When Modi took charge of the world’s largest democracy in May 2014 after leading his party BJP to a spectacular victory in the general election, the country was passing through very difficult time. India’s growth and development was crippled due to challenges on multiple fronts. The worst victim was governance. Decision making process had hit a roadblock, leading to “policy paralysis”. There were talks of corruption everywhere. Corruption and policy paralysis were dominating the public discourse pushing growth and development to the back burner.
Modi claims that he has brought “new spirit” and “new energy” to take the country forward. According to the Prime Minister, the new spirit and new energy have resulted in transformative changes in several sectors over the last four years. The pace of construction of highways has more than doubled. The construction of new houses has gone up four times in the villages. The food production in the country today has reached an all-time high; there has been a record production of mobile phones; the sale of tractors has touched a new high. On the one hand, a record number of tractors are being bought by the farmers today, at the same time, the country has witnessed a record number of aeroplane purchases since independence. Toilets are being built in schools; new IIMs, new IITs and new AIIMS are being established. Giving momentum to Skill Development Missions, the country is setting up new centers in small towns. At the same time, tier-2 and tier-3 cities are being flooded with start-up enterprises, bringing regeneration.
What are the basis for Modi’s claim of change in the last four years? No doubt, corruption and policy paralysis dominated the political and media discourse in 2014. Has Modi been able to change that discourse? The measures like demonetisation, revival of major infrastructure projects and implementation of Goods and Services Tax (GST) are considered to be bold measures and clearly show that policy paralysis is the thing of the past. The NDA government has also introduced Insolvency and Bankruptcy Code and considerably eased the foreign direct investment regime. The government has been largely taint-free so far. There is no major corruption scandal. However, questions are being raised on implementation of the key policy measures especially demonetisation and GST. Job creation remains another major area of concern.
Let’s put it bluntly: Indian banking system is in a mess. The mess started during the first tenure of Manmohan Singh with a push to easy money flow by the government in order to boost growth. This mess has become murkier over the years. The Reserve Bank of India began the process of early identification of stressed assets in January 2014. The central bank has forced lenders to dig out the dirt in their balance sheets. As a result the combined Non-Performing Assets (NPAs) of Indian banks surged to Rs.9.62 lakh crore in March 2018 from Rs.2.52 lakh crore in March 2014. Nearly 90 per cent of these NPAs are on the accounts of the government-run banks. Modi Government has pushed for stronger regulatory measures and recapitalisation of banks, with a view to clean the mess in the system.
On 8 November 2016 Prime Minister Narendra Modi announced demonetisation of all Rs.500 and Rs.1,000 banknotes. As a result 86 per cent of the currency in circulation ceased to be a legal tender. This is positioned as the boldest move by the government to weed out the black money and corruption. The move was also aimed to choke the funding to terrorists, Maoists and other anti-social elements that thrive on fake currencies and black money. Promotion of digital payments and formalisation of economy were among the other major objectives of the demonetisation move.
As per the government data, close to Rs.3 lakh crore, which was earlier not part of the banking system, had been deposited in banks. Over Rs.2 lakh crore of black money reached banks, while around Rs.1.75 lakh crore deposited by people post-note ban are under suspicion. Around 18 lakh people with disproportionate income are under government scrutiny now.
It is today amongst the most debated issue whether the government has been able to achieve the objectives of demonetisation. According to the RBI annual report for 2017-18, out of the total Rs.15.417 lakh crore worth of Rs.500 and Rs.1,000 notes in circulation at the time of the announcement of demonetisation, Rs.15.31 lakh crore or 99.3 per cent have returned to the banking system. While the opposition parties argue that demonetisation has failed to make any significant impact on black money as most of the money came back to the banking system, the government’s argument is that just because the money is back in the banking system does not mean that it has become white.
Goods and Services Tax
A majestic ceremony was held in the Central Hall of Parliament on the midnight of 30 June 2017. The occasion was to launch the Goods and Services Tax (GST), India’s biggest tax reform. This has overhauled the country’s direct tax system.
