Seven Decades of Independent India

by Vinod Rai

  Unfortunately, people get very low value for money in both the public and private sectors. Poor-quality services, wastage, corruption, and weak management characterize many of the public healthcare institutions. The most commonly cited reason why people do not avail of public services is that they are not satisfied with medical treatment by a government doctor or facility. Other reasons include distance and non-availability of facilities and services. As a result, though treatment is almost free (except for some minor user fees), in 2014, more than 70 per cent of outpatient care (72 per cent in the rural areas and 79 per cent in the urban areas) and more than 60 per cent of inpatient care (58 per cent in rural areas and 68 per cent in urban areas) was in the private sector.10 But there is hardly any assurance of proper care. Many health centres and hospitals in the private and non-profit sector offer good quality healthcare services. However, with the virtual absence of effective regulation and oversight by the state, the quality of healthcare is mixed at best and the costs are often unreasonably high. In the virtual absence and enforcement of national regulations for provider standards and treatment protocols for healthcare, many private medical facilities over-diagnose, over-treat and maltreat. Many also dispense substandard and counterfeit medicines, prescribe unnecessary drugs and tests, avail of kick-backs for referrals, and manipulate hospital admissions and length of stay.11

  It is well known that private markets in healthcare are grossly inefficient given the large informational asymmetry (where the profit-oriented doctor can ‘cheat’ the patient by prescribing unnecessary medicines or unwanted treatment). Further inefficiencies are also generated by the ‘public goods’ nature of healthcare stemming from the interdependences involved.

  Third, Indian policymakers do not seem to realize private healthcare, even if properly subsidized, or private health insurance, subsidized by the state, can simply not meet the challenge of universal health coverage. Both the Central and state governments have introduced a number of publicly financed health insurance schemes to improve access to hospitalization services and to offer financial protection to households from high medical expenses. For instance, by 2014, close to 370 million (almost one-fourth of the population) enjoyed coverage under the Government of India’s Rashtriya Swasthya Bima Yojana (RSBY),12 which was launched in 2008. Nearly two-thirds belonged to families below the poverty line (BPL category). Those above the poverty line, and most in the informal sector (that employs close to 90 per cent of the workforce) are forced to rely on commercial health insurance markets.

  There are serious incentive-incompatibility problems with commercial insurance as interests of providers, consumers and insurance companies do not align to maximize returns to consumers. Typically, insurance companies deny use, medical practitioners induce demand or encourage overuse, and patients themselves misuse the facility (commonly referred to as the ‘moral hazard’ problem). For instance, because inpatient treatment is ‘free’ and covered by health insurance schemes only if the patient is hospitalized for at least twenty-four hours, do insurance companies settle the bills, even when such a stay is not warranted. Furthermore, evidence suggests that quite apart from the problems of oversight to check malpractice and a high level of induced demand and inappropriate care, conventional insurance schemes siphon away large sums for tertiary care; they do not incentivize preventive and promotive care; and they do little to help with cost-containment.

  Many of these shortcomings are observed in the Indian health insurance markets as well. Governments admit of low awareness among the RSBY beneficiaries about entitlements, denial of services by private hospitals for many categories of illnesses, and oversupply of some services. They also acknowledge that some hospitals, insurance companies and administrators resort to collusion and various fraudulent measures. For instance, in July 2015, the Competition Commission of India imposed a fine of Rs 6.71 billion on four public sector insurance firms after finding them guilty of involvement in anti-competitive practices in bidding for the Kerala government’s Rashtriya Swasthya Bima Yojna (RSBY).13 Furthermore, in May 2016, the Bihar Human Rights Commission directed the state government to pay a compensation of around Rs 150 million to 703 victims whose uteri were removed purportedly to gain incentive money under the RSBY.14 There have also been reports of major increase in certain operations like hysterectomies (surgical removal of uterus) due to coverage under the health insurance schemes.

  Fourth, governments have not been able to put in place appropriate regulatory frameworks for ensuring the provision of high-quality healthcare services to people in both public and private sectors. For instance, in the case of institutional births (i.e. births in a hospital or healthcare centre), standard protocols are often not followed during labour and the postpartum (occurring immediately after birth) period. Poor quality of care has also been directly responsible for sterilization-related deaths. There are gaps in access to safe abortion services too, as well as in the care for sick neonates (a baby from birth to four weeks). Many self-declared ‘doctors’ practise without any qualifications. Informal care providers, with no formal medical training or registration with government for medical practice, are estimated to represent 55 per cent of all providers and are also frequently the first point of contact, especially in rural areas.15

  Looking ahead

  The country’s GDP is expected to grow, on average, by around 8 per cent per annum over the next fifteen years. By 2030, GDP is projected to more than triple to USD 7.25 trillion. Real per capita GDP is expected to triple by 2031–32.16 Translating economic expansion into better healthcare is one of the major challenges facing India over the coming decades.

  This can happen only if, as a nation, India embraces the idea of Universal Health Coverage (UHC). UHC embodies specific health and social goals: it is the aspiration that all people can obtain the quality health services they need (equity in service use) without fear of financial hardship (financial protection).

