Counter-cyclical fiscal policy: Booster dose to the economy
Author: BI Bureau
New Delhi: The Union Budget 2021-22 has endeavoured to lay the foundation of India’s mid-term growth trajectory. The Indian economy is currently at an inflection point – recovering steadily from the twin shocks of the pandemic and associated health measures. The fiscal expansion illustrated in the Budget was, therefore, imperative to give necessary ‘escape velocity’ needed for the Indian economy to overcome the ‘influence-sphere’ of once-in-a-century shock.
The fiscal deficit target, which indicates the borrowing requirements of the government, has been revised sharply upward to 9.5 per cent of GDP in FY21 RE, from 3.5 per cent of GDP in FY21 BE. While 30 per cent of this increase was attributed to a shortfall in revenue collection, the remaining 70 per cent was due to higher public expenditure during the year. On similar lines, a higher fiscal deficit target of 6.8 per cent has been set for FY22 BE. It is, therefore, evident that India has consciously adopted a counter-cyclical fiscal policy – expansionary during economic downturns and contractionary in good times).
Economic Survey 2020-21 had lucidly provided the intellectual anchor for adopting an active counter-cyclical fiscal policy, during a time of economic crisis such as the one we are witnessing. The various channels through which fiscal expansion cushions output contraction during economic downturns are: by boosting private investment and consumption through higher fiscal multipliers in recession; compensating for greater risk-aversion of private sector and bringing back animal spirits through risk multiplier; and instilling confidence through expectation multiplier as reflected in the surge in equity indices after Budget announcement. An RBI study corroborates this stance by estimating the fiscal multipliers in India – a one-rupee increase in capital expenditure by the Central government crowds in private investment, and increases output by 3.25 rupees (RBI Bulletin, April 2019).
A key highlight of this growth-centric Budget for FY22 has been the emphasis on quality of spending through a big push to public investments. The capex for FY21 has been revised to Rs 4.39 lakh crore in RE, and budgeted at Rs 5.54 lakh crore for FY22. This encompasses a year-on-year growth of 30.8 per cent in FY21 (FY21 RE over FY20 actuals), and 34.5 per cent in FY 22 (FY22 BE over FY21 BE). BE capex outlay for FY22 for major Infrastructure sector Ministries saw considerable growth over BE for FY21, that is, 53 per cent for railways, 32 per cent for road transport and highways, 21.8 per cent for housing and urban affairs.
The Economic Survey 2020-21 advocated such an expansionary fiscal policy stance with an emphasis on stimulating public investment, to credibly raise growth expectations, crowd-in private investment and thereby, unleash a virtuous circle. Expansion in public expenditure amidst an economic crisis is often accompanied by concerns regarding the sustainability of rising debt. Economic Survey 2020-21 addresses these concerns in the present scenario. The accumulation of Government’s debt can be understood through a simple identity of debt dynamics, whereby the change in debt-to-GDP ratio is directly proportional to the difference between interest rate and growth rate of the economy.
A negative interest rate-growth differential implies that output is growing at a rate higher than the rate of interest to be paid on debt. The higher this negative differential, the lower are the debt-to-GDP ratios, thus making it easier (and quicker) for the Government to ensure debt sustainability. This is akin to a simple investment made from borrowed funds – it is sustainable if it yields more return than the interest repaid on the principal amount.
The Economic Survey 2020-21, through extensive analysis, elucidates that for most of the years during the last two and a half decades in India, the GDP growth rates have been greater than the interest rates, resulting in a negative interest rate-growth differential, and thus causing the debt levels to decline. It, further, shows that with the interest rate-growth differential expected to be significantly negative for India in the foreseeable future, counter-cyclical fiscal policies may lead to lower, not higher, debt-to-GDP ratios.
Owing to the expected sharp increase in the borrowings (Fiscal deficit) during FY21, as reflected in the Union Budget 2021-22, the Central Government Debt to GDP ratio is expected to shore up in FY21. Even with this higher debt to GDP ratio, the simulations in the Survey show that debt sustainability may not be a concern for India-even in the worst-case scenario where India’s real growth rate is 3.8 per cent from FY 2023 onwards. A well-designed counter-cyclical fiscal policy during the crisis in the Union Budget 2020-21 has, therefore, emerged as a booster dose for the economy at this juncture. It will spur economic growth and thereby, pave the path for a self-financing fiscal policy and sustainable debt levels.
