A substantive welfare state remains an illusion

As a young undergraduate student in Delhi University in the mid-1990s, I belonged to a generation that tasted the first fruits of economic liberalization. Freed from the shackles of the state, our lives and futures improved dramatically. We embraced the new consumer goods flooding the market with gusto—queuing up four hours, for instance, to taste a McDonald’s burger when the chain first opened in New Delhi. Our future prospects, visible in private sector recruitment drives on campus, looked lucrative and bright. The state had exited from our everyday lives, and we celebrated our newly found economic freedom.

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A few years later, I joined a non-profit. My work took me through dusty rural roads. Here, I encountered a different India. Far from celebrating the exit of the state, this India was waiting, in fact, yearning for the state. Waiting for it to build schools, roads and hospitals.

This India wasn’t naïve. The people I encountered knew, better than I, that the state could be corrupt, apathetic and inefficient. But they also looked to this mai-baap sarkar (as many described it) to give them the means to enjoy their economic freedoms. Without the road, we can’t get to the market. Without schools, we can’t get jobs. This was—and arguably 30 years later remains—the constant refrain.

It is in the interstices of these two competing narratives of the Indian state—and what they mean to different Indias—that our seven-decade-long journey towards building an India that delivers social and economic freedoms to all citizens needs to be assessed.

The Indian state has produced the world’s best. It built the Indian Institutes of Management (IIMs), the Indian Institutes of Technology (IITs) and the All India Institutes of Medical Sciences (AIIMS) and gifted the world some of its finest doctors, nurses and engineers. We have made progress on key socio-economic indicators. Literacy rates improved from 18% in 1950 to 77% in 2017, maternal mortality ratios declined from 1,000 deaths per 100,000 live births in 1950 to 103 in 2017-19.

Yet, when it comes to substantively ensuring these freedoms for all Indians, our performance has been singularly unimpressive. India ranks 116 out of 174 countries in the World Bank’s human capital index, 131 out of 189 countries on the UN’s Human Development Index and 101 out of 116 in the Global Hunger index.

Our abysmal record on human capital and basic welfare is not just a moral failure in a democracy but also a drag on growth. It has put disproportionate constraints on the bulk of India from participating in the modern economy, locking them instead into a vicious low-skill and low-wages cycle. Consequently, at 75, much of India is still yearning for the opportunity to enjoy economic freedoms, wholly and in full measure.

The elite skew

Behind these dismal rankings is a story of limited political and economic imagination, some prosperity through growth, broken state capacity and hard-won democratic victories that resulted in halting and very limited welfare investments. It is the interplay of these factors that has shaped India’s welfare journey in these last 75 years.

In the pre-reform phase, two narratives shaped the idea of the welfare state.

The first was guided by the Nehruvian imagination of building a high-modernist state. The emphasis was on elite institutions to enhance productivity through high value human capital.

We built IITs, IIMs, AIIMS but also invested heavily in agriculture institutions and world-class statistical institutions, to name a few. But welfare in its classic sense— mass education, primary health, sanitation and universal social insurance—was relegated to the background.

Welfare, the second narrative went, was unaffordable and India had to focus on economic development which would eventually trickle down.

It isn’t that the state did not recognize the centrality of welfare investments for human capital. Going as far back as 1946, the Bhore committee report recommended the creation of a primary health infrastructure for India. In 1966, the government set up the Kothari Commission in 1966 and unveiled a national policy on education in 1968, which pushed for universalization of education.

Yet, the dominant policy framework remained focused on centralized economic planning and building elite institutions. The five-year plans of these early decades paid lip service to welfare. Even in the Indira Gandhi era of garibi hatao, investments in building the grassroots welfare state were limited to relieving absolute poverty rather than building human capital.

But democracy is a powerful corrective. From the 1980s, civil society and the courts together did what the Constituent Assembly hesitated to do. They pushed for a more expansive interpretation of Article 21, which guarantees the right to life, and led the state to formally recognize some social and economic rights —a matter that the Constitution had placed under the purview of the Directive Principles. These new sites of pressure slowly pushed the Indian state toward reimagining welfare. State governments too began innovating—the mid-day meal scheme in Tamil Nadu being the most pathbreaking of such steps.

The retreating state

The year 1991 initiated dramatic changes that both created opportunities and imposed constraints on our welfare imagination. Against the backdrop of the stifling licence raj regime, getting the state out of the way was the animating spirit of the 1991 moment. Deregulation, market competition, state exit were the mantras of the time. But our policy and economic imagination simply failed to invest in the state where we needed to. Worse, we allowed much of the institution-building project of the early years to atrophy.

