CII Pre-Budget Recommendations: Sectoral Reforms

It is that time of the year when everybody is looking forward to the Budget, scheduled to be presented on 1 February, 2018. Several pressing issues and concerns including job creation, manufacturing growth, exports etc. are expected to be addressed in this year’s Budget to boost investor confidence.

India’s economic growth depends on the performance of sectors such as agriculture, healthcare, banking and exports, among others, and it is imperative for the Government to address the sectoral concerns of the country.

This article, part of the article series on CII Pre Budget Recommendations, focusses on industry recommendations on sectoral reforms. In this article, the focus is on the broad sectors of agriculture, education and skill development, healthcare and employment.

Agriculture

Inadequate infrastructure in the agricultural sector is a primary concern. Lack of modern facilities including warehouses, cold storage, logistics and cold chains lead to high wastage, lowering incomes of farmers.

CII suggests setting up post-harvest infrastructure such as warehouses and cold storage facilities in all districts. These could be leased to the private sector including food processors/large buyers.

Restrictive land leasing laws negatively impact agricultural productivity. Amendment of current contract farming laws would allow leasing of land to corporates/large growers without transfer of title which would help in reaping the benefits of large scale scientific farming.

Another recommendation is the setting up of an Agri Start-up Fund to promote science-based modern agriculture. This would encourage start-ups in rural areas by imparting skills and training to farmers in scientific agriculture and good agricultural practices to meet export market standards.

Social Sector

The social sector of an economy, covering sectors such as healthcare and education, is a critical pillar that supports the overall development and growth of the economy. Reforms in the sector are therefore important for propelling growth.

Expenditure on social services as a proportion of GDP is presently around 7.4% and social sector spending should be stepped up, especially in sectors like health and education.

Expenditure on Social Services as % of GDP

Source: Economic Survey 2016-17 Vol 2

Education: Presently, public spending on education is only 3.2% of GDP. CII recommends increasing the expenditure on education to the stated target of 6% by 2022. Special focus must be laid on pre-primary, primary, secondary and higher education. Education supply in the 3-6 year age group must be increased through crèches and Anganwadis.

The Government may consider a pilot voucher system for choice in school selection through Direct Benefit Transfer (DBT). Other suggestions include creating a special fund for providing technology infrastructure in school, upgradation of teacher training systems and ensuring greater attendance through biometric means. Merit scholarships must be increased in secondary schools for lowering drop-out rates.

Skill Development: An estimated 127 million people need to be trained by 2022 (Economic Survey 2016-17 Vol 2) and hence the time is ripe for India to invest in human infrastructure and best leverage its demographic dividend. In this context, it is important to ensure that skill development must be in sync with emerging global needs as well as with the formal domestic education system.

Job creation and livelihood generation are key to achieving sustained growth. Raising quality of human development through enhanced public spending, focussing on skill development and improving education quality are of utmost importance for this purpose.

Healthcare: The current public spending on Healthcare is a meagre 1.5% of GDP (Economic Survey 2016-17 Vol 2) with household out-of-pocket expenditure at 70%. The immediate focus should be on increasing healthcare expenditure to the stated target of 2.5% of GDP by 2022 as in the National Healthcare Policy.

India ranks poorly in the Human Development Index (HDI) with a rank of 131 among 144 economies. Sustained efforts must be undertaken to move the HDI rank within 50 in 5 years.

India’s rank for women in the Health and Survival sub-index in the Global Gender Gap Report 2017 is 141, the fourth lowest in the world. Therefore, speedy measures to target women’s health through direct outreach programs on nutrition and health must be instituted. Digital healthcare facilities in rural areas must be facilitated through creation of special funds.

Other recommendations to improve healthcare include fast-tracking of 15 AIIMS-like institutions, set-up of more teaching hospitals and technical skill centers, providing infrastructure status to private sector hospitals and making healthcare a concurrent subject.

Social Security and Employment: While there is no social security for approximately 475 million workers in the unorganized sector, the organized sector firms face challenges with regards to workforce flexibility.

CII recommends re-allocation of subsidies for better targeting of poorest households and the convergence of existing schemes. According to CII ‘Future of Jobs’ Report, universal social security of insurance, pension and health insurance combined would cost Rs. 1.6 lakh crore for the unorganized sector over 5 years. CII recommends undertaking pilot scheme for universal basic income to poor households.

Additionally, incentives must be in place for employment generation, for example, in the form of Government contribution to Provident Fund to new workers. Fixed term employment must be provided to all labour-intensive manufacturing sectors for promoting greater workforce flexibility.

These sectoral reforms are critical for propelling higher growth and are critical for the overall development of the economy. The recommendations have already been presented to the Finance Ministry and Industry is hopeful of a growth oriented and progressive budget, much like the previous ones.

Read other articles on the series: http://ciiblog.in/cii-pre-budget-recommendations-investment-other-macro-reforms/

 

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