Recently, the Kelkar Committee published a roadmap for fiscal consolidation. The report stresses the need and urgency to address India’s fiscal deficit. A high fiscal deficit – the excess of government expenditure over receipts – can be problematic for many reasons. The fiscal deficit is financed by government borrowing; increased borrowing can crowd out funds available for private investment. High government spending can also lead to a rise in price levels. A full PRS summary of the report can be found here. Recent fiscal trends Last year (2011-12), the central government posted a fiscal deficit of 5.8% (of GDP), significantly higher than the targeted 4.6%. This is in stark contrast to five years ago in 2007-08, when after embarking on a path of fiscal consolidation the government’s fiscal deficit had shrunk to a 30 year low of 2.5%. In 2008-09, a combination of the Sixth Pay Commission, farmers’ debt waiver and a crisis-driven stimulus led to the deficit rising to 6% and it has not returned to those levels since. As of August this year, government accounts reveal a fiscal deficit of Rs 3,37,538 crore which is 65.7% of the targeted deficit with seven months to go in the fiscal year. With growth slowing this year, the committee expects tax receipts to fall short of expectations significantly and expenditure to overshoot budget estimates, leaving the economy on the edge of a “fiscal precipice”.
Figure 1 (source: RBI)
Committee recommendations - expenditure To tackle the deficit on the expenditure side, the committee wants to ease the subsidy burden. Subsidy expenditure, as a percentage of GDP, has crept up in the last two years (see Figure 2) and the committee expects it to reach 2.6% of GDP in 2012-13. In response, the committee calls for an immediate increase in the price of diesel, kerosene and LPG. The committee also recommends phasing out the subsidy on diesel and LPG by 2014-15. Initial reports suggest that the government may not support this phasing out of subsidies.
Figure 2 (source: RBI, Union Budget documents, PRS)
For the fertiliser subsidy, the committee recommends implementing the Department of Fertilisers proposal of a 10% price increase on urea. Last week , the government raised the price of urea by Rs 50 per tonne (a 0.9% increase). Finally, the committee explains the rising food subsidy expenditure as a mismatch between the issue price and the minimum support price and wants this to be addressed. Committee recommendations - receipts Rising subsidies have not been matched by a significant increase in receipts through taxation: gross tax revenue as a percentage of GDP has remained around 10% of GDP (see Figure 3). The committee seeks to improve collections in both direct and indirect taxes via better tax administration. Over the last decade, income from direct taxes – the tax on income – has emerged as the biggest contributor to the Indian exchequer. The committee feels that the pending Direct Tax Code Bill would result in significant losses and should be reviewed. To boost income from indirect taxes – the tax on goods and services – the committee wants the proposed Goods and Service Tax regime to be implemented as soon as possible.
Figure 3 (source: RBI)
Increasing disinvestment, the process of selling government stake in public enterprises, is another proposal to boost receipts. India has failed to meet the disinvestment estimate set out in the Budget in the last two years (Figure 4). The committee believes introducing new channels [1. The committee suggests introducing a ‘call option model’. This is a mechanism allowing the government to offer for sale multiple securities over a period of time till disinvestment targets are achieved. Investors would have the option to purchase securities at the cost of a premium. They also propose introducing ‘exchange traded funds’ which would comprise all listed securities of Central Public Sector Enterprises and would provide investors with the benefits of diversification, low cost access and flexibility.] for disinvestment would ensure that disinvestment receipts would meet this year’s target of Rs 30,000 crore.
Figure 4 (source: Union Budget documents, PRS)
Taken together, these policy changes, the committee believe would significantly improve India’s fiscal health and boost growth. Their final projections for 2012-13, in both a reform and no reform scenario, and the medium term (2013-14 and 2014-15) are presented in the table below: [table id=2 /]
In the recent past, there has been a renewed discussion around nutrition in India. A few months ago, the Ministry of Health and Family Welfare had released the National Health Policy, 2017.[1] It highlighted the negative impact of malnutrition on the population’s productivity, and its contribution to mortality rates in the country. In light of the long term effects of malnutrition, across generations, the NITI Aayog released the National Nutrition Strategy this week. This post presents the current status of malnutrition in India and measures proposed by this Strategy.
What is malnutrition?
Malnutrition indicates that children are either too short for their age or too thin.[2] Children whose height is below the average for their age are considered to be stunted. Similarly, children whose weight is below the average for their age are considered thin for their height or wasted. Together, the stunted and wasted children are considered to be underweight – indicating a lack of proper nutritional intake and inadequate care post childbirth.