Before implementation of GST, Indian taxation system was a farrago of central, state and local area levies. In the constitutional scheme, taxation power on goods was with the Central Government but it was limited up to the stage of manufacture and production while States had the power to tax sale and purchase of goods. Centre had the exclusive power to tax services. This sort of division of taxing powers had created a grey zone, which led to legal disputes since determination of what constitutes a goods or service became increasingly difficult.
The introduction of GST is truly a game changer for Indian economy as it has replaced multi-layered, complex indirect tax structure with a simple, transparent and technology-driven tax regime. The target is to integrate India into a single, common market by breaking barriers to inter-State trade and commerce. By eliminating cascading of taxes and reducing transaction costs, it will enhance Ease-of-Doing business in the country. By subsuming more than a score of taxes under GST, the road to a harmonised system of indirect tax has been paved making India an economic union.
True, GST had been in the works for more than a decade and a half. Successive governments including the NDA government led by Atal Bihari Vajpayee and UPA government led by Manmohan Singh was not able to implement the tax reforms largely due to differences with the states. Modi Government deserves the credit of bringing all the states and major political parties on board and successfully implementing the reform.
Modi Government has taken several bold policy initiatives and introduced structural reforms. These measures have been endorsed by the World Bank in its Ease-of-Doing Business report. India has moved up 42 position to be among the top 100 in the Ease of Doing Business ranking. In 2017, India jumped 30 places. This is the highest jump that any country has made in the World Bank ranking.
The Ease-of-Doing Business ranking takes into account certain regulations based on 10 parameters including starting a business, getting electricity, dealing with construction permits and paying taxes among others. Of the 10 parameters, India got its highest ranking on “protecting minority investors” by rising to the fourth position globally from 13th last year as the country’s corporate law and securities regulations were recognised to be highly advanced. Its worst performance came in “dealing with construction permits” despite improving its ranking to 181 from the 185th position last year.
There was a historic achievement in the power sector this year. On 28 April 2018 electricity reached to Leisang village in Senapati district of Manipur from the national power grid. This was the last village in the country to be electrified. Now all villages in India have access to electricity.
When Modi assumed office in 2014, there were 18,452 un-electrified census villages in the country out of the total 597,464 census villages. The NDA government had set a target to electrify all villages by December 2018. This is indeed commendable that the target was reached before the deadline.
The government considers a village to be electrified if the number of households electrified is at least 10 per cent and electricity is provided to public buildings including schools, health centres, dispensaries, community centres and village councils. Under ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana’ – Saubhagya scheme, the target is to achieve universal household electrification in the country by 31 December 2018.
A significant increase in power generation capacity has almost eliminated India’s energy deficit. As per a Care Ratings report, energy deficit in India’s power sector came down to 0.7 per cent in 2017-18 from 4.5 per cent in 2013-14. It was around 10 per cent in 2011-13. This has happened because of a massive push to power infrastructure by NDA government.
According to Power Minister R K Singh, 1 lakh MW of power generation capacity and 1 lakh circuit Km of inter-state transmission capacity was added in the first four years of Modi Government. Power generation capacity was increased by around 25,000 MW per year, this was 4,800 MW during the previous government. Circuit transmission capacity addition increased to 25,000 km annually from 3,400 km in the previous government.
Electrification of very village is a big achievement. It is indeed a historic moment in the development history of India. However, the focus should now shift to connecting every household with the power grid and ensuring uninterrupted quality power supply.
Women are increasingly playing a bigger role in the development of the nation. Be it sports, judiciary, bureaucracy or politics, women are not only making their presence felt but in some cases outperforming their male counterparts.
However, the Indian women still remain amongst the most discriminated and prone to domestic and sexual violence. An opinion poll report of Thomson Reuters Foundation recently termed India as the most dangerous country for women to live. The parameters used for the survey were access to health, sexual violence, non-sexual violence including domestic, physical and mental abuse, lack of access to economic resources, human trafficking and the continuation of cultural practices including child marriage, genital mutilation and acid attacks. Although the government has outrightly rejected the findings of the expert poll report, it clearly highlights the challenges faced by women on several fronts.