This was visible in the decimation of higher education institutions, our statistical system and, above all, a stubborn refusal to invest in reforming public administration, which remained mired in corruption and inefficiency.

In the post-liberalization phase, the size of the state actually shrunk. Calculations by political scientist Devesh Kapur highlight that public employment in India fell from 19,000 per million population in 1986 to 14,000 per million population in 2012.

Economic growth opened new sites of political contestation. The elite policy and economic imagination that sought to get the state out of the way positioned welfare and growth as tradeoffs. But as India began to shine, Bharat pushed back — and this was a reality politics could simply not ignore. The result was a half-hearted expansion in India’s architecture of welfare.

Between 1990-1991 and 2013-2014, per capita social sector spending recorded a threefold increase—spending on education increased by 2.7 times and on health sector by 2.3 times. This was not generous, evident when you compare India’s spending on health and education with countries at equivalent and lower levels of GDP. But it did lead to a limited expansion in the infrastructure of core public goods like health and education.

India today boasts of near universal enrolment in primary education and a large network of primary health centres, nutrition centres and subsidised toilets across the length and breadth of the country. But the real power of this moment came in the form of new legislations enshrining the right to work and right to food. The laws offered a new imagination for reshaping the terms of the social contract away from the vagaries of the mai-baap sarkar towards a contract based on rights and active citizenship.

That these gains were made against the backdrop of an elite policy discourse that saw spending — particularly on MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) and the public distribution system (PDS) — as an exercise in fiscal profligacy, is itself a victory of democracy.

Today, it is these programmes that saved the country from starvation amid the horrors of covid. But Covid also exposed how limited even these gains have been.

Most of India’s workers have no safety net and are only one income shock away from abject poverty. That these workers were left to walk home amid the ravages of the first lockdown was a reminder of how easily the Indian state strips its citizens of basic rights and dignities and how far India is, even in 2022, from achieving the constitutional promise of equal citizenship.

Moreover, in the contestation between state exit and welfare investments, despite these limited gains, no attempt was made to build state capacity where we needed it. Every rupee spent on welfare has been challenged as a “freebie” or populist profligacy. Instead, corruption and inefficiency were routinely offered as an excuse to roll back investments. While democratic pressure preserved safety nets like MGNREGA and PDS, investments in core welfare — health and education fell victim to low state capacity

Consequently, on key metrics of quality and outcomes, India’s performance on public provisioning has remained abysmal. The Annual Survey of Education Rural has, for over a decade, highlighted that nearly 50% of students on completing 5 years in primary schools in India can barely read a Class II text.

Primary health, too, suffers from serious quality concerns. Studies show that government doctors put in 50% less effort and are equally less likely to correctly diagnose patients than doctors in other developing countries.

The private option

In this mix of low investments in state capacity and poor outcomes, we have fallen into a vicious cycle of exit from core government services. Anyone who has the means, whether rich or poor or middle-class, has turned to the private sector.

Pre-covid, for instance, nearly 50% of India’s primary school-going children were in private schools. Not only does this place stress on meagre incomes for what is dubious quality education, it has also led to perverse democratic outcomes.

Most Indians today — and that includes those who are part of the state apparatus, bureaucrats and politicians — simply do not trust the public system to deliver public and merit goods (health and education, in particular).

This collective disenchantment has created a vicious cycle of weak delivery, mass exit, broken legitimacy, and thus low investment in public systems, which, in turn, again leads to weak delivery.

Democracy’s response to this disenchantment has been to seek recourse in tech-enabled direct benefit transfers (and occasional flirtations with ideas like universal basic income) and state led privatisation of public goods (PPPs in health are a good example) rather than investing in state capacity to deliver critical core public and merit goods that lie at the heart of welfare.

As we look back at 75 years, India’s record on human development and welfare remains patchy at best. Democracy pushed the state haltingly toward limited gains but our collective elite enchantment with getting the state out of the way, and abject refusal to acknowledge that welfare is constitutive of growth has allowed a pessimism about the state’s capacity to deliver core public goods to take root.

In 2022, schools, roads and hospitals may well have arrived in those parts of rural India that were searching for them in the early 2000s. But for most of India, the promise of a substantive welfare state that delivers quality goods remains an illusion. Ensuring this requires us to believe in the state and invest in its capacities to deliver economic freedoms to all. This is the challenge of the next 25 years.

The writer is president and chief executive of the Centre for Policy Research, Delhi