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Urban Indians do not think highly of budget allocations

February 25, 2007

The media has been doing its bit in trying to find out what people feel about the budget that is expected this coming week.
A pre-budget poll by TOI and TNN in seven cities (Delhi, Mumbai, Kolkata, Bangalore, Hyderabad, Lucknow and Patna) of 1,104 respondents (the ages of 20 – 50 years and belonging to socio-economic categories A and B) has shown that people have little respect for the government – at least where the allocation and usage of tax is concerned. Only 17 percent think that the government utilises the taxes it collects very well 22% feel they are not at all properly utilised. Worse they feel that the government has it’s priorities all wrong. The respondents were asked what they thought the country’s priorities should be and they felt that education and health were the top prioritites. 38 percent of the people felt that Education should be the top priority.

Lets look at our health scenario first:

“According to a 2005 World Health Organization report, India has fewer than one hospital bed and one physician per 1,000 residents; in the countryside, where nearly three-quarters of the population lives, one doctor may be responsible for more than 200,000 residents…Despite these ominous trends, government spending on health care as a percentage of Gross Domestic Product has fallen in recent years.”!!

Lets compare health spending in our country as compared to the rest of the world:
Health spending as percent of GDP (2004):

United States: 15.2%
Canada: 9.9%
Japan: 7.9%
Africa: 6.1%
China: 5.6%
India: 4.8%
Pakistan: 2.4%

Developed countries tend to spend more on health per person than growing economies. I guess other aspects of development like infrastructure are top priorities for the government in the developing nations. But even then one needs to strike some balance. I could not find the latest percentages of government spending on health online, but it is believed to have actually decreased from 2004!

And what about Education? Surely Education is as important as any “infrastructure”?
Lets see whats happening on the Education front:

“…the Central Government has announced an expected 150 percent increase in central spending on higher education in 2007-08 (at Rs. 6,354 crore over Rs. 2,550.50 crore this year), the fact remains that India will continue to lag behind, compared to its asian counterparts…in comparison, the United States spends US$ 9,629, the United Kingdom US$ 8502 and Japan US$ 4830, on higher education per student. Even among the BRIC (Brazil, Russia, India and China) countries, India is at the bottom of the pile. While China, Russia and Brazil spend US$ 2,728, US$ 1,024 and US$ 3,986 respectively on higher education per student, another developing country Malayasia’s expenditure under the same head is quite high at US$ 11,790.”

We are at the bottom of the pile where the BRIC nations are concerned and I wonder how we are expected to rise to the top economically by 2050 as the BRIC report has indicated unless we develop our people? But according to this chart, at least Elementary Education expenses have been going up steadily and now the government is promising to make good the neglect of higher education. I have read several newspaper reports that this will happen in this coming budget.

But but we know that the government’s education expenditure as a percentage of GDP has never risen above 4.3% of GDP, so there is room to do more.

CNN-IBN’s pre-budget initiative has been to ask citizens which personal taxes should be done away with. They zeroed in on five taxes people believed were most unfair.
This initiative has been called Axe the tax and a petition submitted to the Finance Mininster, P. Chidambaram.
Unfair Taxes
1) They think that the LTA (Leave Travel Allowance) being taxable if you holiday abroad is not right.
2) The Fringe Benefit Law forces even small companies to pay taxes on fringe benefits.
3) The Rs 15,000 limit on medical expenses that can be claimed. If your annual income exceeds Rs 2 lakhs, then treatment abroad is fully taxed!
4) Senior citizens with taxable income more than Rs 1,85,000 pay 20% tax
Deduction up to 25% on house rent paid but with limit of Rs 2000/month
5) Deduction up to 25% on house rent paid but with limit of Rs 2000/month

Related Reading: The increasing number of Indian billionnaires is a portent of the future
Overall view of India Budget 2007

2 Comments leave one →
  1. Rahul permalink
    February 25, 2007 4:21 pm

    Nice & comprehensive Article.
    My take :
    1) Spend (wisely & sincerely) atleast 10% of GDP towards Education.
    Also reduce the rate of interest on Education Loans (not more that 4/5%).

    2) And atleast 10% for health sector.

    P.s. Its possible coz there has been almost a rise of 42% rise in overall Tax collections.

    This will take care of many a Ills in the society.

  2. February 26, 2007 9:01 pm

    Good post how about infrastructure investments, like health and education infrastructure sector also does not promise big returns in the short term and we don’t see big private investments. Check out other posts on BRIC countries and trends.

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