Modi spending plans risk India's demographic dividend

Subject

Social spending.

Significance

Since assuming power in May 2014, Prime Minister Narendra Modi's government has promised high and inclusive economic growth. Its first full budget -- for the April 2015 to March 2016 fiscal year -- attempts to balance these priorities by slowing the government's austerity programme and maintaining subsidy spending. However, spending in key areas such as health and education is set to decline in real terms. The latter is a long-term trend that the incumbent administration is unlikely to reverse.

Impacts

• Lack of a large, healthy and skilled workforce undercuts Modi's vision for the manufacturing sector, but a policy reversal is unlikely.
• One casualty of low social spending will be efforts to increase women's participation in the paid workforce.
• On key development indices, India will rank poorly compared with other BRICS, damaging its international image.