An expenditure budget focussed on consumer demand, private investment, health, education and agriculture is the need of the hour

On February 1, the Finance Minister shall present the Budget for the financial year 2021-22. The Budget comes after a year-long economic crisis which was the result of an unprecedented crisis in the form of the Coronavirus pandemic. Everybody is looking forward anxiously to the forthcoming Budget to gauge the response of the government to the crisis and also the direction of economic growth that it would indicate. The 1991 Budget was historic as it came in the wake of a serious Balance of Payments crisis and ushered in an era of economic reforms. The current crisis is much more threatening than that of 1991 as it is for the first time since 1979 that the country is poised to declare a negative growth rate to the extent of 7.5 per cent. This is despite the fact that the economy has shown remarkable resilience and bounced back much faster than expected with even the Reserve Bank of India claiming forthrightly that there is a V-Shaped recovery of the Indian economy. However, it cannot be denied that the pandemic has set back the economic clock and it will take time and a proper blend of policies and reforms to take the economy forward on the required rate of growth.

It is true that even before the once-in-a-lifetime pandemic struck and caught us all unaware, the growth rate of the Indian economy had been slowing down continuously to record a 4.2 per cent growth rate in the preceding year. Unemployment, farmer distress and a host of other economic issues were lingering on the horizon, waiting to be resolved. This Budget, therefore, presents a huge opportunity to give the required momentum and direction to the economy. This could well be the “Dream Budget”. It is true that not all economic decisions of significance are taken during the budget session only, and the government has to keep taking sound policy decisions throughout the year to respond in a dynamic manner to the changing economic scenario. However, the timing of the Budget is such that it would indicate the pace of economic recovery as well as bring into being, the economic reforms across various sectors. This Budget, thus cannot be an incremental pedestrian budget but has to create an environment which would bring about a quantum leap in economic growth. It is all the more important because the Government of India has set for itself an extremely ambitious target of taking the economy to the level of USD five trillion by 2025, which would require a growth rate in excess of 8 per cent every year in real terms.

The first focus area has to be that of resources. Government will need funds if it wants to step up expenditure on priority sectors, but in the aftermath of the pandemic, there is very little space left for an increase in taxes. The administering of the Corona vaccine is also expected to cost about 6,000 crores and there are speculations that this could be met through a cess imposed for this purpose. This may not be very advisable, as the need today is to put more cash in the hands for the consumers rather than taking money away from them. Macroeconomic theory clearly points out that economic growth is a function of consumption demand, private investment, government expenditure and balance of exports over imports. Among these, consumption demand has about 55 per cent weightage, and thus, it is a clear pointer that if the consumption demand is raised then the economy would grow faster. It becomes clear that the Budget has to prioritise raising consumer demand. One of the ways of doing this would be to paradoxically reduce the tax rate or do away with some of the imposed cess, so that there is more money left in the hands of the consumer to spend in the market. In addition, stressed sectors like hospitality and tourism need a booster dose of direct cash transfer. This can also be done in other sectors as well. Special schemes for putting more money into the economy would be beneficial at this moment. This would in turn give the much-needed fillip to the private investment, which so far, has not shown any propensity to increase despite the exhortation by the honorable Prime Minister of India. We have to go forward and further facilitate ease of doing business by suitable reforms in land, labour and other related sectors, but these measures have to bring results at the ground level to genuinely attract more private investment. The government has to step up its investment in public infrastructure in a big way to enhance private investment as well as put more money into the hands of the people. Investment in infrastructure will have a multiplier effect on the economy, besides, leading to increased capital formation. Some of the measures that can be taken to increase the resources are through public sector undertakings divestment or by offering tax-free bonds.

The expenditure priorities have to be healthcare, nutrition, education, agriculture and medium and small scale industries, with public health becoming the topmost priority of the nation. Of course, we cannot ignore the all-important defense sector.

New Education Policy was announced in the midst of the raging pandemic and is high on intent and idealism but needs to be translated into cogent schemes and action plans. This Budget would set the ball rolling with special schemes in education sectors to enhance foundational learning as well as to bring about an all-round improvement in the quality of education.

