Modinomics = Corporatonomics Part III: Modi’s Budgets and the Social Sectors

In the previous four issues of Janata, we first published two articles on Modinomics = Falsonomics, and then in the next two articles, we have analysed Modinomics. We have shown that the Modi Government, if it wants, can raise enough resources to increase its expenditures on the social sectors. Instead, it is giving away huge subsidies to the tune of several lakh crore rupees to the corporate houses. In this article, we discuss the overall allocaton for the social sectors during the past five years of Modi’s rule, and then specifically discuss budget allocations for education.

Public social sector expenditures: India vs other countries

Most developed countries have a very elaborate social security network for their citizens, including unemployment allowance, universal health coverage, free school education and free or cheap university education, old age pension, maternity benefits, disability benefits, family allowance such as child care allowance, allowances for those too poor to make a living, and much more. Governments spend substantial sums for providing these social services to their people. The average public social sector expenditures of the 34 countries of the OECD have been around 20% of GDP for the last many years, and for the EU–27 have been even higher at around 30% of GDP.[i]

In contrast, India’s social sector expenditures are just around 7% of GDP. They are not only way below the developed countries, as a recent report of the Reserve Bank of India admits, India’s social sector expenditures are also “woefully below peers” (see Chart 1).[ii]


The major part of the social sector expenditure in the country is done by the States. The Economic Survey 2017–18 puts the total social sector expenditure of Centre and States combined (2017–18 BE) at Rs 10.94 lakh crore, which is around 6.6% of GDP. Of this, the Centre’s share is Rs 1.95 lakh crore (2017–18 Budget document), which works out to only 17.8% of the total social sector expenditure, Centre and States combined. This figure of Rs 1.95 lakh crore is 9.08% of the total budget outlay. The social sector expenditure of 2018 and 2019 are not specifically mentioned in the budget, but assuming that as a percentage of the total budget outlay, they are constant, then it means the social sector expenditures in 2018–19 and 2019–20 would be around Rs 2.22 lakh crore and Rs 2.53 lakh crore respectively.

Is it not possible for the Modi Government to increase the total social sector expenditure of the government (Centre + States combined) to at least 15% of GDP? That is actually not much; it is only half the level of EU-27. That would require a total social sector expenditure of Rs 31.5 lakh crore in 2019–20. Assuming that the Centre spends 25% of it, this would require the social sector expenditure of the Centre to go up to Rs 7.88 lakh crore from the Rs 2.53 lakh crore at present—an increase of just Rs 5.3 lakh crore. The Centre, if it so wants, can easily afford this by reducing the loan write-offs of the corporate houses, or reducing the tax concessions to the rich, or by cancelling the mineral leases given to corporate houses at very low royalty rates, or . . .

Boosting demand by increasing social sector expenditures

Let us for a moment drop this fact-based critical examination of the budget from a socialist perspective, and examine it purely from the perspective of mainstream capitalist economics. In the Economic Survey 2017–18 presented by Arvind Subramanian, the Chief Economic Advisor of the Government of India, he devotes a good deal of space to a discussion of the serious decline in gross investment in India as a proportion of the GDP. The Survey notes: “The ratio of gross fixed capital formation to GDP climbed from 26.5% in 2003, reached a peak of 35.6% in 2007, and then slid back to 26.4% in 2017.” It admits that such sharp swings in investment rates “have never occurred in India’s history”, and that while “the past 15 years have been a special period for the entire global economy, no other country seems to have gone through such a large investment boom and bust during this period.” The Survey frankly and ominously adds: “India’s investment decline seems particularly difficult to reverse . . . The deeper the slowdown, the slower and shallower the recovery.” And as we have pointed out in a previous article[iv], government data shows that the economy has further slowed down in 2018.

The way out of this economic slowdown is to boost demand, and one way of doing it is by boosting social sector spending. It is now fairly well established that government spending on social sectors such as education and health has significant positive multiplier effects.[v] [The fiscal multiplier is an estimate of the effect of government spending on economic growth. A multiplier greater than 1 corresponds to a positive growth stimulus (returning more than Re 1 for each rupee invested), whereas a multiplier less than one reflects a net loss from spending.]

However, as we show below, the government has not attempted to give a boost to the economy by expanding its social sector expenditures. 