(The authors are IES officers serving in the Department of Economic Affairs. The views expressed are strictly personal)
ENDS
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NEP-2020 aspires for inclusive excellence in school education
Rajeev Ranjan Roy
The New Education Policy-2020 (NEP-2020), unveiled recently, aims at achieving excellence in school learning by imparting quality, affordable and inclusive education to all, with an extra emphasis on those children coming from socially and educationally disadvantaged groups of the society. It is a futuristic endeavour towards building Ek Bharat, Shrestha Bharat. The previous education policies largely focussed on the issues of access and equity in giving school education, while the NEP-2020 commits to laying the foundation of a vibrant Bharat where no one is devoid of a kind of school education, which helps every student become an asset for the nation in a true sense. The unfinished agenda of the National Policy on Education 1986, which was modified in 1992, has been effectively dealt with in the NEP-2020 along with the vision behind the Right to the Free and Compulsory Education Act, 2009, which “laid down legal underpinnings for achieving universal elementary education.”
Given the undisputed role of education in nation building, the NEP-2020 rightly lays the stress on standardization and accreditation of school infrastructure and teachers as well, since education with accountability, transparency and affordability is the need of the hour, and hence the need to “empower schools, teachers with trust, enabling them to strive for excellence and perform at their very best, while ensuring the integrity of the system through the enforcement of complete transparency and full public disclosure of all finances, procedures and outcomes.” Since private sector is significantly present in the field of school education, the idea to promote ‘not-for-profit’ entities is a unique feature of NEP-2020, which at the same time intends to promote private philanthropic efforts for quality education, thereby affirming the public-good nature of education, while protecting parents and communities from arbitrary increase in tuition fees.
An equally important area, which has got due attention in the NEP-2020 is the need for efficient resourcing and effective governance through school complexes and clusters, a significant initiative in view of the fact that nearly 28 per cent of India’s public primary schools and 14.8 per cent of upper primary schools have less than 30 students. The average number of students per grade in the elementary schooling system – Grades 1 to 8 – is about 14, with a notable proportion having below six students during 2016-17, the year which also had 1,08,017 single-teacher schools, and majority of them – 85,743 – being primary schools taking care of Grades 1-5 children. It was, therefore, a pressing need to evolve a mechanism for establishing a grouping structure, say, school complexes, consisting of one secondary school together with all other schools, which lead to greater resource efficiency and more effective functioning, coordination, leadership, governance, and management of schools in the cluster. This will not only ensure optimum utilisation of resources, but will also foster the sense of oneness and togetherness among the school children, who are the future of the nation.
What further makes the New Education Policy-2020 uniquely special is its pledge for equitable and inclusive education for all, one of the great dreams of our founding fathers. Education, as the NEP-2020 rightly envisions, is “the single greatest tool for achieving social justice and quality.” Inclusive and equitable education, indeed an essential goal in its own right, is also critical to achieving a social order where every citizen has “the opportunity to dream, thrive, and contribute to the nation.” Quality, affordable and ethical education to all is the first move to break multiple social and economic barriers, which sow the seeds of exclusion, discrimination and exploitation against our own people on different parochial considerations.
Needless to say efforts were made in the past as well to bridge the educational chasm between socially and educationally disadvantaged groups (SEDGs) and the children of top social strata, but the desired results remained elusive. SEDGs account for the country’s overwhelming population, but their children’s share in quality school educational institutions has been minimal over the years. Early childhood care and education (ECCE) needs to be handled more comprehensively. According to the Unified-District Information System for Education (U-DISE) 2016-17 data, about 19.6 per cent of students belonged to Scheduled Castes (SCs) at the primary level, but this fraction fell to 17.3 per cent at the higher secondary level. These enrollment drop-outs were more severe for ST students (10.6 per cent to 6.8 per cent), and differently-abled children (1.1 per cent to 0.25 per cent), with even greater declines for female students within each of these categories. Thus, there is no scope for any complacency on the part of the government. A series of interventions including better facilities, more and more hostels, scholarships and other enabling support have been provisioned in the NEP-2020 so that the idea of ‘learning for all’ is realised in a more comprehensive manner.
