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Of government's misdirected stimuli
February 26, 2009
Throwing all caution and fiscal discipline to the wind, the government continues to dole out sops and announce one populist scheme after another, ostensibly to provide stimulus to a slowing economy.
How many of these so-named stimuli packages are indirectly or directly aimed at stimulating the poll prospects of the ruling United Progressiva Alliance can be a subject of many conjectures.
What is not in doubt anymore it that whichever government comes to power in May will have one of the most daunting tasks ever to restore any semblance of stability and respectability to the nation's finances and the balance sheet.
It is even more frustrating to see that the government has consistently shied away from undertaking structural reforms that could have stimulated the economy on a much more effective and sustained basis.
This inexplicable and inexcusable myopia extends to many core sectors, covering both the physical and social infrastructure.
However, one that really stands out in terms of its potential (and the urgency) to transform India is healthcare. The other sector that comes a close second is education which has also suffered extensively and continues to suffer on account of a total lack of vision of our political leadership.
Like in every infrastructural sector, the demand-supply gap is already extremely alarming, and increasing by the year as India continues to add almost 18 million people to its 1.1 billion-strong population.
Even by the low, developing country norms, the current gap is over 1.1 million hospital beds that will require -- on a conservative basis -- an investment of at least Rs 300,000 crore (over $60 billion).
If India has to offer reasonable-quality, universally-accessible healthcare to the expected 1.4 billion people by 2030, it needs to invest an additional Rs 1,500,000 crore (almost $300 billion) over these 20 years.
Over 500 million sq m of constructed space will be required just on the delivery side (hospitals) and at the current (absurdly low) floor space to land area norms, over 110,000 acres of land will be needed to put these additional six million hospital beds across 5,500 towns and covering 660,000 villages.
All these hospital beds will require unprecedentedly large numbers of doctors, nurses, paramedics, community health workers, dentists, pharmacists, and technicians such as radiologists and pathologists.
To put the manpower requirements in perspective, even if 600 new medical colleges and 1,500 nursing colleges are commissioned immediately, it will take more than 15 years of output to enable India to reach anywhere close to the global standards.
If this infrastructure can be established, over five million direct and over 25 million indirect jobs can be created in the next 10 years alone. That can take care of more than 25 per cent (over 100 million) of the net new entrants in the job market over this period.
Finally, the indirect impact of this level of activity in the healthcare delivery side on related sectors such as pharmaceutical, medical equipment, construction, education, food and other myriad support services is also extremely significant.
The best stimulus the current or new government can give to the economy is to create the right investment climate, supported by the right regulatory and policy framework, to direct domestic and foreign investment to high-impact sectors such as healthcare (and education).
The private sector cannot be expected to make this quantum of investment, nor can the government alone. Innovative, out-of-the-box public-private partnership models have to be conceptualised and put into execution with a war-like urgency.
Yet, the total public healthcare spending in India in 2008-09 is static at just about 1 per cent of GDP (about $11 billion or Rs 50,000 crore), of which the central government's share is a mere 0.34 per cent (about Rs 16,500 crore or Rs 165 billion).
The government has made many promises in the last five years to raise the spending on healthcare to at least 3 per cent of GDP, but like with most promises, it has failed to deliver or even show any serious inclination to rise to the challenge.
As far as new private sector capacity creation is concerned, sadly, most of the investment is directed in the top six-eight metro cities and that too, at such high capital costs that it is affordable to a very, very small strata of even the residents of metros.
Malpractice and questionable practices have already begun to creep in as some of the high-cost/high-price operators of these ultraluxe facilities try to meet their investors' financial expectations.
Hence, the government has to make all the efforts to bring down the investment and operating cost of new healthcare capacity and that again requires serious, well-thought and determined policy, fiscal and regulatory intervention.
India has already paid a very heavy price for the lack of vision on the part of its political leadership on the physical and social infrastructure front. It should not continue to do so.
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