Jaitley/Goyal have no problem in giving lakhs of crores of rupees as subsidies to the rich in the name of ‘tax incentives’, or ‘investment subsidies’, or bank loan write-offs, and so on. But when it comes to increasing welfare spending on the poor, they claim that the government cannot afford that as the fiscal deficit needs to be curbed. 

This is precisely what neoliberalism is all about—it means running the economy solely for the profiteering of giant foreign and Indian corporate houses, including shamelessly cutting down the public welfare expenditures on the poor and transferring the savings to the coffers of the corporate houses. Every government that has come to power at the Centre since the beginning of globalisation in 1991 has dutifully implemented these policies; the Modi Government is even more unashamedly implementing these policies.

Such is the nationalism of the BJP–RSS. It is confined to unfurling giant sized flags in universities, and forcing people to stand up while the national anthem is being played in cinema halls—while on the ground, it is doing shastang dandavata before the international financial institutions and giant foreign corporations, betraying the interests of the common people.

Let us now take a look at the budget allocations for some of the more important social sectors.

More detailed analysis of social sectors under Modi rule

School education: Back to the dark ages

No country in the world has developed without making provisions for providing free, compulsory, equitable and good quality elementary education to ALL its children in the initial stages of its development, and later expanding it to secondary and higher secondary education. Since the private sector will only invest for profit, all countries, including the avowedly capitalist countries of the West, have done this entirely through public funding.

Unfortunately, because of inadequate spending on education since Independence, the condition of India’s education was dismal even when the BJP came to power. India has not been able to provide this to a majority of its children seven decades after independence.

According to the Planning Commission of India, 42.4% children drop out of school before completing elementary education.[vi]

  • And for those attending schools, the conditions in a majority of the schools are simply terrible:

In a majority of the primary schools in the country, a single teacher is teaching two or three different classes at the same time in a single room (data for 2015)![vii]

Even for all schools, upto higher secondary, 42% schools have 3 or less than 3 classrooms, and 50% schools have 3 or less than 3 teachers![viii]

Nearly one-third of the schools do not have usable toilet facilities.[ix]

47% primary schools do not have electricity; and 38% of all schools do not have electricity.

An amazing 44% of primary schools do not even have a boundary wall, while 35% of all schools do not have a boundary wall.[x]

With such dismal conditions, is it any wonder that a survey found that 48% of Class V students were unable to read Class II–level text; and 43% of Class VIII students could not divide numbers.[xi]

On the other hand, for the well-to-do classes, there are a wide range of private schools of varying quality, both in terms of educational and extra-curricular facilities, with fees varying from Rs 1 lakh per year to as much as Rs 15 lakh per year and more.

Because of such a discriminatory school education system, only 15–17% of those enrolled in Class I are able to clear Class XII. The situation is worse for the marginalised sections: only about 8%  of SCs and 6% of STs, about 10–11% OBC’s and around 9% Muslims cross the Class XII barrier. This also means that almost 92% of Dalits and 94% of tribals and 90% of OBCs never become eligible for the benefits of reservation under the social justice agenda.[xii]

The BJP came to power, promising to rectify the situation, and increasing spending on education (Centre + States combined) to 6% of GDP during their 2014 Lok Sabha election campaign. It has turned out to another jumla.

The above data of the state of India’s schools were for 2015–16. Yet, during its five years in power, the BJP has made an unprecedented 38% cut in its budget for school education (see Table 1). This only implies that the condition of government schools must have worsened considerably. The reason for this huge budget cut for school education is simple: the BJP wants to privatise school education completely. For this, the strategy adopted is simple: ruin the quality of government school system by cutting the funding of school education and keeping teaching posts vacant; children will automatically exit government schools, and those who can afford it will join private schools. The consequence: more than 2 lakh government schools have closed down till date.[xiii]


Business of higher education

Coming to higher education, the number of students in colleges, defined by the Gross Enrolment Ratio or GER (number of students as a percent proportion of the youth population in the age group 17–23 / 18–24) is way below the developed countries—the GER for India is only around 20, whereas for developed countries it is above 60, with several countries having a GER above 70.[xiv] An important reason for this is the accelerating privatisation and commercialisation of higher education since the neoliberal reforms began in India in 1991—even before the BJP came to power, by 2011–12, total number of private higher educational institutions (including both degree and diploma institutions) accounted for more than two-thirds of all higher educational institutions, and for nearly 60% of student enrolment.[xv]

