wider aim to extend the duration and improve the quality of education received by the growing number of school-age children. The National Apprenticeship Scheme is also to be expanded .
The Budget also announced higher investment outlays on railway rolling-stock, line-doubling, and wi-fi availability along with expanded aviation capacity in regional and sub-regional hubs, and of broadband access in the rural areas.
Rolling out universal health-care (UHC)
70 years after independence, less than 20% of Indians are covered by health insurance or have access to affordable health care, despite the 1947 Constitution promising universal access to affordable health care. Most households today risk incurring health costs that can be financially catastrophic, with seven per cent of low-income households – around 63m people- pushed into poverty by such costs each year. Many others, of course, die or suffer life-changing disabilities because of their lack of access to quality health care or because of poor sanitation, in particular within the rural areas. The impact of mortality and morbidity rates, of poor sanitation of inadequate, and of inaccessible primary and secondary health services, and their associated economic costs are unquantifiable, but are likely to be huge.
As way of background, an official report (the Srinath report, https://www.slideshare.net/anupsoans/universal-healthcare-dr-srinath-reddy-report-to-planning-commision ) in 2011 recommended to the previous Congress government that annual public spending on health care should be raised from 1.2% to 2.5% of GDP by 2017, and to 3% in 2022, in order to eliminate the need for user charges. The report noted that per capita government spending on health in India (at purchasing power parity:PPP) at $43 was significantly lower than was the case in Sri Lanka (PPP$87), in China (PPP$155), and in Thailand (PPP$261), as well as across most other low to middle-income countries.
Srinath urged that the existing national – Rashtriya Swasthya Bima Yojana (RSBY) – and similar state publicly-financed health schemes should be merged and their scope considerably expanded in order to create a viable UHC model in India, funded from general tax revenues, rather than ‘unsteady streams of contributory health insurance which offer incomplete coverage and restricted services’. Instead all citizens should be guaranteed access to essential primary, secondary and tertiary health care services. This UHC model, it proposed, should be provided by a mix of public and contracted-in private providers, with 70% of the increased funding devoted to primary care, reversing by 2022 the current mix of public and private funding to one instead two-thirds publicly-financed.
In 2017 total combined public and private spending on health care totaled 4.5% of Indian GDP (well below international averages). Publicly financed health expenditure remained at the particularly low-level of 1.3%. Private spending was more than double that. User-payments for hospitalisation, for drugs and for other medical expenses and private insurance premiums continue to constitute the main sources of national total health financing, although with central and state governments reimburse insurance funds for costs they incur on eligible publicly-covered insured persons. Only 23% of total government spending on health is actually directed at the provision of public health care facilities.
The main proposal made in the Budget was for 10 crore poor households, or an assumed 50 crore people living in such households (one crore = 10 million, so 10 crore is 100 million, 50 crore is 500 million), to be provided with up to around five lakh rupee hospitalisation insurance cost cover per household. This compares to to the three lakh cover currently provided by the main RSBY and its state-level current equivalents. (One lakh is 100,000, so five lakh is 500,000 rupees: at prevailing rupee-sterling exchange rate (85-90 rupees = £1), the proposed NHPS will offer each eligible household broadly between 5,500 and 6,000 pounds insurance cover for hospital-related costs).
If, and when, it is implemented, this National Health Protection Scheme (NHPS) – the Ayushman Bharat in Hindi – will become the world’s largest health insurance scheme, administered by a dedicated and new National Health Authority of India. Its second plank is to expand and improve the currently chronically under-resourced public primary health sector. Currently each village should have a sub-centre provided with one multipurpose health worker covering an average 5,000 people. The next tier is the primary health centre equipped with basic operating, lab, and lest one doctor and other supporting staff, with the community health centres and district hospitals providing in-patient and some specialist care. However many supposed sub-centres do not exist; while those that do, inevitably, vary in quality and effectiveness. Many villagers have to travel some miles to find a working one. It is proposed that the sub-centres are converted into wellness centres, equipped and resourced to diagnose and treat illnesses, such as diabetes and hypertension, with 150,000 to be rolled out by 2023.