In order to overcome the challenges the government has made several women-centric policies. The flagship schemes focused on women empowerment include Beti Bachao Beti Padao, Pradhan Mantri Ujjwala Yojana and Pradhan Mantri Sukanya Samriddhi Yojana. Launched on 22 January 2015 at Panipat, Haryana, the Beti Bachao Beti Padao scheme is today implemented in all the 640 districts of the country. Two major components of the Scheme are: (i) Multi-sectoral intervention and media advocacy in 405 districts (including initial 161 districts) is being implemented by District Collectors; and, (ii) 360 degree approach in alert media advocacy and outreach activities is in operation in the remaining 235 districts. Multi-sectoral intervention in selected districts led to innovative initiatives to generate awareness and created enabling environment for girls.
Under Pradhan Mantri Ujjwala Yojana, free LPG connections are being provided to BPL families. The idea is to prevent women from falling prey to diseases caused by cooking through firewood. Apart from causing pollution, the smoke from cooking firewood adversely affects the health of women and children. Smoke inhaled by women from unclean fuel is equivalent to burning 400 cigarettes in an hour, according to a WHO report. Due to Ujjwala Yojana more than three crore poor women are now living smoke free lives. Under the Sukanya Samridhi Yojana, which seeks to ensure a secure future for the girl child, 1.26 crore accounts were opened and an amount of Rs.19,183 crore was deposited till November 2017. The Pradhan Mantri Surakshit Maitritva scheme ensures comprehensive ante-natal care to pregnant women. Another important decision taken by the Government was to enhance maternity leave from 12 weeks to 26 weeks under the Maternity Benefit Act.
More than six crore toilets have been built to make sanitation safer and more accessible, directly impacting the health and dignity of women. This is not a culture of temporary handouts that keeps people dependent on the government but is a culture of true and irreversible empowerment. Under Swachh Vidyalaya, many schools saw separate toilets being built for girls, to reduce girls dropping out of schools. MUDRA and Jan Dhan schemes have brought formal financial inclusion and entrepreneurial opportunities to crores of women.
One of the key focus of the government in the last four years has been on extensive use of technology in governance. A whole host of citizen services are now provided electronically. Almost all bills of the government services are now shared electronically and payments are also made electronically. With the introduction of Goods and Services Tax (GST) almost all the taxes can be now paid electronically. This has brought transformational change in service delivery system making the process more efficient and transparent.
e-Governance is an important component of Digital India programme, which was launched in July 2015, with an aim to transform India into a digital economy with participation from citizens, businesses and promises to transform the country into a digitally empowered society and a knowledge economy with high intellectual capital. The major objectives of this programme include the development of a secure and stable digital infrastructure, digital literacy and delivering government services digitally, among other things.
A substantial progress has been made to achieve the objectives of creating a digitally empowered society. The progress has been recognised and appreciated globally. In the United Nations e-Government Index India jumped 22 places in the last four years to break into the top 100. In the latest Index ranking released in 2018 India occupies 96th position among 193 United Nations member states. The report is released once in two years.
The e-Government Development Index, which assesses e-government development at the national level, is a composite index based on the weighted average of three normalised indices. One-third is derived from a Telecommunications Infrastructure Index based on data provided by the International Telecommunications Union (ITU), one-third from a Human Capital Index based on data provided by the United Nations Educational, Scientific and Cultural Organisation (UNESCO), and one-third from the Online Service Index (OSI) based on data collected from an independent survey questionnaire, conducted by UNDESA, which assesses the national online presence of all 193 United Nations member states.
