Home / Budget / Economic Survey /  Focus must be on economic growth to curb poverty

NEW DELHI : Unlike in wealthy nations, economic growth in India helps reduce inequality and poverty, the Economic Survey said on Friday. It said social sector spending was 8.8% of gross domestic product (GDP) in 2020-21.

“Both economic growth and inequality have similar relationships with socio-economic indicators. Thus, unlike in advanced economies, in India economic growth and inequality converge in terms of their effects on socio-economic indicators," the survey said amid criticism that India’s high growth rate in the recent past may not have positively impacted people’s lives.

The survey said a developing economy such as India can avoid the conflict between growth and inequality “because of the potential for high levels of economic growth, on the one hand, and the significant scope for poverty reduction, on the other hand". It added that “this question becomes pertinent, especially because of the inevitable focus on inequality following the covid-19 pandemic".

The survey said economic growth has a far greater impact on poverty alleviation and given its stage of development, India must continue to focus on economic growth to lift people out of poverty.

The survey said government spending as a percentage of GDP is increasing for social sectors. Expenditure on social services including education and health by both the Centre and states combined as a proportion of GDP increased from 6.2% in 2014-15 to 8.8% in 2020-21. For education, it increased from 2.8% in 2014-15 to 3.5% in 2020-21, and for health, from 1.2% to 1.5%.

“The relative importance of social services in the government budget, as measured in terms of the share of expenditure on social services out of the total budgetary expenditure, has also increased to 26.5% in 2020-21 as against 23.4% in 2014-15," it added.

To be sure, there is a constant demand to increase education expenditure to 6% of the GDP and even the new National Education Policy has underlined the need for increasing education expenditure to 6% to achieve better human development outcome.

Similarly, experts have been demanding that health expenditure should be increased to 3% of GDP and even the national health policy has noted a need for increasing it to 2.5% of GDP by 2025.

The survey said that though most of the schools are closed due to the covid-19 induced restrictions, “online schooling took off in a big way during the pandemic".

“The access to data network, electronic devices such as computer, laptop, smartphone etc. gained importance due to online learning and remote working," it said.

Notwithstanding the push, only one-third of India’s school children are pursuing online education and a smaller cohort of this—32.5%—are doing live online classes, according to the Annual Status of Education Report published in October 2020. The report underlined how the digital divide is still wide in the school sector and just 11% of all students enrolled in both private and government schools were using live online classes, while another 21.5% were using videos or recorded classes.

The survey admitted that covid-19 has “exposed the vulnerability of urban casual workers, who account for 11.2% of urban workforce... a significant proportion of them are supposed to be migrants". However, it did not say how many informal sector workers had lost their jobs.

“With limited data available on inter-state migration and employment in informal sectors, it is difficult to figure out the number of migrants who lost their jobs and accommodation during the pandemic and returned home," it added.

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