Private higher educational institutions are all for-profit institutions; therefore, very few students can afford their fees. But the BJP has further slashed higher educational spending – during its five years in power, it has cut its spending on higher education (2018–19 RE over 2014–15 BE) by as much as 18% in real terms (see Table 1). Because of this, most government funded colleges are starved of funds and so, to meet their expenses, are being forced to increase student fees using all kinds of excuses. Consequently, studying in government funded educational institutions too is becoming unaffordable for students from poor families.

To cover up for this cut in higher education spending, Jaitley last year (2018) once again resorted to his standard ‘smoke-and-mirrors-routine’. In his budget speech, he announced: “Technology will be the biggest driver in improving the quality of education.  We propose to increase the digital intensity in education and move gradually from ‘black board’ to ‘digital board’.” But how serious is he about this can be gauged from the fact that the allocation for ‘Digital India e-learning’ was reduced from an already inadequate Rs 518 crore in the 2017–18 RE to an even lower Rs 456 crore in the 2018–19 BE; the 2018–19 RE shows a marginally increased spending of Rs 511 crore.

Even within the limited higher education budget, most of the funding is going to elite government institutions like the IITs and IIMS. The allocation for the University Grants Commission, that regulates the higher educational institutions in the country and provides grants to more than 10,000 institutions, has been halved in the five Modi budgets, from Rs 8,978 crore in 2014–15 BE to just Rs 4,687 crore in 2018–19 RE. The allocation for the All India Council for Technical Education, the regulator of engineering education in India, has remained dismally low during all the five Modi years and is a lowly Rs 452 crore in the 2018–19 RE. On the other hand, more than half of the higher education budgets have gone towards funding the so-called ‘institutions of excellence’ such as the IITs, IIMs and the Central Universities.


Last year (2018–19), the finance minister announced a new initiative, ‘Revitalising Infrastructure and Systems in Education’, or RISE, to “step up investments in research and related infrastructure in premier educational institutions”. He announced an investment of Rs 1,00,000 crore for this over the next four years. The catch is, this investment is not going to be from the budget. Educational institutions will be given loans from a new non-bank finance company set up last year by the government, the Higher Education Financing Authority (HEFA), which will borrow money from the market for this. The college will have to repay the principal, the Central government will bear the interest costs. The budget will only fund the interest costs, for which the budget allocation for HEFA was Rs 2,750 crore in 2018–19 RE and Rs 2,100 crore in 2019–20. This means that universities and colleges will have to borrow from HEFA for upgrading themselves, which in turn means that they will have to increase student fees to repay the loans, making higher education even costlier. Yet another fraud on the people!

It was way back in the 1960s that the Kothari Commission had recommended that “if education is to develop adequately”, the proportion of GDP allocated to education should rise to 6% by 1985–86. Successive governments have continued to ignore this recommendation, and the total educational expenditure only gradually inched up to reach 3.31% in 2012–13 BE.[xvi] Educationists estimate that given the huge under-spending on education over the past decades, the country probably needs to spend around 8% of the GDP today to achieve even modest goals in education development.

Be that as it may, Narendra Modi and the BJP had promised to increase spending on education (Centre + States combined) to 6% of GDP during their 2014 Lok Sabha election campaign. However, the Economic Survey 2017–18 admits that this has actually fallen under Modi rule, from 3.1% of GDP in 2013–14 to below 3% during the first four years of Modi rule, and was 2.7% in 2017–18 BE. With the Centre’s educational budget as a percentage of GDP falling from 0.48% in 2017–18 (A) to 0.44% in 2018–19 RE, the combined spending of Centre and States on education must be even lower in this year.

Can’t Modi–Goyal increase the education budget?

If Modi was indeed serious about implementing his election promise, it would require a total educational spending (Centre + States) of Rs 12.6 lakh crore in 2019–20. Even if the Centre spends 25% of this so as to give a boost to total educational spending in the country (the Centre had spent 17.4% in 2017–18 BE), it would require Jaitley to allocate Rs 3.15 lakh crore for education, an increase of Rs 2.2 lakh crore over the actual allocation made in the budget—not an unaffordable amount for a government that gives several times this amount as subsidies to the rich every year.

