Military & Aerospace

Growth, Human Development & Defence: Budget 2024-25
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Issue Net Edition | Date : 06 Feb , 2024

Introduction

While the interim budget of Nirmala has to be complimented for its continued focus on infrastructure investment and the will to contain fiscal deficit, its surprising lack of mention of its intent to usher foundational learning and vocational education in government schools, inadequate allocation to improve health care infrastructure, contain rising anemia levels among children and women is extremely disappointing. While it leaves no stone unturned to decry the Congress government on every count, it fails to realize that be it HDI (Human Development Index), GII (Gender Inequality Index), GHI (Global Hunger Index), its track record in the human development parameters like  IMR (Infant Mortality Rate), MMR (Maternal Mortality), MDPI (Multi-Dimensional Poverty Index) and women representation in Parliamentscontinues to be equally unedifying. Like a bad work man blaming his tools, the Modi mandarins often find flaws with the methodology from these independent agencies or hound officials at the helm of organizations like IIPS for bringing out the disquieting discourse on hunger and nutrition in their NFHS V report. It would be therefore, to examine the track record of the decade (2014-2024) and the previous decade in terms of both growth and development parameters and make a holistic assessment of their comparative performance

Major Growth Achievements

The genuine achievements of the government must be put on record. Compared to most other countries India waded through the dystopia of Covid 19 with a slew of fiscal stimulus packages for the nutritional needs of the poor, Small and Medium Enterprise’s, and migrant workers. Its GDP growth rate is much higher (7%) than other countries, including China, as per the Economist. It has been able to generate employment and kickstart embracing technology in financial services. This is due to its focus on CAPEX and promoting Digital India. From 12% allocation to capital expenditure out of total central government expenditure during the Manmohan budget (2012), it has now gone up to 23% under Modi. As percentage of GDP, it has swelled from 1.7% to 3.4% of GDP as recommended by the Deepak Parekh Committee, a decade back. The prime beneficiaries in this allocation priority have been roads, railways, and defence. The 2023-24 budget witnessed a whooping increase of 23% over the previous year’s budget and this year 11%. This will have a Keynesian multiplier effect, in terms of overall output increase and generation of additional employment. The allocation for the MNREGA program, which creates work and ensures minimal livelihood for nearly 113.7 million households who are unskilled workers is praiseworthy. The allocation is nearly 40% above the previous years. The carping critics must note at the height of Covid 19 and the massive migration of nearly 50 million workers, the FM put an additional allocation into MNREGA to bail out these beleaguered migrants. Besides 10.11 Cr free cooking gas to women (Ujjwala), 11.72 toilets(Swachh Bharat), tap water to 10.82 crhouseholds (Jal Jeevan), 6.27 crpoor families having hospital care under the Ayushman Bharat scheme and 2.6 cr‘pucca’ houses built are humongous achievements. While many of these programs were mooted during the UPA regime, they were moribund and were galvanized and energized during Modi’s decade-long governance.

The Development Deficits

While the budget claims that 25 cr people have moved out of the Multi-Dimensional Poverty Index (MDPI), the Sustainable Development Goals (SDG) report says that 21.3% are still suffering from malnutrition, 26.2% are deprived of clean cooking fuel, and nearly 24.6% have poor sanitation. Chronic malnutrition and poor sanitation are the prime causes of stunting among children (34.7%). Even amongst the comity of underdeveloped countries like Sub-Saharan Africa Indiais very lowly positioned. The National Family Health Survey (NFHS) survey our 50.4% of women are anemic. The Human Development Report (HDR) 2022 report says India’s Maternal Mortality Ratio (MMR) is as high as 137 out of 1 lakh, where most developed countries have it in single digits. Infant Mortality Rate (IMR) is still very high at 28.3 per 1000 which is way higher than single digit in most developed countries. This is despite the Constitutional mandate in Article 47 that it is the duty of the state ‘ to raise the level of nutrition ‘ and Article 15(3) which enjoins upon the state ‘to make special provision for women and children’.

While there have been a slew of programs geared to supplementary nutrition requirements of children and pregnant and nursing mothers under Indiras ICDS in 1975 and lately under Modi under Poshan (2019), the allocation to Women & Child development program is a measly Rs 25848 cr), 0.4% increase over previous budget, the picture is equally disturbing in the Poshan program, where the allocation is only Rs 15047 Cr, again 0.4% increase over previous year. Sadly, the allocation to Anganwadi Centre (22 Lakh) catering to nutrition, basic health care, and early childhood education and care if children accounting for 70 million children and 10 million pregnant and nursing mothers has been brought down from Rs 21948 cr to 21200 cr for next year. If inflation of around 6% is taken into account, there is a real dip in the allocation of critical nutrition intervention programs.Quite clearly nutrition is a low priority area for Mr Modi, despite the rhetoric for AneamiaMukt Bharat and bolstering Nari Shakti!! In the budget 2022-23, FM had promised to upgrade two lakh Anganwadi Centres. There was no commensurate budget to resuscitate the rickety and leaky Anganwadi Centres. In the present budget, there is a repeat of the same promise without any additional allocation. The gap between intent and allocation could not have been more glaring and ironical.

However, it must be mentioned that budgeting in India is generally incremental, factoring in likely inflation and utilization trends, instead of looking at budget outcomes regarding achievements against the targets envisaged. Accordingly, an outcome budget was introduced in 2006-07, which is not being scrupulously observed. It may be recalled that Robert Mc Namara had introduced ZBB (Zero Based Budgeting) to pre-empt any past expenditure as an obligation but to be measured against the touchstone of dispensability. A simplisticcomparison with the previous budget may not be wholly tenable.  