  Adopting UHC has five major implications. First, the commitment to Universal Health Coverage would require ‘to stop believing, against all empirical evidence, that India’s transition from poor health to good health could be easily achieved through private healthcare and insurance.’17 Commitment to expanding government-provided health services should become a priority. Second, entitlement to healthcare should be independent of the specific financial contributions made by individuals. In other words, every individual, regardless of their ability to pay, should be entitled to a package of essential healthcare services. Third, healthcare should be cashless at the point of service delivery. User charges and fees for any kind for use of healthcare services should be done away with. Government should ensure availability of essential medicines and diagnostics free of cost. Fourth, general taxation should be used as the principal source of healthcare financing—complemented, to the very limited extent possible given India’s large workforce in the unorganized sector, by additional mandatory deductions for healthcare from salaried individuals and taxpayers. Finally, the government should make a firm commitment to step up public expenditures on health.

  The recently announced National Health Policy 2017 (NHP 2017) embraces some of the UHC principles. It calls for increasing health expenditures by the government as a percentage of GDP from the existing 1.15 per cent to 2.5 per cent by 2025; increasing state sector health spending to more than 8 per cent of their budget by 2020; and ensuring a 25 per cent decrease in the proportion of households facing catastrophic health expenditure from the current levels by 2025. Two other features of the NHP 2017 are noteworthy. One, it calls for allocating a major proportion (up to two-thirds or more) of resources to primary care followed by secondary and tertiary care. And two, it also calls for viewing public hospitals as part of a tax-financed single-payer healthcare system, where the care is pre-paid and cost-efficient.

  Three constraints, however, need to be addressed for meeting the financial targets specified under the NHP 2017. First, without significantly expanding the tax base, India is
unlikely to generate the kind of resources needed not only for health, but also for education, water and sanitation, nutrition, infrastructure and other priorities. Expenditure on social sectors has hovered between 6 and 7 per cent, and public expenditure on health at around 1.2 per cent of GDP for over two decades. For public expenditures on health to be stepped up, India will have to increase its tax-to-GDP ratio, which now between 16 and 17 per cent is significantly lower than that of China (19–20 per cent) and Brazil (35–36 per cent). In a nation of over 1.25 billion people, 36.5 million individuals filed their tax returns for the assessment year 2014–15.18 In addition, the state needs to ensure that benefits of public spending reach the poor. According to the Economic Survey 2015–16,19 an estimated Rs 100 billion spent on subsidies continues to go to the well-off, not to the most deserving; and tax benefits have not reached the middle class, but the mega rich.

  The second constraint to address is the limited competence and capacity of human resources, especially at lower levels of governance. Health being a state subject under the Constitution of India, state governments are primarily responsible for the funding and delivery of health services. As acknowledged by the Economic Survey 2016–17,20 with increasing devolution of responsibility to state governments, capacity constraints at lower levels pose serious implementation challenges. For instance, even if national regulation of healthcare is introduced, the lack of capacity at the level of state governments, and particularly in districts, will pose serious challenges to effective implementation.

  Above all, it is important for India to firmly, and not half-heartedly, embrace the concept of Universal Health Coverage. This calls for a new political commitment and a determination to make UHC succeed. Policymakers and politicians seem mesmerized by targets of economic growth. They do not seem to realize that if India’s growth has to be sustained, good health has to be assured to all Indians.

  XIV

  Jobs in India

  Amitendu Palit

  It’s hardly surprising that for a country with a population of 1.3 billion, which is nearly 18 per cent of the global population of 7.6 billion,1 employment will be one of the foremost public policy concerns. The concern has aggravated as India has added almost a billion people to itself since 1947. Over the last couple of decades, the quality of the concern has changed dramatically with India beginning to realize the long-term implications of labour-saving technological innovations displacing existing jobs and bringing down creation of new ones to a trickle. Dwindling jobs and livelihood prospects have serious social, economic and political ramifications for a country itching to maximize its demographic dividend.

  The concern over the country creating less and less jobs and fast losing the existing ones was highlighted by none other than India’s 13th President, Pranab Mukherjee. Less than eight months before stepping down from office in July 2017, Mukherjee drew attention to the problem in as blunt a manner as possible:

  We must turn our evolving demographic configuration into strength. For that, adequate job creation is a priority. The job creation figures of 1.35 lakh in 2015, which is the lowest in seven years, are not encouraging. With machines fast replacing men, we have to look at a paradigm shift. We have to prepare our youth, who are buzzing with innovative ideas, to turn into entrepreneurs. We also have to enable our students-turned innovators-turned entrepreneurs to be able to successfully harness the market.2

  As a lower-middle-income country still grappling with the challenge of lifting a substantial part of its population from poverty, inability to create jobs and the consequent lack of sufficient livelihood opportunities can aggravate poverty, more so since India’s population continues to increase. With India fast catching up with China as the world’s most populous country,3 the ominous possibility of more and more young people entering the workforce to find themselves jobless is indeed real. Rising unemployment, apart from impacting poverty, will increase social tensions and unrest. This is evident from the increasing number of communities demanding reservations in public sector employment such as the Jats in Haryana and the Patels in Gujarat.

