Social Sector Expenditure

The expenditure by the government or by the private sector and NGOs on education, nutrition, housing, sanitation, urban development, etc, are included in social sector expenditure, which creates positive externalities and, hence, helps in the upliftment and development of the individual as well as the society. 

According to recent data from the economic survey, there is an increase in government (central and state government) expenditure to GDP ratio to 8.6% in 2021-2022 in the Budget Estimate from 6.2% in 2014-2015. India still lags behind many countries in social security expenditure, excluding the health sector. 

For example, France spent almost 31% of its GDP in the social sector in 2019; the Scandinavian countries almost spent 25% of their GDP in the social sector. To attain sustainable development goals, which define 17 developmental goals, we must focus on social sector development and its proper implementation.

Government schemes

The Government of India initiated different schemes to improve the state of the society and for its inclusive development. The National Health Mission, MGNREGA, Poshan Abhiyan, Pradhan Mantri Awas Yojna, Jal Jeevan Mission, etc, are parts of India’s social sector expenditure.

Allocation of budget in different major schemes and sectors

Health –  The Government of India allocated Rs 86,200.65 crore for the health sector for the financial year (FY) 2022-23. 

Education-  According to the Union Budget’s data, the Government of India allocated Rs 1,04,278 crore for the education sector.

Jal Jeevan Mission- The Government of India allocated Rs 60,000 crore for this scheme to improve water availability and quality.

Pradhan Mantri Gram Sadak Yojana- The main objective is to develop all-weather roads and connect the unconnected villages. The Government of India allocated Rs 1,900 crore for this scheme.

Relation between social sector expenditure and development

There is a positive correlation between the social sector expenditure and the development of individuals and society. The social sector expenditures have positive externalities and enhance the living standard and well being of people as individuals and the society as a whole. 

Health and education play an important role in the human development index, and it is one of the measures to define growth and development. The sustainable development goal is to bring prosperity, protect the environment, and tackle climate change. Therefore, we can achieve sustainable goals through social sector reforms and an increase in spending in the social sector.

Trends of expenditure in the social sector

There is a continuous increase in expenditure on planned social sector outlay. During the sixth five-year plan (1981-86), the planned spending on social sector outlay was Rs 140.35 billion, 14.4% of the total plan outlay. 

During the seventh five-year plan in 1985-90, the planned outlay on social sector expenditure increased to Rs 315.45 billion, 17.5% of the total plan outlay.

During the eighth five-year plan (1992-97), the total outlay on social sector expenditure increased to Rs 790.12 billion, 18.2% of the total plan outlay. 

In the ninth five-year plan (1997-02), the outlay increased to Rs 1,832.73 billion, 21.3% of the total plan outlay.

In the tenth five-year plan (2002-2007), the total outlay on the social sector increased to Rs 3,473.91 billion, which was 22.8% of the total plan outlay.

During the eleventh five-year plan, the total outlay on social sector expenditure reached Rs 11,023.27 billion, 30.2% of the total plan outlay.

During the twelfth five year plan, the total outlay on the social sector reached Rs 26,648.43 billion, which was 34.7 % of the total plan outlay. 

In the data cited above, we have seen that in the sixth plan (1981-85), the social sector expenditure outlay was 14.4%, which was more than doubled during the twelfth plan (2012-17) to 34.7%. 

In FY 2021-22, according to the Economic Survey of India, in the budget estimate (BE), the total expenditure on the social sector rose to Rs 71.61 lakh crore from Rs 65.24 lakh crore in the budget estimate for 2020-21, which is 9.8% greater than the total expenditure. 

From this allocation, Rs 6.97 lakh crore was spent on education, Rs 4.72 lakh crore on health and Rs 7.37 lakh crore on other social sectors. According to the BE of 2020-11, the social sector expenditure was Rs 65.24 lakh crore. Rs 6.21 lakh crore was allotted to education, Rs 3.50 lakh crore was allocated to health and Rs 6.63 lakh crore on other social sector expenditures.

State government expenditures on the social sector

In terms of social sector expenditure to total expenditure, the trends of the top three states to allocate the highest expenditure on social sector to total expenditure outlay are as follows:

NCT of Delhi spent 55% of FY 2021-22 on social sector expenditures to total expenditure outlay. Bihar allocated 53.3% of total expenditure to social sector expenditure, and Manipur allocated 53.1% to social sector expenditure to total expenditure outlay.

In terms of social sector expenditure, the top three states are Uttar Pradesh, which according to 2021-22 (BE), spent Rs 2,11,660.8 crore; Maharashtra spent Rs 1,93,269.9 crore; and Tamil Nadu, which allocated Rs 1,23,029 crore.

Conclusion

The expenditure in the social sector plays an important role in the growth and development of any country as it creates positive externalities. Just not the expenditure in the social sector is important but also its implementation. Although the government spending on the social sector increased from last year, India still lags behind many countries in the social sector expenditure to GDP ratio. It is important to spend in the social sector to attain sustainable goals and bring prosperity to the nation.