In Part II of the budget analysis, I focused on the unprecedented humungous outlay of Rs. 5.17 lakh crore allocated to the transport sector in the FY2024 budget as compared to 3.90 lakh crore (33 percent more) in the revised estimate of FY2023 and Rs 3.22 lakh crore in FY2022 (61 percent more).
Part III, the final one, takes a deep dive into the urban versus rural focus of the budget and then analyses the budget allocation for the critical social sectors- health and education.
THE URBAN PUSH
In her budget speech, Finance Minister Nirmala Sitharaman put a strong emphasis on encouraging states and cities to undertake urban planning reforms to transform cities into ‘sustainable cities of tomorrow’ with a strong focus on the following-
- Strong emphasis on efficient use of resources– Land resources, adequate resource generation for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land and opportunities for all.
- Critical urban reforms- Urgently needed property tax governance reforms and ringfenced user charges to create urban infrastructure and incentivizing cities to improve their creditworthiness for municipal bonds.
- Focus on Tier-2 and Tier-3 cities- A neglected area that this year’s budget brings to the fore. The budget seeks to establish Urban Infrastructure Development Fund (UIDF) to be managed by National Housing Bank, to create urban infrastructure by public agencies in these cities and allocate Rs 10000 per annum for the same. The budget also encourages states to leverage resources from grants of the 15th Finance Commission and other schemes as well as by adopting appropriate user charges while accessing the UIDF.
- Urban sanitation- Another key feature of the budget is enabling all cities and towns to provision 100 percent mechanical desludging of septic tanks and sewers to transition from ‘manhole to machine-hole’ mode. Budget also focuses on the scientific management of dry and wet waste.
The above is laudable.
India is fast turning into an urban behemoth. In less than a decade, by 2031, more than 60 crore Indians will stay in cities and towns. And it is time for the country to get into fast-forward mode to make itself ready for the time when it will be more urban than rural.
- Readiness for great Indian urban rush- India, soon to be the most populous country globally, is urbanizing fast. The time is now to make cities and towns ready for the sustainable “great Indian urban rush”. And the intent of the budget ticks the boxes right. But once one analyses the Ministry of Housing and Urban Affairs budget, much of the enthusiasm tapers off. As against Rs 1.07 lakh crore, actuals of FY2021-22, the budgeted outlay at Rs 80,196 crore in FY2023-24 is 25 percent less than what the country spent a couple of years back. Such reduced allocation does not augur well.
On further deep dive into the allocation to the urban sector, I find that much of the allocation goes to grants in aid to states (Rs 50592 crore) and loans for urban development (Rs 18,585).
- Allocation for metro rail- Indian cities and towns are already transport gridlocked and the situation is worsening fast. As the size of the cities and population increases manifold rapidly, urban India faces Hobson’s choice- metro rail as the default sustainable choice of urban transport in conjunction with an effective bus transport system and first and last-mile connectivity. Faced with such a daunting reality, the outlay for metro rail to Rs 19518 crore in the FY2023-24 budget as against actuals Rs 23262 crore of FY2021-22 is bad news.
It is worth noting that sometime in FY2023-24, India will dethrone China as the most populous country. Further, India, like China, is on a fast-track urbanization mode. But where does India stand compared to China on the development of sustainable urban transport infrastructure? I submit nowhere.
It is time to look east with the transformative urban agenda Prime Minister Narendra Modi way. India currently has an 850 km operational metro rail network, 800 km in construction and 800 km in planning. This is good news. The bad news is- it is not enough if Indian cities have to be sustainable engines of growth and have to generate 75 percent of India’s GDP by 2031. It is time to emulate China.
As on 31 December 2022, China already has 9,500 km of urban rail nationwide (49 systems in 47 cities), the longest globally and its nine metro rail systems (Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Hangzhou, Wuhan, and Nanjing, in that order) are amongst the ten longest, globally. China is committed to increasing the metro rail length to 20,000 km by 2035. Also, it also has more than 5000 km of rapid urban bus transit, commensurate city bus service-that too mostly electric and hydrogen buses.