There is a sharp increase in digital penetration in India. The total number of mobile phone users rose to 121 crore in December 2017 from 103 crore in 2016. The number of smart-phone users have grown from 30 crore in 2016 to 40 crore in 2017. The number of Internet users have grown from 40 crore in 2016 to 50 crore in 2017. Digital transactions surged by 300 per cent in 2017 over the previous year data.
India has witnessed astonishing pace of digitalisation in the recent years. Although, telecom and Internet penetration has reached almost every nook and corner of the country a huge gap persists between urban and rural India. Telecom and broadband services have expanded in urban India at much faster pace than rural India. Urban Tele-density reached to 172.28, while Rural Tele-density stood at 55.89 at the end of May 2017, as per the Telecom Regulatory Authority of India (TRAI) data. There is also a wide gap in internet penetration in urban and rural India. Internet penetration in urban India reached 64.84 per cent in December 2017, it stood at 20.26 per cent in rural India. What’s more disturbing is that the pace of increase in rural India is slower than urban India. While the Internet penetration in urban India rose by over four percentage points to 64.84 per cent in December 2017 from 60.6 per cent in December 2016, for rural India the increase was by just around two percentage points. It grew from 18 per cent in December 2016 to 20.26 per cent in December 2017. Growth rate in rural India is low despite the low-base. An estimated 182.9 million urban users access Internet daily as compared to 98 million users in rural India, according to data released by the Internet and Mobile Association of India (IMAI).
Plugging the Leakage
On a visit to drought-affected Kalahandi district of Odisha in 1985 the then Prime Minister Rajiv Gandhi had said that out of one rupee spent by the government for welfare of the downtrodden, only 15 paise thereof actually reached those persons for whom it is meant. The biggest reason for that widespread leakage in public welfare fund was the lack of means to correctly identify the genuine needy person. As a result, major part of the fund was misused by ghost beneficiaries, corrupt bureaucrats and middlemen.
Aadhaar and other government measures have helped eliminate ghosts and duplicate beneficiaries. So money now reaches to the genuine needy. Money is now transferred directly to the bank accounts of the intended persons. There is little scope of middlemen or even bureaucracy taking the cut. Addressing a public gathering at Jujwa, a village in Gujarat after a collective ‘e-Gruha Pravesh’ (online house warming) event for beneficiaries of the Prime Minister’s Housing Scheme for rural areas, Prime Minister Narendra Modi claimed that the government eliminated the leakages from the system. “If one rupee is released from Delhi, the entire 100 paise (now) reaches the house of the poor,” Modi asserted.
Under Direct Benefit Transfer (DBT) scheme money is directly transferred to the bank account of the beneficiaries. Most of the money spent by the government on social welfare is now transferred directly. As on 9 May 2018, 435 schemes from different ministries and departments are being implemented under DBT. Total DBT (cumulative) R389,596 crore has been transferred to the beneficiaries. As per the government claim, DBT, Aadhaar and other governance reforms have led to the estimated savings / benefits of R82,985 crore to the exchequer. However, critics argue that this figure is exaggerated. Significant reduction in subsidies on food grains, gas and other welfare schemes are not only because of Aadhaar. Many other factors are also helping in weeding out ineligible beneficiaries. How much is due to Aadhaar? The jury is still out on this question!
India has huge development deficit. It is argued that growth and development have not kept pace with the rising aspirations and needs of the people. In the past over four years, the government led by Prime Minister Modi has worked on multiple fronts through targeted schemes and programmes to bridge the development deficit. There are not just reforms and social welfare schemes. Concerted efforts have been made to influence the common people’s thought process and behaviour on the issues like cleanliness, health, energy conservation, promotion of girl child and so on. Nation will have to wait for the verdict of 2019 election to arrive at a conclusion whether Modi Government was able to keep pace with the rising aspirations and needs of the people!
India needs a sustained double-digit economic growth in order to lift millions of people out of poverty. In his very first year of prime ministership Modi talked about making India a $20 trillion economy. The current size of the Indian economy is around $2 trillion. What would it take to make India a $20 trillion economy? At least 10 per cent of sustained GDP growth for the next 25 years!
