'Education, health spends outgrow GDP'

Public expenditure on education at 19 percent and health at 17.5 percent grew faster than GDP which expanded at 15.3 percent during the period between 2003-04 and 2010-11, rating agency Crisil said in a note today.

Spending on social infrastructure grew at a compound annual growth rate of (CAGR) of 18.7 percent, ahead of the CAGR of nominal GDP at 15.3 percent during the period ending FY11, the Crisil note said.

Crisil has analysed the trends in combined spending of both Centre and states from 2003-04 to 2010-11 to assess the trends in expenditure in social and physical infrastructure.

"There are some positive features in the expenditure patterns of the government. Within social infrastructure, spends on all four sub-sectors such as health (17.5 percent), education (19 percent), family welfare (22.3 percent), and scientific services at 16.8 percent, have grown faster than nominal GDP.

"Within physical infrastructure, spends grew particularly faster in urban development with a CAGR of 28.9 percent, roads and bridges (22.1 percent) and rural development (19.4 percent)," Crisil Managing Director and Chief Executive Roopa Kudva said in the report.

"Clearly, if the government has to build on the momentum of the increased spending in education, health, and physical infrastructure, the considerable savings that will accrue from curtailing subsidies on fuel, fertilisers, and food can be re-allocated to these areas," Kudva said.

The report points out that the social welfare and subsidies have been the fastest growing items of government expenditure during the past decade, leading to pressure on the government's fiscal position.

Crisil says the growth in spending on physical infrastructure which stood at 15.7 percent during the reporting period just about kept pace with nominal GDP growth.

Consequently, the share of spending on social infrastructure in GDP rose from 4.1 per cent to 5 per cent over this period, while the share of physical infrastructure spending in GDP marginally rose from 4.5 per cent to 4.6 per cent.

... contd.

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