Why India cannot do what China has already done?
Repurposing the focus is all that is needed. PM Modi’s vision is looking where 50 Indian cities will have a Metro transportation system.
Make no mistake, it is time to substantially increase the outlay for metro rail to make cities livable and reduce urban pollution. It is time to reduce the weight of roads and highways from the budget as there is an inbuilt financial logic, 1$ investment in metro rail gives 4$ to the economy.
- Urban rejuvenation- There are welcome, enhanced allocations for Urban Rejuvenation Mission AMRUT and Smart City Mission. Compared to Rs 13,868 crore actuals of FY2021-22, Rs 16000 crore budget in FY2023-24 is welcome along with a 250 percent increase to Rs 5000 crores in FY2024 to Swachh Bharat Mission (urban) as compared with Rs 1952 crore actuals in FY2022. It needs to be repurposed and further enhanced substantially.
- Pollution, the Achilles’ Heel of Indian cities and towns, needs urgent attention- Pollution in India is increasingly becoming an urban problem. Urban pollution has turned crippling with Indian cities and towns vying with each other to become the most polluted cities in the world. An outlay of Rs 756 crore to reduce pollution is a pittance and the time is now to make a multidisciplinary frontal attack on the problem. The time is running out.
RURAL INDIA GETS THE LION’S SHARE
For long, the dominant paradigm and the ruling mantra has been- “India lives in its villages.” This has led to traditional anti-urban bias for decades. It is unsurprising then; rural India gets lion’s share of the budget.
Also, the budget for rural India comes from allocation to various ministries, departments and heads – including but not limited to Ministry of Rural Development, Agriculture and other activities Subsidy (Fertilizer and Food even part of Petroleum) and many centrally administered schemes. There are many other ministries and departments which have embedded rural outlay. Here is my complete analysis of this year’s budget and its implication for rural India.
But before I move to the pluses and minuses of budget allocation for rural India, a few initiatives, some sitting at the intersection of rural and urban India, and others benefiting rural poor need mentions –
First, the new scheme to supply free food grain to all Antyodaya and priority households for the next year under Prime Minister Garib Kalyan Anna Yojana (PMGKAY) with the entire Rs 2 lakh crore expenditure to be borne by the Central government is a bold new scheme that deserves full credit.
Second, a well-deserved high jump in the allocation to Pradhan Mantri Awas Yojana from FY2023-23 BE of 48,000 crore to a whopping Rs 79,590 crore, a 66 percent increase indicating a continued commitment to meet the deficit of affordable housing.
Third, Rs 10000 crore jump in the outlay of Jal Jeevan Mission from FY2023 BE to Rs 70000 BE FY2024 is on the right path.
Four, a reduction from high allocation to MNREGA from Rs 98468 crore (high actuals of FY2021-22 owing to Covid-19 compulsions) to Rs 89400 RE of FY2023 to budgeted of Rs 60000 crores in FY2024 is not really a cause of concern, as this being a demand-driven scheme, the allocation is always adjusted in between the years.
Five, another notable rural focus of the budget is Pradhan Mantri Gram Sadak Yojana, allocation of Rs 19000 crore (FY2022 actuals Rs 13992 crore), Pradhan Mantri Krishi Sichai Yojana FY2024 budget Rs 10787 crore (FY2022 actuals Rs 11728 crore) and Swachh Bharat Mission Gramin FY2024 Rs 7192 crore (FY2022 actuals Rs 3099 crore).
But the most crucial step in FY2024 to fast forward rural development is the one it takes up building on the appreciable success of the Aspirational Districts Programme, in which the government aimed to quickly transform 112 most under-developed districts across the country. Learning the lessons of the Aspirational District Programme, the government has now launched the Aspirational Blocks Programme, covering five hundred blocks for saturation of essential government services across multiple domains such as health, nutrition, education, agriculture, water resources, financial, inclusion, skill development, and basic infrastructure. This is truly an aspirational program- worth mainstreaming faster.
