Make or break moment for demographic dividend

(MainsGS3:Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.)

Context:

• In 2020, India accounted for 20.6% of the worldwide population of 15 to 29 year olds, which means that in the years ahead, one out of every five workers deployed globally could be an Indian. 
• So the world is indeed looking up to the Indian economy as a ‘bright star’, as the Finance Minister noted in the Budget speech.

Reducing social sector spending:

• On the one hand, there will be a considerable increase in capital expenditures, for the building of physical infrastructure, mainly in transport, energy and defence. 
• The figures under this head are expected to be higher by ₹3.2 trillion (or lakh crore) in 2023-24 compared to the corresponding level in 2022-23 (revised estimates). 
• While the growth of the tax revenues is going to be modest, the government is nevertheless committed to reducing the fiscal deficit  to 5.9% of GDP. 
• That could have been achieved only by reducing the spending on some other sectors like subsidies and social sector expenditures.

Contrasting approach:

• Compared to its previous year, in 2023-24, the Union government’s expenditure on food subsidy will fall by ₹0.9 trillion (or 90,000 crore), on fertilizer subsidy by ₹0.5 trillion, and on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by ₹0.3 trillion. 
• The marginal increases in the allocations on health, education, agriculture and the Anganwadi scheme are unlikely to make an impact, after taking into account the effect of inflation.
• In contrast to capital expenditures, subsidies and social sector spending are considered ‘wasteful’ and, therefore, it is believed, a cut on their outlays will not hurt economic growth. 
• Quite the contrary, a reduction in social expenditures not only worsens the existing social inequalities but can also dampen the prospects for long-term growth. Only 9.8% (in 2020-21) of India’s workers are in regular jobs that provide some form of social security. 
• Therefore, measures such as MGNREGA and free provision of food have been a clutch at straw for millions of poor Indians, hit as they have been by the COVID-19 pandemic and joblessness.

Invest in people is to invest in the future:

• Public expenditures on the social sectors constitute an investment for the future — more so for a country with a predominantly young population. 
• The income a destitute mother receives for work through MGNREGA may ensure that her children do not have to go to school with empty stomachs. 
• Underinvestment in education and health will undercut India’s chances in a global economy that is increasingly dominated by knowledge.
• Every year, millions of young women and men in the country are denied the opportunity for affordable basic and higher education. 
• At the same time, there is frustration among the educated that there are too few decent jobs for many of them. 
• Government expenditure on health and education can provide a boost to both the supply and the demand fronts in a knowledge-driven economy: more new jobs as teachers and doctors, especially for women, and a greater supply of younger professionals and skilled workers.

Fears about the fiscal deficit:

• Inflated fears about the fiscal deficit and government debt will only be counterproductive in a country possessing vast reserves of untapped human and other resources as India does.
• India’s government debt is held largely by domestic financial institutions, including public sector banks, insurance companies and provident funds. 
• If the government is borrowing to build resources that help generate new jobs and incomes, it is in fact setting off a virtuous cycle. 
• Higher incomes and higher levels of development will also lead to the creation of fresh savings, which will help pay off the debts. 
• Many middle-class Indian families take loans for their children’s education partly because they recognise that an educated child will open the door for upward mobility of the entire family. 
• In this way, the children belonging to asset-poor and socially disadvantaged households too will get a chance to pick up the qualifications required to enter the new economy.

Conclusion:

• Government needs to provide a boost in government expenditures to provide food security, health and education, millions of India’s youngsters could indeed aspire to grow into bright stars that illuminate the world.