Central and state governments (with a 60% central, 40% state apportionment) are expected to pay the insurance premiums of the additional 100m households covered by the NHPS, or to otherwise set up an alternative institution or fund to defray claims. As discussed above, the future actual cost of NHPS premiums, and whether the government will, or can, meet them, remains to be seen. As way of comparison, premiums charged for a household of five in a private scheme vary on average between 12,000 and 24,000 rupees annually. Assuming a 12,000 rupee annual cost would imply a Rs. 1.2 lakh crore public budgetary cost. This compares to the actual budget of Rs. 2,000 allocated in 2018-19, the initial rolling-out year.
The low distribution costs and economies of scale that large-scale bulk purchasing of insurance cover could potentially offer, has led some insurers to project that the premiums could fall to Rs 5,000 annually, reducing the public budgetary requirement to 50,000 crore, of which the national share at 60% would be Rs.30,000: that sum is still, however, fifteen times the 2018-19 allocated amount. Government officials project that the premium cost could drop to as low as Rs 1,000 to 1,200, but that appears very optimistic. In order to demonstrate commitment to the effective execution and implementation of the NHPS in line with stated aims, rather than lip-service to another aspirational policy designed with more of an eye on short-term electoral impact, the government needs to show the colour of its money in terms of future year budgetary allocations .
Another issue relates to the selection and targeting of scheme beneficiaries. It is proposed that they will be identified from the 2011 Social and Economic Caste Census. Such a form of election, however, is subject to definitional and recording error, as well as to corruption and fraud.
Even if fully implemented, the NHPS will cover only around 40% of the population, leaving many households with low to moderate incomes, as well as poor people, uncovered and exposed to an associated higher risk of morbidity and/or of catastrophic health costs. It has attracted the epithet ‘ModiCare’, derivative of the US insurance support MediAid scheme for the poor and uninsured. It will need to overcome similar problems to those that beset the US system, related to its reliance on a predominately privately provided hospital sector to provide secondary and tertiary health care to the population in general. Such a reliance is questionable in terms of both effectiveness and equity outcomes, touched on in http://www.asocialdemocraticfuture.org/personal-experience-indian-private-health-sector/ .
Certainly it is not clear that entrenching an insurance-based system is the best strategic route to a viable and sustainable Indian UHC system, to the more universalist approach recommended by the Srinrath report and other health and development experts.
The overarching issue concerning India’s post-1991 development is whether and to what extent that the substantial leap in GDP has benefited or percolated down to the majority of the population, the poor and those with low and moderate incomes. The rise in per capita average GDP achieved indicate that household per capita income should have more doubled since 1991, and if continued should double further every 12-15 years. Although the proportion of the population defined as living in poverty, as measured by a very low consumption strict subsistence-related standard, has fallen, it remains highly doubtful that the actual household and per capita incomes of the majority of the population have risen anywhere near that implied rate, with the incomes of the rural poor and some of the urban poor remaining stagnant. Most of the GDP gain has been secured by higher income and educated groups employed in buoyant market sector, such as IT, and by those in a position to extract or colonise economic rents linked to rising land values. That increased numbers of individuals belonging to disadvantaged caste and other groups have been able to make good financially, perhaps, perhaps serves to cloud dramatically increasing inequality and that, according to National Sample Survey data, per capita expenditure only rose on average by 0.1% per year between 1993 and 2010.
Related and ancillary to that is that social welfare outcomes as measured by nutrition, educational and health indicators have not improved significantly, and in some cases have actually regressed, resulting in India falling behind countries with lower levels of GDP per capita, such as Bangladesh, in child mortality and immunisation rates per 1,000 population, for example. Impressive economic growth has not gone hand-in hand with social welfare advancement in post-reform India.
Given India’s robust and effective democracy, one would expect rising and strong pressures for improved social outcomes and compressed income inequality. These pressures, however, are mediated by and on cross-cutting caste, communal, and regional lines within India’s gigantic, awe-inspiring, and complex democracy. In order to secure and maintain power, parties at both central and sate level must succeed in building up electoral coalitions of support across such lines, rather than rely on broad development programmes.
The 2018 Budget evidenced that in relation to its MSP measures, while also responding to competitive populist pressures to improve access to health care through the NHPS in a grandstanding and bold manner, clearly designed to attract attention during a year preceding the 2019 general election.
That said, the focus on rural development, connectivity infrastructure, and on health, which despite massive under-provision relative to need and latent demand, health is still India’s third-largest economic sector, makes sense, in GDP value-added, employment, as well as in social welfare terms. As ever, the acid test of progress will be their focused and effective implementation and measured outcomes.