Examine the pattern and trend of public expenditure on social services in the post-reforms period in India. To what extent this has been in consonance with achieving the objective of inclusive growth?

Introduction

Public expenditure on social services—such as education, health, and social welfare—has been a critical tool for achieving inclusive growth in India. The post-reforms period (post-1991 economic liberalization) witnessed a shift in fiscal priorities, with a focus on balancing economic growth and social equity. However, the adequacy and effectiveness of this expenditure remain a subject of debate.

Value Addition Block — Key Trends in Social Services Expenditure (1991–2023)

• 1991–2000: Fiscal constraints led to limited social spending.
• 2000–2010: Increased focus on education (SSA) and health (NRHM).
• 2010–2020: Rights-based schemes like MGNREGA and RTE Act.
• 2020–2023: Pandemic-induced rise in health and welfare spending.

Pattern and Trend of Public Expenditure on Social Services

1. Share of Social Services in Total Expenditure

• Trend: The share of social services in total government expenditure increased from 19.9% in 1990–91 to 26.6% in 2020–21 (Economic Survey 2021).
• Substantiation: This reflects a gradual prioritization of social sectors, though the increase has been modest compared to the growing GDP.

2. Sectoral Allocation

• Education: Expenditure rose from 2.9% of GDP in 1990–91 to 3.1% in 2020–21, but it remains below the 6% target recommended by the Kothari Commission.
• Health: Spending increased from 0.9% of GDP in 1990–91 to 1.5% in 2020–21, with a pandemic-driven push to 2.1% in 2021–22 (NITI Aayog).
• Social Welfare: Schemes like MGNREGA and PM-KISAN have seen significant allocations, but leakages and inefficiencies persist.

3. Central vs. State Expenditure

• Trend: States contribute nearly two-thirds of total social sector spending, highlighting their critical role in implementation.
• Substantiation: Variations in state capacities have led to uneven outcomes, with southern states outperforming northern counterparts.

Extent of Alignment with Inclusive Growth Objectives

1. Positive Contributions

• Poverty Reduction: Programs like MGNREGA and PM-KISAN have provided income support to rural households, reducing poverty levels.
• Human Capital Development: Initiatives like SSA, Mid-Day Meal Scheme, and Ayushman Bharat have improved access to education and healthcare.
• Social Equity: Targeted schemes for marginalized groups (e.g., SC/ST scholarships, PM Awas Yojana) have promoted social inclusion.

2. Challenges and Gaps

• Underfunding: Despite increases, spending on health and education remains below global benchmarks (e.g., OECD average of 6% of GDP for health).
• Regional Disparities: States with weaker fiscal capacities struggle to implement social programs effectively.
• Leakages and Inefficiencies: Issues like corruption and poor targeting dilute the impact of welfare schemes.

Way Forward

• Increase Allocations: Raise public spending on health to 2.5% of GDP and education to 6% of GDP as per policy recommendations.
• Strengthen Implementation: Use technology-driven solutions (e.g., DBT, Aadhaar) to reduce leakages and improve targeting.
• Address Regional Disparities: Provide special fiscal support to lagging states for social sector development.
• Focus on Outcomes: Shift from input-based to outcome-based budgeting to ensure effective utilization of funds.

Conclusion

While public expenditure on social services has increased in the post-reforms period, it remains inadequate to fully achieve the objectives of inclusive growth. A more targeted, outcome-oriented, and equitable approach is essential to bridge gaps and ensure that economic growth translates into social equity, in line with SDG 10 (Reduced Inequalities) and India@100 vision.