P V Indiresan

Budget falls short on basics

P. V. Indiresan | Updated on March 21, 2011

What the healthcare sector needs the most is encouragement to serve the poor.   -  The Hindu+SEP+THE HINDU

The Budget should be an instrument of economic discipline and a promoter of healthy social development. As it is, it is like a leaky tap; it cannot halt inflation without disciplining political skulduggery.

A lot has been written about the Budget, how it affects this or that industry or business, or how it will increase or decrease the GNP growth rate. Undoubtedly, all those factors are important. But there has been little comment on social development — how well educated our children will be, how well their health will be or how good their houses will be. Though our economy is one of the fastest-growing among the comity of nations, it is not as well appreciated that we continue to lag in the Human Development Index (HDI). Since HDI includes per capita income, which is growing quite fast, the stagnation in HDI ranking should be due to poor, even negative, performance in education and healthcare.


The Central Government does offer considerable funds for education and healthcare. However, these are for physical inputs, without any check on performance-related aspects. For instance, Sarva Shiksha Abhiyan offers Rs 2 crore to any village which provides five acres of land. Instead, the government could have fixed minimum norms for students in each class and paid the teachers (or parents) of qualifying children the money it spends on Sarva Shiksha Abhiyan. That would have ensured good performance. Unfortunately, it does not do so.

It is true that social activists have advocated removal of all evaluation in elementary schools. The result is tragic; even after three years of schooling, many, rather most children, cannot perform such simple tasks as dividing a two digit number by a single digit, or read a sentence in their native language.

Activists are not always right. Our so-called leaders of education are forgetting that our country is in competition with countries such as China. Even as China is investing heavily in training its children in English, India is regressing — its politicians are demanding that the IITs should switch over to Hindi!

Every family that can afford to take its children away from state-owned schools and put them into “convent” schools is doing so. The issue is whether the Finance Minister has a responsibility to make India competitive and is democratic enough to learn from what parents are doing. India's healthcare is probably in a worse mess than its education. The Finance Minister has imposed a tax on medical care. What healthcare needs most is encouragement to serve the poor.

Instead of giving all sorts of incentives to start fancy nursing homes, and then taxing the profits, he should have given them an allowance for every poor patient they treat. Then, healthcare would have been a service and not the big business it has become now.


Inflation has become apparently uncontrollable. Virtually every other week, the Reserve Bank has been raising interest rates as its contribution to inflation control. That has not helped. On his part, the Finance Minister has been selling the family silver — in the form of shares in companies owned by the Centre. That has been used for quite a few years to keep the Budget deficit in check. However, that can only be a temporary phenomenon; what is needed is fruitful investment of the proceeds.

That brings us to our housing system. It is no secret that housing is riddled with corruption; huge sums of unaccounted money have been acquired by politicians and their friends by capturing land and selling it at extraordinary profit. That has led to what Prof Galbraith called private affluence and public poverty.

It has also fuelled uncontrollable inflation. The basic problem is that most housing developments are in, or close to, large cities. Unlike in the West, where cities are being systematically shrunk, we are taking perverse pleasure in expanding mega cities. The way we are growing, 50 per cent of our population may be concentrated in and around no more than 20 urban centres.

It is maddening to see how prices shoot up because only the large cities offer social development of acceptable quality. The Finance Minister could have simply ordered that only housing with low floor area ratios can access bank or consumer credit. That would have put an end to mega cities. He is unable to do so, because most of the profits are cornered by people of his coterie.

The Budget should be an instrument of economic discipline and a promoter of healthy social development. As it is, it is like a leaky tap; it cannot halt inflation without disciplining political skulduggery.


A recent issue of Herald, a popular magazine in Pakistan, discusses how that country's nuclear power can check India. The way we are growing, it will take not many nuclear devices to destroy the economy of India. We have deliberately turned away from Gandhiji's dream of a prosperous, self-contained rural India. However, even he was only partially correct: Villages are too small to support schools and hospitals of quality, nor modern industries. We could have modified his dream either by supporting some 10,000 small towns, or a similar number of clusters of villages.

Then, Pakistanis or others would not dream of checkmating India with a handful of nuclear devices. An urban policy which promotes large numbers of relatively small habitations will also check inflation.

In sum, the Budget should promote good performance and not merely hand out largesse. Unless that policy changes, the Finance Minister's or the Reserve Bank's attempts to curb inflation will be no more than straightening a dog's tail.

This is 299th in the Vision 2020 series. The previous article appeared on March 7.)

(The author is a former Director, IIT Madras. > blfeedback@thehindu.co.in and > indiresan@gmail.com)

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Published on March 21, 2011
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This article is closed for comments.
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