Social Spending Must Continue

In the forthcoming budget, Union Finance Minister Nirmala Sitharaman should not reduce social spending, as such investment may turn out to be productive if leakages are properly plugged. The funding is essential not only to boost the rural market but also to support marginalised people who more often than not struggle to make ends meet. At the same time, such spending will help the country bridge the urban-rural divide in an effective manner.

For instance, as per a National Statistical Office (NSO) study, the average monthly income of an agricultural household in India was around INR 10,000 during 2018–19. With rising prices of essential commodities, along with seeds, fertilisers and pesticides, the present income of such households has gone down further, forcing nearly 60 per cent of families into a debt trap and pushing many towards extinction.

Without mincing words, it can be stated that those who term social spending by the government as doles and a complete waste of taxpayers’ money are deliberately refusing to accept the country’s ground realities. They are simply ignoring the economic disparity that has existed in the country for ages. For them, development means improvement of urban facilities, enhanced employment opportunities for skilled manpower and lower tax rates. They are not concerned about a large section of the Indian population that remains deprived of basic facilities such as housing, sanitation, health and education. They believe in the trickle-down effect, where robust economic growth is expected to improve the living standards of marginalised people.

As a matter of fact, the very idea of the trickle-down effect was widely debated at the beginning of the present century when the UPA government, under the leadership of Dr Manmohan Singh, was in power. The then Prime Minister, who had freed the Indian economy from excessive government control in the early 1990s, was a strong advocate of this approach. On the other hand, his finance minister, Pranab Mukherjee, firmly argued that for real and meaningful growth of the country’s economy, sufficient economic activity should take place in rural India rather than urban areas. The debate continues over which path is more suitable for India, considering its lack of economic parity.

It was during the COVID-19 pandemic that the government was virtually forced to spend heavily to provide momentum to the economy, which had contracted by nearly 25 per cent. Despite being aware that such measures would place tremendous pressure on the state exchequer and potentially disturb fiscal discipline, the government provided free rations along with other benefits to a large section of the population to keep the economy running. Ironically, when these efforts helped India emerge as one of the fastest-growing economies in the world despite the odds, questions began to be raised about the justification for continuing such social programmes.