Teachers are not only an integral part of an education system, but the most important stakeholder in the entire gamut of things. Their quality and ability to teach school students, when they are in their formative age, become something of paramount importance. From their recruitment to training, every precaution needs to be taken to ensure that school education is not rendered to a mere formality, but becomes a game changer. The New Education Policy-2020 comes with a basket full of tools and parameters to ensure holistic training and upgradation of teachers and their teaching skills in a sustainable manner. From continuous professional development (CPD) to career management and progression (CMP), the NEP-2020 vouches for a set of common guidelines – National Professional Standards for Teachers (NPST), which will be put in place by the National Council for Teacher Education (NCTE) in its restructured new form as the Professional Standard Setting Body (PSSB) under the General Education Council. This exercise will be carried out in consultation with National Council Educational Research and Training (NCERT), SCERTs, teachers from across levels and regions.
The teacher education will also undergo a sea-change. By 2030, the minimum degree qualification for teaching will be a 4-year integrated B.Ed. that teaches a range of knowledge content. Today B.Ed. teaching is most poorly regulated in our country ever since the standalone B.Ed. colleges were allowed to be opened up in the private sector. It is high time to take B.Ed. teaching more than seriously. The NEP-2020 stipulates that by 2021, a new and comprehensive National Curriculum Framework for Teacher Education (NCFTE-2021) will be formulated by the NCTE. NCFTE, which will also factor in the requirements of teacher education curricula for vocational education, will be revised once every 5-10 years.
In conclusion, the NEP-2020 visualizes to impart a school education which lays the foundation of a self-reliant India and also to help our country emerge as a knowledge hub. From the foundation of learning to foundational literacy and numeracy to checking drop outs and ensuring universal access to education for all and at all levels to the restructuring of school curriculum, India is in for a metamorphosis in the field of school education, recognizing, identifying and fostering the unique capabilities of each student. Tools such as multi disciplinarity, emphasis on conceptual understanding, creativity and critical thinking, ethics and human and constitutional values, full equity and inclusion, and light but tight regulatory framework are bound to do wonders. Education is a public service, a rare pursuit in nation building, which should be holistic and inclusive and must make one take pride in India and its rich, diverse, ancient and modern culture and knowledge systems and tradition. The NEP-2020 aspires so, indeed!
( The writer is a senior journalist and author. The views expressed are strictly personal.)
NEP-2020 aspires for inclusive excellence in school education
Rajeev Ranjan Roy
The New Education Policy-2020 (NEP-2020), unveiled recently, aims at achieving excellence in school learning by imparting quality, affordable and inclusive education to all, with an extra emphasis on those children coming from socially and educationally disadvantaged groups of the society. It is a futuristic endeavour towards building Ek Bharat, Shrestha Bharat. The previous education policies largely focussed on the issues of access and equity in giving school education, while the NEP-2020 commits to laying the foundation of a vibrant Bharat where no one is devoid of a kind of school education, which helps every student become an asset for the nation in a true sense. The unfinished agenda of the National Policy on Education 1986, which was modified in 1992, has been effectively dealt with in the NEP-2020 along with the vision behind the Right to the Free and Compulsory Education Act, 2009, which “laid down legal underpinnings for achieving universal elementary education.”
Given the undisputed role of education in nation building, the NEP-2020 rightly lays the stress on standardization and accreditation of school infrastructure and teachers as well, since education with accountability, transparency and affordability is the need of the hour, and hence the need to “empower schools, teachers with trust, enabling them to strive for excellence and perform at their very best, while ensuring the integrity of the system through the enforcement of complete transparency and full public disclosure of all finances, procedures and outcomes.” Since private sector is significantly present in the field of school education, the idea to promote ‘not-for-profit’ entities is a unique feature of NEP-2020, which at the same time intends to promote private philanthropic efforts for quality education, thereby affirming the public-good nature of education, while protecting parents and communities from arbitrary increase in tuition fees.
An equally important area, which has got due attention in the NEP-2020 is the need for efficient resourcing and effective governance through school complexes and clusters, a significant initiative in view of the fact that nearly 28 per cent of India’s public primary schools and 14.8 per cent of upper primary schools have less than 30 students. The average number of students per grade in the elementary schooling system – Grades 1 to 8 – is about 14, with a notable proportion having below six students during 2016-17, the year which also had 1,08,017 single-teacher schools, and majority of them – 85,743 – being primary schools taking care of Grades 1-5 children. It was, therefore, a pressing need to evolve a mechanism for establishing a grouping structure, say, school complexes, consisting of one secondary school together with all other schools, which lead to greater resource efficiency and more effective functioning, coordination, leadership, governance, and management of schools in the cluster. This will not only ensure optimum utilisation of resources, but will also foster the sense of oneness and togetherness among the school children, who are the future of the nation.
