Saturday, 27 Jul, 2024
By: Manya Upreti
Source: Wikimedia Commons
In December 2023, the head of the IMF's Asia and Pacific Department, Krishna Srinivasan warned of the need to boost India’s investment in education and health to prepare a staggering 15 million workforce every year.
The International Monetary Fund (IMF) has underscored the critical need for India to ramp up investments in education and health to effectively harness its burgeoning youthful demographic for economic growth. This appeal follows the World Bank's recent caution, which reiterated worries about South Asian countries like India not being able to make use of their demographic dividend. As the Union Budget for 2024-25 reveals, allocations for these pivotal sectors have fallen short of meeting the targets set by government policies.
In December 2023, the head of the IMF's Asia and Pacific Department, Krishna Srinivasan warned of the need to boost India’s investment in education and health to prepare a staggering 15 million workforce every year. He called for the need to equip the workforce for future challenges and reap India’s demographic dividend with 65% Indians below 35 years of age.
The IMF has predicted that India's economy will grow annually at 6.8% in FY 2024-2025, despite the high young unemployment rate, reportedly over 40% in 2022-2023 emphasizing. Robust investments in education and health are indispensable for India to leverage its youthful workforce, ensuring they are adequately skilled and healthy for employment opportunities. India can support the development of its human capital, which is essential for long-term economic growth, by giving priority to these areas. The IMF's recommendations are in line with the general understanding around the world that health and education are essential for promoting inclusive growth and minimizing socioeconomic inequalities.
Similar opinions were expressed earlier this month by the World Bank, which warned South Asian nations like India on the risk of losing their demographic dividend if they don't address urgent issues like healthcare and education. Even though India has a large youth population, poor health and education spending could reduce their productivity and harm the country's economic future. The World Bank's caution highlights how urgent it is to fix shortcomings in these vital areas.
On February 1, 2024, Union Minister of Finance Nirmala Sitharaman delivered the budget speech. She made no noteworthy commitments for the fiscal year 2024–2025. The health sector did not gain much traction this year either, as usual. Experts have been recommending for years that the health budget should represent at least 3% of GDP, and the National Health Policy of 2017 set a goal of raising the budget to a minimum of 2.5% of GDP by 2025.
The health sector received only Rs 90,171 crore from the FM for the vital election year of 2024–2025. Experts have long argued that education should receive 6% of GDP, much like health. Additionally, National Education Policy 2020 promotes allocating 6% of GDP to the field of education. This works out to Rs 19,66,309 crore, well below Rs 1,24,638 crore allocated for education in the current budget.
The inadequate budgetary allocations raises concerns about India's ability to adequately equip its workforce with the necessary skills and ensure access to quality healthcare services, both of which are fundamental for sustainable development. The IMF's call for increased investments in education and health directly correlates with the inadequacies observed in the Union Budget allocations. Without substantial funding directed towards these sectors, India risks perpetuating a cycle of underdevelopment, hindering its ability to harness the potential of its young population. In addition, the discrepancy between the budgetary priorities and the IMF's recommendations emphasizes the necessity of a coherent strategy to effectively handle the socioeconomic difficulties facing the country.