The current century is the one where those investing in knowledge lead the race, and if India has to occupy a dominant status, then there has to be a sharp increase in the budget allocation for research and development in various sectors and also special schemes to incentivise R&D in the industrial sector. The Budget will also clarify the real meaning of Atmanirbhar Bharat, which should not in any way, become like the import-substitution policies after the independence which were the hallmark of self-reliance. Atmanirbhar Bharat should mean an India having a vibrant manufacturing sector, producing quality goods for the domestic as well as the global economy. The Budget would be watched keenly to see what kind of schemes and incentives are introduced to make the vision of Atmnirbhar Bharat a reality.

The farmers’ agitation has shown that the agriculture sector is under a lot of stress and needs more direct support from the government. The PM Kisan is an excellent scheme but the amount has to be increased beyond Rs. 6,000 per year to give more direct support to the farmers — already impacted by the volatility of the agriculture market. This Budget should come out with a comprehensive scheme for creation of Farmer Producer Companies in such a manner that they can be operationalised to bring about the required aggregation of farmers to come out of the cycle of the low income trap — brought about by fragmentation of landholdings.

The Budget should also come up with innovative social safety nets for the migrant labourers whose plight shocked the soul of the nation. Medium Small and Micro Enterprises, especially those related to food-processing have to gravitate towards rural areas to create employment in non-farm activities near the villages, so that people do not have to migrate to the far-off states in quest of jobs and basic minimum income. The Budget should also focus on increasing the exports from India in both agriculture as well as manufacturing. The growth in exports over the last few years has not shown an encouraging trend.

Last but not the least, it is the all-important issue of employment which has been further accentuated by the pandemic. The government must come out with concrete proposals to tackle this problem head-on and create an economic environment where sufficient jobs would be created to absorb the youth joining the workforce in large numbers every year. Introduction of an urban equivalent of MGNREGA could be one of the options.

The public sector banks are in urgent need of recapitalisation and the Budget will have to address this to enable the banks to give more credit to generate more investment.

There is no doubt that this has to be a momentous budget, which will set the tone for the recovery of the economy and general well-being of the society in the years to come. This Budget is coming at a defining moment in the life of the nation.

India’s vaccination campaign will pose many challenges of logistics and governance

Following the approval of two vaccine candidates in India, the first lot of vaccines have reached the states for priority vaccination of healthcare workers. One can hear the immense sigh of relief that is widespread and already there is a sense of euphoria that the crisis is behind us and we can look forward to a quick return to normalcy even though it might now be the new normal. In my life — and I am over sixty years old — I have not seen a crisis of this dimension which has shaken the entire world. People have lost their near and dear ones and a lot has changed, including the imperative of moving to a digital economy, online education and work from home. Many of these changes that the pandemic has forced upon us have shown hidden benefits which might enable them to continue in the future. But it must be emphasised that by no means is the pandemic over and there is no cause for relaxing precautions.

I feel that the Government handled the crisis reasonably well but now is faced with the herculean task of administering the vaccine which presents a logistics and governance nightmare. In the order of priority set by the Centre, healthcare workers and frontline workers are to be vaccinated first, followed by those above the age of 50. One has to register to avail of the vaccine. The first part of vaccinating the health care and frontline workers should not pose much of a problem as they can be easily identified and administered the two doses at requisite intervals. However, my experience of administration shows that administering the vaccine to those above 50 is not going to be that easy. In India, we are plagued by VIP culture and the most annoying habit of queue jumping which is likely to take place in a big way. I can visualise politicians and senior civil servants trying to get themselves and their families vaccinated on priority once they are convinced that the vaccine that does not have any adverse effects. District magistrates and directors of various hospitals will have to wrestle with this problem as it would be difficult to evolve a rational system for this. It is possible to vaccinate people on the basis of a list drawn on the basis of the date of registration and that should be made public so that it is difficult for influential people to try and get preferential treatment. However, there are going to be numerous vaccination centres making it difficult to have such a simplistic solution.

On the other hand, there could also be many people not wanting to take the vaccine as they are not convinced of its efficacy or fear the adverse effects. Further, with registration being a requirement how would those not having a smartphone or awareness of the online registration process avail of this facility?

The vaccine will be supplied in batches and the first question will be that of allocation between states. What should be the criteria of allocation? Should equal doses be given to each state or the amount should vary according to the level of the infection in a state or the fatality rate? The next stage would be the allocation of the vaccine to different districts at the state level where again similar questions will have to be addressed. Whatever the decision is, some people are bound to feel unhappy about it.