It is worth reckoning nonetheless that with all the focus on rural India, the outlay for the Ministry of Rural Development for FY2023-24 (Rs 2.28 lakh crore) is slightly more than the actual expenditure of Rs 2.38 lakh crore of FY2021-22 and less than Rs 2.43 crore of revised estimate of FY2022-23. However, to this, must be added the FY2023-24 budget of Rs 89000 crore of the Ministry of Agriculture and the entire portion of the allocation of subsidy on fertilizer and a part of the food subsidy.
While there has been a substantial reduction of the subsidy burden, a time has come when some mechanism is needed to be developed to introduce politically difficult income tax on agricultural income. Agreed that it might not have been possible in the election year budget, but at some time, someone has to eventually bail the cat and separate the creamy layer, the ‘haves’ in rural area from the ‘have nots.’ Non-taxation of a segment of those Indians who must pay income tax cannot continue in perpetuity.
HEALTH MATTERS
Ever since independence, budgetary allocation for the health sector has witnessed step-motherly treatment. Despite a relative uptick in health sector allocation in recent years’ budget and despite the country having managed the ‘covid-curse’ better than most developed countries, I submit that the FY2023-24 budget has once again missed the urgent need to address the growing health inequity in the country. Here is my take on the allocation for the health sector in this year’s budget.
One, how much India spends on health in real terms? The health sector allocation of Rs 89,155 crore in FY 2023-24 is a small increment over the FY2023 budget estimate of Rs 86606, which was a marginal increase over Rs 84091 crore actual expenditure in FY2022.
Two, make no mistake, the Union Budget’s health sector expenditure as a percentage of the GDP continues to crawl- it has shown an incremental increase from 1.4 percent of GDP in FY2019 to 2.1 percent of GDP in FY2023. It is still a road to nowhere and fares poorly to that of the USA (18.7 percent of GDP) and China (6.7 percent of GDP) in 2021. Compared to other Asian peers also, India fares poorly- Vietnam with 7.1 percent, Thailand with 6.5 percent, Singapore with 4.9 percent and Malaysia with 4.2 percent of the GDP.
Three, relatively poor allocation to the health sector brings out a stark reality-even if the allocation of state governments adds to the health sector, the big picture is— health is not a priority for the governments and the nation is fast heading to a stage where the poor and vulnerable may risk foregoing treatment due to higher cost of care.
As per the World Health Organization’s (WHO) March 2022 report ‘India health system review’, the high out of pocket expenses (OOPE) on health (48.21 percent in 2018-2019 according to the National Health Accounts) are impoverishing some 55 million Indians annually, with over 17 percent households incurring catastrophic levels of health expenditures annually.
As per a World Bank report, there are significant state-wise disparities in OOPE expenses– Uttar Pradesh (71.3 percent of the total health expenditure), Kerala (68.6 percent), Jharkhand (63.9 percent), Andhra Pradesh (63.2 percent), Bihar (53.5 percent), Madhya Pradesh (55.7 percent), Odisha (53.2 percent), Punjab (65.5 percent) and West Bengal (68.7 percent).
The above is too disturbing a scenario, requiring much higher union budget outlay and commensurate outlay in state budgets.
Four, a singular welcome feature of the health budget is an announcement of a mission to eliminate sickle cell anaemia by 2047.
Five, the most notable omission in the budget is the pathway to control an ailment that has become ‘Ghar Ghar Ki Kahani’– the fast growing curse of mental illnesses. I will return to it a bit later.
Six, the allocation for the health sector is not only grossly insufficient on most parameters but is also opaque as to where the money is actually spent beyond the expenditure on the establishment. The humongous and crippling out-of-pocket-expenses for the families is the net result.
Seven, flagship program of the National Health Mission outlay is almost constant at Rs 29,085.26 crore for FY2023-24 against Rs 28,974.29 crore in FY2022-23 and for Pradhan Mantri Jan Arogya Yojana (PM-JAY), the budget is up from Rs 6,412 crore in FY2023 to Rs 7,200 crore in FY2024.