  The problem of low growth in jobs is compounded by the loss of jobs to automation. This heavily complicates long-term employment policymaking in an economy aiming to capitalize the demographic dividend of a large young population. The demographic dividend from a steady supply of young labour to various sectors of the economy, who, in turn, would save, consume both wage and non-wage goods, and invest productively in sustaining various sectors—thereby creating virtuous forces of economic growth on both supply and demand sides—would remain unrealized if the jobs deficit constrains youth employment. Greater absorption of young people by the economy would increase consumption of both wage and non-wage goods and also increase savings and investment. But if the jobs deficit does not allow such absorption, then the demographic dividend would remain unrealized. This would imply failure of labour-intensive industrialization in a labour-surplus emerging market economy creating obstacles for national economic aspirations and development plans. The dual challenge of reversing lower job growth and preventing job losses emerges as probably the most significant public policy imperative in modern India. The grimness of the situation becomes more stark given the fact that jobs need to be ‘productive’ and ‘decent’ by ensuring they fulfil individual and national aspirations.

  Structural Transition Not Employment-Intensive

  India’s structural transformation over the last seven decades has resulted in services contributing more than 60 per cent of its national output. Both manufacturing and agriculture now have shares of less than 20 per cent in the national economy.4 The higher contribution of services to the national economy has been accompanied by lower shares of agriculture and manufacturing, with the combined share of the latter reducing from 43 per cent in 1991–92 to 32 per cent at present.

  While many service industries, led by IT and including finance, hospitality, education, health, real estate, retail, entertainment, transport, communication, have generated new jobs, they have not been as much as the economy requires given the rising population and youth bulge. Indeed, agriculture and manufacturing, notwithstanding their lower contributions to GDP, continue to be providers of livelihood for many, particularly agriculture, which accounts for almost half of the total workforce employed in the country, and is the main provider of rural jobs for both men and women.5 This is in contrast to services (as represented by the tertiary sector in employment surveys conducted by the National Sample Survey Organization) that is now the largest provider of jobs for both men and women in urban areas, underscoring the urban bias that services have had in generating employment. The latter bias has created multiple employment opportunities for urban women in services like the construction industry, retail trade, IT-based call centres, business process outsourcing (BPO) establishments, hospitality establishments, financial enterprises and educational institutions. However, these opportunities should not obliterate the fact that services have failed to generate jobs in rural areas that continue to depend critically on agriculture, and partially manufacturing, for employment. The nature of jobs created by the ‘new’ urban services are also those that require skills greatly different from those of most rural workers, making the latter unsuitable for the former.

  Expanding further on the relationship between structural transformation of the economy and low job growth, the inability of services to generate jobs commensurate with its contribution to the national economy has given rise to ‘jobless growth’. The phrase describes a situation where notwithstanding high economic growth, the economy is unable to create jobs and provide employment. While many service industries in India have created jobs, comparatively, growth in services has been less job-intensive than their similar growth in other emerging markets like China, Russia and Brazil. The share of services in India’s employment increased by 4.7 per cent during 2001–14,6 while those in the latter three economies increased by 34.3 per cent, 7.2 per cent and 17.2 per cent respectively.7 Th
is is regardless of services growth in India being among the highest in the four countries. Whether the disconnect between rate of growth in services and its ability to employ is due to specific characters of the service industries, or on account of other specific structural issues in the economy impacting labour force participation rates and employment is debatable. But there is little doubt over the structural transformation of the Indian economy resulting in jobless growth, which portends critical prospects for future employment generation.

  The crisis of employment in India must also be looked at in the context of significant changes taking place in the labour market, including in the Labour Force Participation Rate (LFPR).8 The Labour Bureau’s estimates point to the LFPR for 2015–16 having declined to 50.3 per cent from 52.5 per cent in 2013–14.9 Assuming a population of 1.2 billion, the reduction reflects a drop of more than 20 million in new entrants to the labour force. A lower LFPR is accompanied with higher unemployment with proportionally greater increase in rural unemployment, which, upon further disaggregation, reveals greater unemployment for rural women. The trend is representative of greater employment for urban women in services along with a reduction in employment opportunities for rural women. Lower LFPR follows lesser participation of women in the labour force, which can be attributed to various sociocultural factors (e.g. household responsibilities, difficulties in taking up work outside home). At the same time, for urban women in particular, greater pursuit of education is also a factor delaying their entries in the labour force. Nonetheless, female unemployment is an area of concern for the economy given that it is characterized by underemployment. This pertains to conditions where many of the persons who are reported as ‘employed’ or ‘workers’ in official publications do not get work for the entire duration of their stay in the labour force. And even those who get some work or another for the entire duration may be getting it for only a small fraction of the time that they are available for work. This apart, some may be working on jobs, which do not allow them to fully utilize their abilities, or from which they earn very low incomes.10