The most important thing is to communicate the scientific truth about the vaccine to the people so that they take the vaccine and develop a rational attitude towards it. We do not want a situation where a single adverse reaction may derail the entire campaign. Often such vaccines lead to allergies and provisions have to be made for immediate handling of these allergies so that it does not fuel the rumour mills. A close watch has to be kept on rumour-mongering through social media on deaths taking place which have no connection to the administration of the vaccine. It is important to inform the people and keep doing so on a continuous basis and thereby build an atmosphere of trust. We can use celebrities as we did for pulse polio where we had Amitabh Bachchan re-enforcing the message of pulse polio continuously. That apart, government officers and doctors and experts whose voice has authority should be on media as well as social media to give authentic information about the vaccine and it’s likely after-effects. Communication will have to be done in all languages used in various parts of the country to reach the maximum number of people and sometimes I have found that such messages are best communicated through street plays, poems, storytelling and community events which involve the entire population in the campaign. Any campaign succeeds only when the people own it and give it their total support.

The objective of administering this vaccine is to control the pandemic and save the life of the people and as such would require sustained efforts over the next two years to reach a significant percentage of the population of the country. This work cannot be done by the health department alone and would need coordination amongst various departments of the state. The coordinating role will have to be performed by the district magistrate at the district level and the Secretary Health/Chief Secretary/Cabinet Secretary at the state or the Central level. One significant point raised by many people is regarding the existence of cold chain points to ensure that the vaccine is kept at the right temperature. Former Health Secretary Sujata Rao recently wrote in an article that of the 28,932 cold chain points half are in the five southern states, Maharashtra and Gujarat while the eight states in the north and Odisha that account for over 40 per cent of the country’s population have only 28 per cent of the cold chain points. She has rightly pointed out that along with this uneven distribution and the fact that weaker states suffer from a shortage of doctors, health care professionals and medical equipment means that different states of India have different capacity to implement the vaccination program with quality and accuracy. The same will apply to large states like UP which has huge regional imbalances. Moreover, it would be quite a task to ensure the second dose of the vaccine within the stipulated time and also to maintain the cold chain in extremely remote and backward areas.

The Prime Minister and several chief ministers have been talking about implementing this campaign in an election mode. There is no doubt that conducting elections in such a vast and diverse country has been a tremendous administrative success. It is amazing how polling booths are set up in almost every village or mohalla and polling parties are nominated and sent there with all necessary equipment to conduct the elections. Massive transportation and security arrangements are undertaken and free and fair elections conducted. There is no doubt that a similar level of commitment, dedication and organisation as well as the involvement of all concerned government officers are required to make the vaccination campaign a success. This is possible but the question is whether this momentum can be maintained for a period which is likely to be almost two years? Elections, at best, require this kind of sustained effort for about two months. Then if the entire government machinery is focusing on the vaccine campaign for such a long time, would not other aspects of governance and administration which are equally necessary to bring about economic recovery suffer in the process? Already because of the pandemic, the education of the children, the nutrition programs and handling diseases like TB have been adversely impacted.

Ultimately, we all must rise above politics and ideologies and join hands to make this campaign a success.

Though India nears the proverbial ‘light at the end of the tunnel’, the pandemic has, nevertheless, imparted several lessons on the need to overhaul public health infrastructure

The biggest learning of COVID-19 for India has been the imperative of focusing on public health. Policymakers, experts, doctors and intellectuals need to sit down and urgently apply their mind on responding to this challenge. There is no doubt that public health infrastructure in India needs a lot of improvement and the worse is that there are huge regional variations with the southern states being in a far better position as compared to states like UP and Bihar. This is borne out by the differences in the figures of infant mortality, maternal mortality and total fertility rate where the southern states can compare with the best in the world while the backward ones are in the same quadrant as Sub-Saharan Africa. The nation is indebted to the sagacity of its political leadership, acumen of the administrative machinery, the brilliance of the scientists and the dedication and courage of the doctors and paramedic staff along with the remarkable patience and fortitude shown by the common citizen, which has helped it handle the seemingly insurmountable challenge of Corona reasonably well. Looking at the huge population that we have, our figures for the total number of people infected, recovery rate and crude fatality rate compare favourably with the best in the world. Of course, a young population and a naturally high level of immunity have helped matters but you cannot take away the credit from all those involved in fighting the Corona menace.