India’s annual GDP growth stood at an average 7.34 per cent between financial year 2014-15 and 2017-18. The growth accelerated to 8.2 per cent in the first quarter of 2018-19. Even if the growth remain in line with the first quarter expansion for the whole year, the GDP growth would not be any better than what was achieved during Modi predecessor’s tenure.
During the second term of Manmohan Singh government from 2009-10 to 2013-14, the average annual GDP growth stood at 7.67 per cent. This was the period marked with a series of corruption scandals and the policy paralysis. During 2004-05 to 2008-09, the first term of Manmohan Singh government the average annual growth rate was much higher at 8.34 per cent. Average annual GDP growth rate under Atal Bihari Vajpayee tenure from 1998-99 to 2003-04 stood at 5.73 per cent. All these figures are with base year 2011-12 and as per the revised back-series data of GDP.
Modi Government has performed better on other major macro-economic indicators. Retail inflation had spiralled to around 10 per cent when Modi took charge in 2014. It has declined consistently, falling to 3.3 per cent in 2017-18. Modi Government has better managed its expenditure in the sense that while it slowed down growth in outlays, it was primarily on the revenue expenditure side despite pay hike for government employees in 2016-17. The NDA government paused on fiscal consolidation twice – in 2015-16 and 2017-18.
A sharp decline in global crude oil price in the first three years of Modi rule had helped in bringing down inflation, trade deficit and current account deficit. In less than a year of Modi becoming Prime Minister in May 2014, the price of the Indian basket of crude oil crashed from $113 per barrel in May 2014 to $50 a barrel in January 2015. This further tumbled to $29 a barrel by January 2016. However, the situation has reversed now. There is upward trend in crude oil price and it is predicted to cross $100 a barrel soon. Rapidly rising crude oil prices will push both inflation and the government subsidy burden. It is having direct impact on current account deficit and import bill. As a result rupee has tumbled to a record low of R71 against a dollar.
India was considered among the “Fragile Five” among the emerging markets when Modi took over. There is a marked improvement in the last four years and the country has today become a preferred foreign investment destination. The confidence of foreign investors in the Indian economy got boosted with a ratings upgrade from global credit rating agencies. In November 2017, Moody’s raised India’s rating from the lowest investment grade of Baa3 to Baa2, and changed the outlook from stable to positive.
Small businesses and entrepreneurs had very limited access to formal credit facilities. To overcome this challenge Prime Minister Modi launched Pradhan Mantri Mudra Yojana (PMMY). MUDRA stands for Micro Units Development and Refinance Agency. The key objective of the scheme, launched in April 2015, is to “fund the unfunded”. The scheme caters to small businesses having loan requirement upto R10 lakh.
Small loans worth over R6 lakh crore was given to R12 crore beneficiaries under the MUDRA scheme in the first three years. 75 per cent of the beneficiaries are youth and women. Majority of these people are those who were not involved in any business before. MUDRA loans are available for non-agricultural activities upto R10 lakh. Activities allied to agriculture such as dairy, poultry, bee keeping etc, are also covered. So the beneficiaries are not from agriculture sector. The scheme has empowered entrepreneurs to create new products and jobs in the market while relieving them from moneylenders and middlemen.
The Micro Units Development and Refinance Agency Ltd (MUDRA) has been set up through a statutory enactment. It is responsible for developing and refinancing through PMMY, all Micro-Finance Institutions (MFIs), which are in the business of lending to micro/small business entities engaged in manufacturing, trading and service activities. MUDRA has partnered with State / Regional level co-ordinators to provide finance to last-mile financiers of small / micro business enterprises. Further, the approach goes beyond credit only approach and offers a credit – plus solution for these enterprises spread across the country.
According to a SKOCH Group report, 1.7 crore incremental jobs were created due to MUDRA scheme in the first two years. The total jobs created are 5.44 crore. There is however, no official data on job generation. Non-Performing Assets (NPA) of MUDRA Yojana stood at 5.9 per cent in December 2017. Bad loan is potentially a big challenge for the scheme. However, so far it remains in the range of comfortable level.
