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.