At the moment, it appears as if the threat of Corona is slowly declining and with two vaccines having been approved, it is possible that sometime towards the middle of 2021 we should have come out of this crisis. Mercifully, the economy is also rebounding faster than anticipated largely due to the innovative spirit and courage of entrepreneurs and farmers. We can heave a sigh of relief but there is no room for complacency to set in. One does not know when another pandemic might invade our lives and we have to be ready to respond to it keeping in mind the learnings of the battle against Corona. The Corona crisis has also led to a situation where because of the focus of our limited resources on the pandemic the other health care problems suffered including immunization of children and battle against diseases like TB. It is now clearly written on the wall that India has to accord the highest priority to public health in the years to come so that we can handle any emergent situation and bring about a vast improvement in the quality of life of its people. The first intervention can start with the current Union budget likely to come within a month which should focus on the health care sectors and come out with innovative schemes and above all significantly raise the percentage of expenditure on public health in general and as a percentage of GDP. In the year 2020-21, the budget allocation for health as a percentage of total expenditure was 5.4 per cent (65,001 crore) which was only 1.6 per cent of GDP. This figure has been more or less constant for the last five years since 2016-17 though the overall amount has gone up from 37,061 crore in 2016-17 to 65001 cr in 2020-21. India has been targeting an expenditure of 2.5 per cent of GDP on public health by 2025 but this was a vision when things were moving normally. The Corona pandemic has been a huge shock necessitating a total re-think and reconsideration of priorities. Even the 15th Finance Commission has highlighted this issue and called for an increased allocation on public health. We should now aim to reach this figure of 2.5 per cent at least two years in advance of our original target and this intent has to be brought out in the budget priorities for 2021-22. It is significant to point out that the figures for public health expenditure are 17 per cent of GDP in the USA, 11.7 per cent in Germany, 11.2 per cent in France & 11.1 per cent in Japan and I read somewhere that even Bhutan and Ethiopia spend more as a percentage of GDP than India. The per capita public health expenditure for India in 2020-21 is only Rs 1,944.

The areas for concern are quite clear. We have to significantly increase the number of beds per 1000 people from the current figure of 0.6 and fully equip and modernize as well as operationalise our 1.5 lac primary health centers (PHC) and 29,144 health and wellness centers. For this purpose, significant investment is required to upgrade the infrastructure of the PHCs. Above all, we need many more doctors as our current ratio is 1 doctor for 1,457 people against the WHO norm of 1:1000. This means that many more medical colleges will have to be opened and in particular, the scheme of converting district hospitals into medical colleges has to be given a major fillip. We need to add many more seats to existing medical colleges by upgrading their infrastructures. A peculiar feature of India is that the private sector share in health care is far more than the public sector amounting to 78 per cent in urban areas and 71 per cent in rural areas. There is a definite need for increasing the share of public health spending and there is also a huge need for regulating the private sector to enable it to cater to the needs of the weaker sections of the society. Innovation and regulatory reform hold the key.

The out of pocket expenditure for citizens in India is 62.4 per cent against the governments spend of 30 per cent. Compare this with the UK where the corresponding figures are 9.7 per cent and 83.1 per cent; for the US the figures are 11 per cent and 48.1 per cent, for Brazil 25.5 per cent, 46 per cent and for China 32 per cent and 55.8 per cent. Almost 52 per cent of this out of this pocket expenditure goes for medicines, 10 per cent for diagnostic labs and 22 per cent on private hospitals. This is quite an anomaly for a developing nation where almost 15 per cent of people are still living in absolute poverty. The situation has to be remedied on an emergent basis. Otherwise, low-income people would be pushed further into poverty by spending more on health. A strange phenomenon I have noticed is that even people with low levels of income do not avail of the free facilities being provided by government hospitals as they have no faith in them and spend huge amounts in consulting private doctors or even quacks.

Increasing public expenditure is only one part of the solution. My experience of more than three decades of governance has clearly shown that the absorption capacity of these funds is an area where huge improvement is required. Significantly, it is the less developed states where the capacity to spend the funds is constrained by issues relating to governance and poor management leading to poor quality of public health delivery and huge leakages of funds. One can just analyse the working of the National Health Mission to prove this point where a lot of funds were year marked for the states but the quality of spending and even the amount of money spent varied from state to state. There is, in my opinion, a great need to bring about governance reforms in the health sectors which would require a lot of training and orientation in issues related to public health as well as the qualities of leadership, planning, coordination and execution amongst the officers involved in the process. Robust institutional mechanisms for service delivery have to evolve and be nurtured; and technology has to be used in a big way to prevent corruption as well as to increase the range of quality health care facilities. Unless we look after our human capital by making them healthy we cannot expect them to participate equitably in the process of democratic governance as well as economic growth. A healthy nation is a happy nation and that is the goal that we must aspire for.