Here are a few SKOCH Group recommendations to make MUDRA scheme more effective:
- MUDRA Yojana is largely a target driven scheme. In order to make it sustainable in the long-run it is imperative that the scheme be commercially viable.
- Banks and financial institutions should be given the freedom to run the scheme on commercial consideration. A direct supervision by the government can ensure that the benefits of the scheme reaches the marginalised regions and sections of the society.
- Lenders should be incentivised for operating outside their comfort zone.
- Tax incentives would give further boost to MUDRA scheme in small cities and rural India. Income from Tier 2 cities should be given 50 per cent tax exemption and there should be 100 per cent exemption on operation from non-tier cities and rural areas
- Small businesses, especially those operating in the services sector, require more working capital. Borrowers need to be given flexibility to utilise the amount as per their need and time.
- MUDRA Debit cards should be replaced with MUDRA Credit cards.
Roads & Highways
The pace of highways construction in the country has more than doubled in the last four years. Construction of highway reached 27 km a day during the financial year 2017-18 from 11.67 km a day in 2013-14 and 12 km a day in the financial year 2014-15. The government has set a target of accelerating the pace of highway construction to 40 km per day during the financial year 2018-19. A total of 1,837 projects amounting to R645,199 crore having length of 61,164 km are ongoing for the development of National Highways in the country, according to the government figures. This acceleration in the construction of the highway projects have come through several structural policy reforms introduced in the past four years.
When the NDA government came to power in 2014, roads and highways projects were almost stalled due to policy paralysis and fund crunch. Banks had stopped lending to infrastructure projects due to mounting NPAs. Private players had started taking little interests and several went bankrupt due to delays and cost overruns. In order to revive the private players’ interest in highway projects, the government has introduced Hybrid Annuity Model. It is a mix of Build, Operate and Transfer (BOT) and Engineering, Procurement and Construction (EPC) model. Under the EPC model, the government pays private players for building the roads. Under this model private player has no role in the road’s ownership, toll collection or maintenance. These are taken care of by the government. While under the BOT model private players have an active role. Under this model private players build, operate and maintain the road for a specified period – say 15-20 years – before transferring the asset back to the government. Private players have not been forthcoming to invest under the BOT model in the recent years due to banking mess and financial constraints. Hybrid Annuity Model spreads the risk between developers and the government. Under this model, the government pitches in to finance 40 per cent of the project cost, while the balance 60 per cent is arranged by the developer.
To minimise toll collection time and reduce pilferage in toll collection on NHs the government has introduced Electronic Toll Collection (ETC) system. Enabling facilities for ETC being put proactively in all toll plazas. Out of 424 toll plazas in the country, ETC has been implemented in at least 382 plazas. 16.57 lakh FASTags have been sold so far and average daily toll collection through ETC has reached R12.62 crore (21 per cent of total toll revenue). All RTOs in 36 States/Union Territories have been connected through IT network to issue Vehicle Registration Certificates (VAHAN) and Driving Licenses (SARTHI).
Steel Sector Revival
It has been an arduous journey for the Steel sector in India lately. The sector suffered because of dumping of cheap steel from foreign steel majors, surge in defective and non-prime imports of steel, financial stress, availability of raw material at affordable prices, slow growth in per capital steel demand emanating from low steel intensity in infrastructure and construction sectors and lack of policy direction for the sector, making the Indian industry un-competitive—resulting in slowdown and losses. The Ministry of Steel took proactive measures and applied policy correctives leading to turnaround of the Indian steel sector. This has helped the sector to gain recognition at global level and ensued India to become Co-Chair at Global Forum for Steel Excess Capacity.
