Budget 2007-08: 'Higher and Higher Growth'

"We need faster growth", says the Indian Prime Minister. But he also goes on to say "But growth alone is not enough if it does not produce a flow of benefits that is sufficiently wide-spread." Faster growth does not ensure an 'inclusive growth' because, only certain sections of the economy grow during this 'faster growth' period. In the Indian case, it has been the Services Sector.

On the whole, the statistics of the Indian economy show that, the economy is 'certainly' growing. Moreover, the objectives of the 11th Plan are 'faster and more inclusive growth'; growth rate of approximately 10% by the end of plan period; growth of 4% in the agriculture sector, faster employment creation, reducing disparities across regions and ensuring access to basic physical infrastructure and health and education services to all.

This article will restrict itself to the issues relating to the educational and health sectors and how far they have been addressed in the current Budget.

The Government has increased the allocation to education by 35% to Rs.32,352 crore. Of this how much actually is used for improving infrastructure is a moot point, as most of it will go towards the payment of salaries. Keeping in mind that, around 50 per cent of the Indian populace has less than $2 dollars a day, it becomes increasingly important for the Government to step up expenditure so that 'education is inclusive'. With the highly efficient private players in the education sector, the government needs to improve the state of the schools and step up the quality of teaching.

Regarding the Health sector (Including Family Welfare), the budget promises an increase in allocation to the tune of 21.9% to Rs.15,291 crore. The state of the Government hospitals in most of the states is abysmal. The only factor which attracts patients is the low cost of services relative to the private hospitals.

Both Education and Health sectors are of paramount importance in an economy, because of the large positive externalities associated with health and education spending, which make such spending a clear merit good. [Ghosh 2006] This is main reason for arguing for targeted and increased expenditures in both these sectors. The positive externalities associated with them outweigh the costs.

The increase in allocation to these sectors is a welcome step, but keeping in the mind the 'so called high growth rates', don't we also need increased spending?