While the new farm bills will bring much-needed reforms, continuing miscommunication with the farmers has seen the Government’s intentions being lost in translation

Almost for the last twenty days, the agitation of the farmers has been catching the national headlines and a situation of stalemate has been created. It is hoped that very soon a solution which is acceptable to both parties is arrived at. The real issue to my mind is that of a lot of apprehensions in the minds of the farmers due to miscommunication and these concerns need to be addressed and the interest of the development of the agriculture sector and the farmers. Agriculture sector structural reforms are ultimately for the benefit of the farmers and, therefore, it is important that they understand and support them and realise the gains that shall flow to them as a consequence of these reforms.

India undertook major economic reforms in the year 1991 which opened up the industrial and the international trade sector leading to a positive impact on the GDP of the country and overall economic development. However, it is true that these reforms bypassed the agriculture sector leading to a situation where over several years we have been witnessing farmer distress. Not since the Green Revolution in the 60s have any major reforms been undertaken to energise the agriculture sector and the benefits of the Green Revolution have long since reached a plateau. I recall during my civil service days we always focused on making inputs like high yielding variety seeds, fertiliser, pesticides and other micronutrients along with water for irrigation and adequate power supply available to the farmers. This led to considerable gains in productivity and overall production leading to India becoming food self-sufficient from an importer of food grains. It has now been realised that raising productivity is not sufficient and the most important thing is giving the farmer a higher income. With this objective in mind, the Government of India constituted a committee known as the Dalwai Committee which has given detailed recommendations and the honourable Prime Minister gave the target of doubling farmer’s income by 2022. This is indeed a laudable goal but it is not possible to achieve this without significant market reforms which would ensure that the farmer gets the right price for his produce.

The current structural reforms seek to address the structural issues in agricultural marketing and can definitely be viewed as a major initiative in opening up the agriculture markets and bringing about value addition to agriculture produce. However, the farmers evidently are not convinced of the intentions of these laws as perhaps adequate time was not given to have a full and comprehensive debate on these issues to make them acceptable. Any major structural reform disturbs the existing equilibrium and shakes people out of their comfort zones which always causes disturbances. We know that any path-breaking change measure goes through various stages before it is accepted. The first reaction is to oppose it, then early adopters respond positively to it and finally on seeing the results the others follow. Change can never be brought about overnight and needs patience and continuous communications to make it acceptable. This, in my opinion, is at the root of the farmer agitation. These measures structural reforms were announced at a press conference about relief packages for the impact of the Coronavirus on the economy and thereafter, ordinances were issued and subsequently acts passed in Parliament without debate leading to different people understanding the reforms in different ways and feeling uncomfortable with the change. We all know that policies always need detailed deliberations with the stakeholders and should not be rushed through. There is an adage which says that when you cross a river you should feel the pebbles below your feet meaning that policy cannot ignore the real issues which have to be taken into account at the time of formulation. However, there is no point in talking about the past. Today there is an opportunity to discuss all issues threadbare with the farmers in a spirit of accommodation and with a flexible approach which would certainly lead to an amicable and acceptable solution.

A written assurance can be given that the MSP mechanism will not be interfered with and that APMC mandis would be strengthened rather than abolished or allowed to decay. To protect the small and marginal farmer a regulatory mechanism is required to enable the farmers and the corporates to be on an equal footing. Farmer producer companies which are genuinely operational should be set up through a major campaign with funding from the Government to ensure that the small farmer is not exploited by the market. Warehouse and cold chain infrastructure have to be developed on a massive scale taking advantage of the one lakh crore Government of India scheme for this purpose and warehouse receipts should be made negotiable instruments so that the farmer does not have to indulge in distress selling and take advantage of the upswing in the markets. Another alternative is to implement the Amul model used for milk in the case of all the vegetables and fruits. Once the farmer is able to parley on equal terms with the corporates

this could lead to a massive spread of food processing industries in the rural areas generating non-farm employment for the youth and transforming farmers into agri-business entrepreneurs thereby considerably increasing their income. Taken to their logical conclusion these reforms if properly implemented can lead to a big increase in agriculture exports.

The reforms are in the right direction but have been announced in too much of a hurry. It is important to address all the genuine concerns of the farmers and take the reform process forward.