The government played an instrumental role in safeguarding the interest of the domestic steel players through implementation of remedial measures like MIP, Anti-Dumping Duty, Safeguard Duty, CVD; Amending GFR 2017 to include life-cycle cost analysis to help increase steel usage in Government projects; and, mandating domestic value addition over direct imports in Government procurement tenders under policy on Manufactured Iron & Steel Products in Government Procurement (DMI&SP).
Measures like controlled imports, BIS approved quality steel, National Steel Policy 2017, policy on Preference to Domestically Manufactured Iron & Steel Products have all had a compounding effect on the steel sector that have catapulted the sector back on its growth trajectory. Industry, which was reeling under severe financial stress, is well on its way to recovery. Indian steel sector is back on its growth trajectory and several small steel plants, which were reeling under severe financial crisis and stress are in the recovery process.
Recovery of the global economy as well as that of the global steel industry, after a decade of limping growth, points to a favourable outlook for the Indian steel industry. The housing and construction sector—major consumers of steel—will get a boost with increase n per capita incomes and social sector schemes like Pradhan Mantri Awas Yojana (PMAY), Smart City Mission, PMGSY, Bharatmala Pariyojana and so on.
Measures like these have given India the proud place of being the 3rd largest producer of steel and is poised to become the 2nd largest. Having achieved the quantities, India’s focus has turned to quality of steel that has spurred demand for Indian steel in the international market. India has today turned into a net exporter of steel.
Modi Government has introduced the world’s largest public-funded health programme called Ayushman Bharat or National Health Protection scheme. Several analysts and lawmakers have dubbed the programme as “Modicare”. The scheme is scheduled for full roll-out on 25 September 2018, the birth anniversary of Pandit Deendayal Upadhyaya. The scheme will cover over 10 crore vulnerable families (approximately 50 crore beneficiaries) and provide health cover up to R5 lakh per family per year.
In-patient hospitalisation expenditure in India has increased nearly 300 per cent in the last 10 years. More than 80 per cent of the expenditure are met by out of pocket, as per the NSSO data. Rural households primarily depended on their household income / savings’ (68 per cent) and on borrowings (25 per cent), the urban households relied much more on their income / saving (75 per cent) for financing expenditure on hospitalisations and on (18 per cent) borrowings. Out of pocket expenditure in India is over 60 per cent, which leads to nearly 6 million families getting into poverty due to health expenditures.
Healthcare is mostly under the purview of the State Government. So Modi Government has been trying to take all the state governments on board to ensure successful implementation of the scheme. According to Health & Family Welfare Minister J P Nadda, so far 20 states have shown their commitments towards the launch of this centrally sponsored scheme.
The expenditure incurred in premium payment will be shared between Central and State Governments in a specified ratio. The funding for the scheme will be shared – 60:40 for all states and UTs with their own legislature, 90:10 in Northeast states and the three Himalayan states of Jammu & Kashmir, Himachal and Uttarakhand and 100 per cent Central funding for UTs without legislature. The states are also free to continue with their own health programmes.
However, the biggest challenge will be upgradation and creation of new healthcare facilities. India faces huge shortage of healthcare facilities and also healthcare personnel like doctors and nurses. There is only one doctor for a population of 11,000. This is 11 times more than the WHO recommended a doctor-population ratio of 1:1,000. Further, there is an unequal development of health infrastructure. The situation is worst in Bihar where one doctor serves a population of 28,391 people, followed by Uttar Pradesh with 19,962 patients per doctor.
There is a huge shortage of hospitals. For a country of 1.3 billion population there is only 23,582 hospitals having 710,761 beds. On an average, a government hospital bed caters to 1,908 people in India. The situation, again, is worst in Bihar where 8,789 share a bed; in Jharkhand, the ratio stands at 6,502:1. In remote areas healthcare facilities is almost non-existent.
Ayushman Bharat scheme seeks to address some of these bottlenecks. Under the scheme there is a target to build a next-generation primary healthcare system by upgrading 1.5 lakh Sub Centres (SCs) into Health and Wellness Centres. The plan is to deliver a larger and comprehensive package of primary healthcare at the grassroots level at locations close to the community.