What is the extent of malnutrition in India?
India’s performance on key malnutrition indicators is poor according to national and international studies. According to UNICEF, India was at the 10th spot among countries with the highest number of underweight children, and at the 17th spot for the highest number of stunted children in the world.[3]
Malnutrition affects chances of survival for children, increases their susceptibility to illness, reduces their ability to learn, and makes them less productive in later life.[4] It is estimated that malnutrition is a contributing factor in about one-third of all deaths of children under the age of 5.[5] Figure 1 looks at the key statistics on malnutrition for children in India.
Figure 1: Malnutrition in children under 5 years (2005-06 and 2015-16)
Sources: National Family Health Survey 3 & 4; PRS.
Over the decade between 2005 and 2015, there has been an overall reduction in the proportion of underweight children in India, mainly on account of an improvement in stunting. While the percentage of stunted children under 5 reduced from 48% in 2005-06 to 38.4% in 2015-16, there has been a rise in the percentage of children who are wasted from 19.8% to 21% during this period.[6],[7] A high increase in the incidence of wasting was noted in Punjab, Goa, Maharashtra, Karnataka, and Sikkim.[8]
The prevalence of underweight children was found to be higher in rural areas (38%) than urban areas (29%). According to WHO, infants weighing less than 2.5 Kg are 20 times more likely to die than heavier babies.2 In India, the national average weight at birth is less than 2.5 Kg for 19% of the children. The incidence of low birth-weight babies varied across different states, with Madhya Pradesh, Rajasthan and Uttar Pradesh witnessing the highest number of underweight childbirths at 23%.[9]
Further, more than half of India’s children are anaemic (58%), indicating an inadequate amount of haemoglobin in the blood. This is caused by a nutritional deficiency of iron and other essential minerals, and vitamins in the body.2
Is malnutrition witnessed only among children?
No. Among adults, 23% of women and 20% of men are considered undernourished in India. On the other hand, 21% of women and 19% of men are overweight or obese. The simultaneous occurrence of over nutrition and under-nutrition indicates that adults in India are suffering from a dual burden of malnutrition (abnormal thinness and obesity). This implies that about 56% of women and 61% of men are at normal weight for their height.
What does the National Nutrition Strategy propose?
Various government initiatives have been launched over the years which seek to improve the nutrition status in the country. These include the Integrated Child Development Services (ICDS), the National Health Mission, the Janani Suraksha Yojana, the Matritva Sahyog Yojana, the Mid-Day Meal Scheme, and the National Food Security Mission, among others. However, concerns regarding malnutrition have persisted despite improvements over the years. It is in this context that the National Nutrition Strategy has been released. Key features of the Strategy include:8
[1] National Health Policy, 2017, Ministry of Health and Family Welfare, March 16, 2017, http://mohfw.nic.in/showfile.php?lid=4275
[2] Nutrition in India, Ministry of Health and Family Welfare, 2005-06, http://rchiips.org/nfhs/nutrition_report_for_website_18sep09.pdf
[3] Unstarred Question No. 2759, Lok Sabha, Answered on March 17, 2017, http://164.100.47.190/loksabhaquestions/annex/11/AU2759.pdf
[4] Helping India Combat Persistently High Rates of Malnutrition, The World Bank, May 13, 2013, http://www.worldbank.org/en/news/feature/2013/05/13/helping-india-combat-persistently-high-rates-of-malnutrition
[5] Unstarred Question No. 4902, Lok Sabha, Answered on December 16, 2016, http://164.100.47.190/loksabhaquestions/annex/10/AU4902.pdf
[6] National Family Health Survey – 3, 2005-6, Ministry of Health and Family Welfare http://rchiips.org/nfhs/pdf/India.pdf
[7] National Family Health Survey – 4 , 2015-16, Ministry of Health and Family Welfare, http://rchiips.org/NFHS/pdf/NFHS4/India.pdf
[8] National Nutrition Strategy, 2017, NITI Aayog, September 2017, http://niti.gov.in/writereaddata/files/document_publication/Nutrition_Strategy_Booklet.pdf
[9] Rapid Survey On Children, Ministry of Women and Child Development, 2013-14, http://wcd.nic.in/sites/default/files/RSOC%20National%20Report%202013-14%20Final.pdf