This increased spending would have to be directed towards:

  • Gradually eliminating the multi-layered discriminatory school education system and replacing it by an egalitarian school system with equivalent norms and standards of at least the level of Kendriya Vidyalayas.
  • Scrapping the policy of appointing contractual teachers; taking steps to ensure that all teachers, without exception, are fully qualified and appropriately ‘trained’ (i.e. educated) before recruitment and paid a regular salary scale with social security that is comparable throughout the country, as is the case with senior government officers.
  • So far as higher education is concerned, government must increase its expenditure on higher education, open more government higher education institutions, and charge only affordable fees, with adequate number of scholarships for all students who cannot afford these fees. No student must be denied education in a higher education institution for lack of money.

Cogs in corporate wheel

The neoliberal model looks at everything, including education, from the perspective of maximising corporate profits. There is no need to look at education from the perspective of human development, as a means of unlocking the inherent potential of human beings, so that they can enjoy an enhanced quality of life. All this is gibberish. The sole aim of education must be to prepare youth for employment in the assembly lines of multinational corporations. For this, the youth must be imparted the necessary skills, so that they can become cogs in the corporate wheel.

This philosophy also fits well with the fascist philosophy of the BJP–RSS regime, which wants to transform our youth into mindless automatons in the service of virulent Hindutva.

And so, while on the one hand, the Modi–Jaitley regime is slowly strangulating our higher educational institutions by starving them of funds, on the other hand, the government has hugely increased funding for skill development. The BJP Government inaugurated the Ministry of Skill Development and Entrepreneurship soon after coming to power in 2014. Its main programme is the Pradhan Mantri Kaushal Vikas Yojana, the allocation for which has trebled since its inception in 2015–16 (Table 3).




      Total Public Social Expenditure as a Percentage of GDP, December 20, 2013,;  “Chapter 3 – Social Protection Systems Confronting the Crisis” in Employment and Social Developments in Europe 2012, European Commission, Brussels, January 2013,

[ii]    “Government’s Social Sector Spending “Woefully” Below Peers: RBI”, April 11, 2018,

[iii]   Ibid.

[iv]   Neeraj Jain, “Modinomics = Falsonomics: Part I”, Janata Weekly, March 31, 2019.

[v]    See for instance: Aaron Reeves et al., “Does Investment in the Health Sector Promote or Inhibit Economic Growth?” Global Health, September 2013,

[vi]   Twelfth Five Year Plan: 2012–17, Vol. III: Social Sectors, p. 53,

[vii]  Here, when we are talking of primary schools, we are talking of ‘Only Primary Schools’. We have calculated this figure from data given in: “Elementary Education in India: Rural India”, and “Elementary Education in India: Urban India”, Analytical Report, 2015–16, NUEPA,

[viii] Ibid.

[ix]   Ranajit Bhattacharyya, Aadarsh Gangwar, “Why India Needs to Count Its Broken Toilets”, July 19, 2017,

[x]    Calculated from DISE data given in documents mentioned in endnote 7 above.

[xi]   “One in Two Indian Students Can’t Read Books Meant for Three Classes Below: ASER”, January 19, 2017,

[xii]  Estimates made by Prof. Anil Sadgopal, the eminent Indian educationist, cited in:Lokesh Malti Prakash, “Education in the Neo-Liberal Limbo”, November 2, 2012, These figures are indirectly verified by another study, that says that 88% ST children and 84% SC children drop out by the time they reach secondary level: Ramesh Pandita, “Dropout Percentage of Scheduled Caste & Scheduled Tribe Children in India: A Decadal Analysis up to Secondary level”, June 2015,

[xiii] Ambarish Rai, “Budget Focus on Infrastructure, Digital Education Cannot Work in a Vacuum”, February 2, 2018,

[xiv] J.B.G. Tilak, How Inclusive Is Higher Education in India? 2015,; see also: Neoliberal Fascist Attack on Education, Lokayat publication, available on Lokayat website,

[xv]  Neoliberal Fascist Attack on Education, ibid., pp. 51-52.

[xvi] Economic Survey, 2012-13, Chapter 13, p. 271.

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