What further makes the New Education Policy-2020 uniquely special is its pledge for equitable and inclusive education for all, one of the great dreams of our founding fathers. Education, as the NEP-2020 rightly envisions, is “the single greatest tool for achieving social justice and quality.” Inclusive and equitable education, indeed an essential goal in its own right, is also critical to achieving a social order where every citizen has “the opportunity to dream, thrive, and contribute to the nation.” Quality, affordable and ethical education to all is the first move to break multiple social and economic barriers, which sow the seeds of exclusion, discrimination and exploitation against our own people on different parochial considerations.
Needless to say efforts were made in the past as well to bridge the educational chasm between socially and educationally disadvantaged groups (SEDGs) and the children of top social strata, but the desired results remained elusive. SEDGs account for the country’s overwhelming population, but their children’s share in quality school educational institutions has been minimal over the years. Early childhood care and education (ECCE) needs to be handled more comprehensively. According to the Unified-District Information System for Education (U-DISE) 2016-17 data, about 19.6 per cent of students belonged to Scheduled Castes (SCs) at the primary level, but this fraction fell to 17.3 per cent at the higher secondary level. These enrollment drop-outs were more severe for ST students (10.6 per cent to 6.8 per cent), and differently-abled children (1.1 per cent to 0.25 per cent), with even greater declines for female students within each of these categories. Thus, there is no scope for any complacency on the part of the government. A series of interventions including better facilities, more and more hostels, scholarships and other enabling support have been provisioned in the NEP-2020 so that the idea of ‘learning for all’ is realised in a more comprehensive manner.
Teachers are not only an integral part of an education system, but the most important stakeholder in the entire gamut of things. Their quality and ability to teach school students, when they are in their formative age, become something of paramount importance. From their recruitment to training, every precaution needs to be taken to ensure that school education is not rendered to a mere formality, but becomes a game changer. The New Education Policy-2020 comes with a basket full of tools and parameters to ensure holistic training and upgradation of teachers and their teaching skills in a sustainable manner. From continuous professional development (CPD) to career management and progression (CMP), the NEP-2020 vouches for a set of common guidelines – National Professional Standards for Teachers (NPST), which will be put in place by the National Council for Teacher Education (NCTE) in its restructured new form as the Professional Standard Setting Body (PSSB) under the General Education Council. This exercise will be carried out in consultation with National Council Educational Research and Training (NCERT), SCERTs, teachers from across levels and regions.
The teacher education will also undergo a sea-change. By 2030, the minimum degree qualification for teaching will be a 4-year integrated B.Ed. that teaches a range of knowledge content. Today B.Ed. teaching is most poorly regulated in our country ever since the standalone B.Ed. colleges were allowed to be opened up in the private sector. It is high time to take B.Ed. teaching more than seriously. The NEP-2020 stipulates that by 2021, a new and comprehensive National Curriculum Framework for Teacher Education (NCFTE-2021) will be formulated by the NCTE. NCFTE, which will also factor in the requirements of teacher education curricula for vocational education, will be revised once every 5-10 years.
In conclusion, the NEP-2020 visualizes to impart a school education which lays the foundation of a self-reliant India and also to help our country emerge as a knowledge hub. From the foundation of learning to foundational literacy and numeracy to checking drop outs and ensuring universal access to education for all and at all levels to the restructuring of school curriculum, India is in for a metamorphosis in the field of school education, recognizing, identifying and fostering the unique capabilities of each student. Tools such as multi disciplinarity, emphasis on conceptual understanding, creativity and critical thinking, ethics and human and constitutional values, full equity and inclusion, and light but tight regulatory framework are bound to do wonders. Education is a public service, a rare pursuit in nation building, which should be holistic and inclusive and must make one take pride in India and its rich, diverse, ancient and modern culture and knowledge systems and tradition. The NEP-2020 aspires so, indeed!
( The writer is a senior journalist and author. The views expressed are strictly personal.)