Defence Allocation

The most significant momentum has been to promote Make in India and ensure that the bulk of the capital items are sourced from domestic companies instead of being imported. The 2024-25 budget pitches the domestic procurement percentage at 68% as against 58% in the previous year. The capital allocation has been hiked from Rs 1.57 lakh Cr in the previous year to 1.72 lakh cr. As it may be recalled the Ordnance factories which were earlier run as government departments have now become PSUs. This has brought in a measure of quality improvement, timely delivery, and accountability, with the private sector, having a levelling field. The budget shows an investment of Rs 1500 cr this year.  However, the critical challenge for the private sector and defence PSUs will be how to improve value addition and be merely integrators of imported parts. The DRDO which accounts for 6% of the Defence Budget continues to have a poor record in terms of delivering critical subsystems like propulsion, sensors, and high-end weapons. Be it passive seekers or AESR radar or Air to Air missiles, or Focal Plane array., its record is most edifying. The Make India projects, which should be given priority over imports still are striving for big success due to serious design capability deficits and a lack of front-line engineering disciplines except in IIT Kharagpur.

Privatisation of Railways

One of the major reforms in budgeting has been to do away with Railway budget presentation, a British legacy, as substantial loans were raised by the Britishers from financiers in London at exorbitant rates, an extension of DadabhaiNaroji’s Drain Theory. The railway budget is handsomely funded by the general budget at no cost. A careful reading of the Railways budget would show that the passenger collection incurs a loss of Rs 86000 cr approximately, which is presently subsidized by the freight collection. This is an extremely unfair situation given the free market pricing we are now following in petrol and diesel. Besides, the cost of operation is much higher than the cost recovered if the cost of capital is factored in

The Debroy Committee has suggested gradual market pricing of passenger fares and commercialization of railway undertakings that are presently producing tracks, wagons, and bogies, It makes eminent sense for a fresh committee to look into the privatization of production and railway operation instead of cosmetic privatization in catering services, etc. Railways cannot be the holy cow and given the sizeable capex of about Rs 2.55 lakh cr , there is a strong case for emulating the national highway model of PPP in Railways. The sector will also attract FDI, which will lighten the burden on general exchequer funding.

Education as the Biggest Bug Bear

The saddest omission in the budget is its lack of any reference to the wonderful NEP 2020 which sets a credible road map for foundational learning, vocational training, and early childhood education. One of the ironies of the 86thamendment to the constitution in 2002 was to make schooling from the age of 6-14 a fundamental right (21A) and early childhood education, a nonjusticiable directive(45). The NEP rightly notes the dismal early childhood care and education and suggests proper training of the Anganwadi workers and improvement of infrastructure andensure that foundation learning in terms of elementary reading, writing, and numeracy isensured by the child reaches grade 3 by 2025. This is in the backdrop of scathing Annual Status of Education Report (ASER) survey reports which point to very low levels of foundational learning.The latest ASER 2023 also brings out how very vocational training is being imparted in vocational training for students in the age group of 13-16. This was a major recommendation by the NEP.

While gloating over the increase in the number of IITs and IIMs, the Honourable FM conveniently forgets that without quality school education our hopes of reaping demographic dividend through a young working population can be a disaster, without the foundation of quality learning at the government school level, which is what the bottom 50% of Indian parents can afford. The allocation to school education has gone up from Rs 54100 cr last year to Rs 57427cr cr next year, an increase of less than 6%.  Education expenditure as percent of GDP remains around 3% against the recommendation of the Kothari Committee to 6% way back in 1966 and reiterated by the NEP 2020. Prof Sen keeps on harping on improving access to quality education as part of their fundamental right and giving priority to 6% allocation of GDP to education. It has fallen on deaf ears, from Socialist Nehru to Free market Modi, as brought our Ashoka Mody in his insightful book “India is Broken”. Allocation against Health missions also shows a similar depressing trend, from Rs 47347 Cr to 42281cr for next year. The irony of this budget is a complete misalignment between allocation between economic infrastructure and social infrastructure. This structural mismatch needs to be fixed, if India aspires to the envy of the world beyond the highest GDP growth rate.

Concluding Thoughts

Countries that are at the forefront of growth and development have given the highest priority to investment in quality education and research and innovation. Robert Solow, the Nobel Winner in economics, who died recently immortalized himself by flagging the importance of factor productivity. He had assessed that 60% of America’s growth was contributed by factor productivity. In China, the contribution of Total Factor Productivity is around 40% during its high growth phase. In India,it is around 30%. The sad part is that as percent of GDP India spends only 0.8% as against 3-4% by most countries. Besides, most of the R& D investments in India are made by the government (90%) whereas it is as high as 60% in the USA. The FM has created a corpus of Rs 1 lakh cr with 50-year period interest-free loans for the private sector to avail of for pursuing research and innovation. It’s a commendable move. But, without a proper research ecosystem, this is unlikely to succeed.  Both the private and government universities and research laboratories must put in all the effort which take India into the realm of a knowledge economy. It is often said: Like a bikini-clad lady, what Statistics reveal is interesting but what it conceals is vital. It’s a pity that a well intentioned FM has glossed over the vital needs of a nation; quality education, nutrition, research, and innovation, to become a true Viswa Guru.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Prof (Dr) SN Misra

was previously Joint Secretary (Aerospace), Ministry of Defence, Government of India.

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