Eight, the step-motherly treatment of domestic branch of medicine under the Ministry of AYUSH continues with a poor Rs 3,647.50 crore allocation (despite a 20 percent increase in outlay from the last financial year). And the worst sufferer is the health research outlay at paltry—Rs 2,980 crore allocation to the Department of Health Research.
Nine, the allocation for the National Digital Health Mission- A desired health scheme, NHM has been increased from Rs 140 crore to Rs 341.02 crore. And along with it, the allocation for National Tele Mental Health Programme, which was launched in the last financial year has been increased from Rs 121 crore to Rs 133.73 crore.
Ten, this brings us to the most neglected sector – ‘Mental Health’. The curse of mental illnesses, even before Covid-19, was increasing its tentacles and post covid, it has assumed monstrous proportions. Between three to four percent of Indians (4.25 crore to 7 crore) suffer from severe mental illnesses and more than 10 crore suffer from relatively non-severe mental illnesses. And the truth is, the difference between severe and non-severe mental illnesses is vanishing fast.
As per pre-covid India’s first National Mental Health Survey, at any given point in time, more than 10 percent of Indians suffer from one or the other mental illness and 16 percent will suffer from one in their lifetime. This is bad in itself. But the real truth is scarier. The mental health allocation is Rs 721 crore for NIMHANS Bengaluru, Rs 63.68 crore for mental hospital Tejpur and a maximum of Rs 30 crore for Central Institute of Psychiatry (CIP), Ranchi (later catalogued as part of the other institutions), add to this 131 crore for telepsychiatry and we arrive at Rs 945.68 crore. This is pittance. More than 100 million Indians badly need mental health services. But the services are not accessible, affordable or available. Contrarily, for 2.14 million Indians living with HIV/AIDS (NACO data), the budget allocation is in excess of Rs 2000 crore, more than double of allocation to mental health despite the personal, familial, organizational and social implications of fast-worsening mental health scenario.
Also, the digital push to mental health has limited applicability. A cursory glance at the FY2023 outcome budget indicates that despite being in operation for decades, National Mental Health Program (NMHP) and District Mental Health Program (DMHP) have failed to make a dent and despite the country having rights-based global best practices–National Mental Health Policy (2014) and National Mental Health Care Act 2017–neither the Central government nor the state governments have woken to the need of taking appropriate action to tame mental illness.
Digital services for mental illness are welcome to increase the reach but the travesty is that the treatment of mental illnesses is best done face-to-face in a supportive doctor framework where trust is the key. The country needs massive push on the front. As many centres of excellence for mental health (on lines of NIMHANS) as there are states in the country and fast ramping up of the human and financial resources to make frontal attack is required to tame mental illness. Not much time is left for the nation to have the wake-up call. For India to turn into a developed nation by 2047, it has to become a healthy India first. The country urgently needs fast-tracking of expenditure on health sector (with commensurate outlay from states) from the present 2.1 percent of GDP to 10 percent of GDP, out of which 20 percent have to be earmarked for world-class mental healthcare services and for suicide prevention. It is substantially our youth in the age group 14-29 which die by suicide and every single suicide is preventable.
EDUCATION- HIGHEST ALLOCATION NOT ENOUGH
With Rs 1.13 lakh crore allocation in the FY2023-24 budget, the education sector has got the highest-ever outlay. Out of total outlay, the School Education Department’s outlay stands at Rs 68,804.85 crore, while the Higher Education Department outlay stands at Rs 44,094.62 crore. This looks good. This is indeed good. But the truth is less than good.
One, between FY2019 and FY23, as a percentage of the GDP, the education budget shows a nano increase of 0.1 percent from 2.8 percent to 2.9 percent of GDP. And the country faces a huge problem of providing extraordinarily high-quality education to an astronomically large number of students for decades to ensure that the country reaps the true demographic dividend.
