Developed India@2047

Education and health outcomes will need to be improved

The inaugural edition of Business Standard’s annual summit, BS Manthan, last week featured a host of prominent policymakers, including Union ministers, as well as business and thought leaders, engaging in discussions to explore India’s journey towards attaining developed-country status by 2047. Delivering the keynote address, Union Finance Minister Nirmala Sitharaman talked about four “I”s — Infrastructure, investment, innovation, and inclusiveness — which would help India attain this goal. Union Railways, Communications, Electronics and Information Technology Minister Ashwini Vaishnaw noted that India would become a product nation in the coming years and many products would be in deep-tech sectors. In his address, Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution, and Textiles Piyush Goyal, among other things, explained the government’s stance on trade issues and noted that the policy was in line with India’s development journey.
 

Discussions over two days covered various areas, including the role of artificial intelligence and startups. While there are different definitions and estimates of what counts as a developed country, and how India can achieve the status, one undisputed aspect of this journey is that India will need to consistently grow at a much faster rate. In this context, while significant investment is being made in building physical infrastructure, which is welcome, several thought leaders underscored the need for improving education and health outcomes to be able to grow at higher rates. This is also critical because India now has a small window of opportunity to take advantage of its demography. However, what is intriguing is that despite an absolute consensus on the need to improve health and educational outcomes, progress over the years has left much to be desired. States will need to reorient their policy focus and redirect expenditure because they have a bigger responsibility for improving outcomes in these areas.
 

One of the key reasons for poor health and educational outcomes is the lack of empowerment of local bodies, which are in a much better position to provide these services at the local level. Montek Singh Ahluwalia, who was deputy chairman of the erstwhile Planning Commission, rightly emphasised the need to empower local bodies. A recent study of the fiscal position of panchayati raj institutions by the Reserve Bank of India showed how India was lacking in this area. On average, a cross-country comparison shows that 10 per cent of total tax revenue accrues to local governments. In some countries, such as Finland and Switzerland, the number is more than 20 per cent, while it’s negligible in India. For instance, the average revenue per panchayat in India, including grants, was just Rs 21.23 lakh in 2022-23. Clearly, fiscally empowering local governments is necessary for improving growth outcomes. Article 243-I of the Constitution mandates the establishment of State Finance Commissions to recommend the sharing of taxes between state governments and panchayats. However, states have been found lagging in this area. One of the possible solutions could be to directly divide the flow of revenue at the level of the Finance Commission with necessary legal backing.
 

To be sure, growing at a higher sustainable rate for an extended period will not be easy, particularly given the subdued global conditions. India will have to adopt the next generation of bold reforms to improve its chances. The broad focus should be on substantially improving the ease of doing business and making the human capital vastly more productive.