Two, what India needs is employable education and entrepreneurial education. And it means getting the implementation of National Education Policy 2020 right and much more. Else, masters and doctorates will continue to fight for government sector class IV posts, as is the case today.
Three, intriguingly, the education ministry’s biggest flagship scheme–Sarva Shiksha Abhiyan–has got almost the same allocation as last year — Rs 37,453 crore FY2024 against Rs 37,383 crore FY2023. This ought to be much more, given the fact that schools, students and teachers are yet to recover from huge learning losses inflicted on them due to disruption of the Covid pandemic.
Four, an appreciable noteworthy feature in the budget speech is the plan of the Centre to recruit 38,800 teachers and support staff for 740 Eklavya Model Residential Schools, which are serving 3.5 lakh tribal students.
Five, setting up of Centres of Excellence for Artificial Intelligence (AI) in top educational institutions in partnership with industry players for conducting interdisciplinary research, developing cutting-edge applications and scalable problem solutions in the areas of agriculture, health, and sustainable cities, is welcome.
Six, teachers’ training will be re-envisioned through innovative pedagogy, curriculum transaction, continuous professional development dipstick survey and ICT implementation. But teachers’ quality (all three- primary education, secondary education, college education) has dipped so low that there is no time left to be lost.
Seven, on the higher education side, there is a healthy allocation of – IITs – Rs 8791 crore, NITs – Rs 4,820.60 crore, IISERs – Rs 1,462 crore, IISc Bangalore – Rs 815.40 crore and IITs – Rs 560 crore. However, given the need to catapult the Indian economy to the level of developed countries, India needs a quantum jump in the allocation of higher education and research. This will also decide whether India’s demography turns out to be divided or the ultimate curse.
Eight, there is a small outlay named ‘National Means and Merit Scholarship’ of Rs 364 crore that provides Rs 500 per month (Rs 60,000 per annum) scholarships to needy meritorious students. I know many students of both my generation and generation next who could complete education only because they received the national merit scholarship. Even yours truly could complete his education because, throughout his education, he received this scholarship. This is the best and most sustainable direct transfer scheme which has come to my notice so far. It is time to immediately increase the outlay at least ten-fold through reappropriation from some other head.
Nine, it is estimated that every year, 20-25 million Indians post education or otherwise, enter the workforce, but only 7 million of them are able to get a secured job. More than 15 percent of youth are unemployed in the country and around 33 percent of youth are neither in employment, education nor training – a mammoth number, the highest in the world. This puts a huge onus on the country to give quality education and make the youth employable. This is a humongous task and despite the highest-ever allocation to education, the outlay is not aspirational.
POSTSCRIPT
The FY2023-24 budget was the fifth budget of Nirmala Sitharaman and the last full budget of the second term of the Narendra Modi government. It was presented in a year when eight states go to hustings. And at a time when the political preparation for next year’s general election has begun.
I began a three-part series with the assertion that no one would have found fault with Sitharaman had she presented a budget playing to the gallery. But it goes to her credit that she has eschewed populism and more importantly, has elevated the capital budget to the level of 4.5 percent of GDP, a huge effective 30 percent increase in capital outlay against last year’s budget.
Nonetheless, dissecting the FY2023-24 budget sector by sector, within the limitations of finances, in a difficult domestic and geopolitical year, the finance minister gets 10/10 marks. Having eschewed populism and presented a forward-looking growth-oriented budget, it is not only the time to walk the talk but to aim higher- all good things to the nation need not accrue only in the budget, the governance is a 365×24 affair.
Let the governance go beyond the seed the budget has sowed. Because the problems facing the nation are so gigantic, it will need similar budgets for next twenty-five years to achieve what India must at the end of the Amrit Kaal, a place in the galaxy of developed nations.
The author is a Multidisciplinary Thought Leader and India-based International Impact Consultant. Making tomorrow’s infrastructure happen today is his passion. He works as President Advisory Service of consulting company BARSYL. Views are personal.
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