In this article we will discuss about the development of social infrastructure in India.

Economic development depends on the existence of an integrated infrastructure or social over­head capital which generates externalities. This is why, since 1956, serious attempts have been made to build heavy industries in the public sector.

In fact, one of the causes of expansion of the public sector in India has been infrastructure building. Heavy industries such as iron and steel, coal, power, petrochemicals, heavy engineering, automobiles, etc. are essentially input-supply­ing industries.

This is why, since its very inception, the World Bank has played a positive role in infrastructure financing. Economic development depends not only on economic infrastruc­ture like a well-developed transport and communication network or the extension of irrigation facilities in dry areas—but also on social infrastructure. In a broad sense, economic develop­ment depends on expansion of not only society’s production capacity but also on social and economic opportunities.


Therefore, not only economic infrastructure but also human capabili­ties play a central role in economic development. Human capabilities depend on basic educa­tion, health services, ownership patterns, social-stratifications, gender relations and the oppor­tunity of social cooperation.

Public Goods and Positive Externality:

Education and health are not only public goods, but merit goods as well. They generate positive externalities in the sense that marginal social benefit far exceeds private benefit. So these are undersupplied—actual output is less than the socially desirable level. This is an example of market failure and calls for optimal correction through grants and subsidies.

Structural Adjustment Programmes:

Since the 1990s, the IMF and the World Bank have imposed certain conditions on developing member countries for obtaining financial assistance. Such conditional loans are known as struc­tural adjustment loans. The purpose of structural adjustment lending and structural adjustment programmes is to improve growth potential of countries, with focus on key macro variables of GDP growth, savings, investment, exports and the balance of payments.

Of late the IMF and the World Bank have insisted that LDCs undertake programmes with focus on poverty alleviation. This demands building up of an integrated social infrastructure (SA). This is absolutely essential for achieving faster economic growth and higher standard of living through proper provision of social goods.

The Main Theme:


India’s main task ahead is the ending of poverty and ignorance and disease and inequality of opportunity, which expands our freedom to lead the lives we value. These ‘elementary capabilities’—a term coined by Amartya Sen-can and do contribute much to economic growth and make the growth process participatory. Moreover, human capabilities are among the chief means of economic success.

We must also recognise the intrinsic importance of human capabilities and effective freedom as the ends of social and political organisations .The first and the most importance task we face is the elimination of illiteracy, ill-health and other avoidable deprivations.

We have to recognise human capabilities as instruments for economic and social performance. Basic education, good health and other human attainments are not only directly valuable as constituent elements of our basic capabilities, these capabilities can also help in generating economic success in the sense of contributing to enhancing the quality of human life in other ways.

It is a mistake to see the development of education, health care and other basic achievements only or primarily as expansions of ‘human resources – the accumulation of ‘human capital’ as if people were just the means of production and not its ultimate end. Amartya Sen calls for structural adjustment with a human face. This will not be a reality in the absence of adequate and timely development of social infrastructure.

Structural Adjustment and Social Infrastructure:


Many of the developing countries of Asia, Africa and Latin America-which experienced slow economic growth or none at all in the 1980s-undertook programmes of ‘structural adjustment’ in cooperation with the IMF and the World Bank. These countries agreed to make major policy changes-correcting macroeconomic imbalances and reforming macro and sectoral policies in exchange for external assistance.

In 1990, the United Nations called for ‘adjustment with a human face’ which requires a set of policies that would permit growth to resume, raise the productivity of the poor, improve the equity and efficiency of social services, compensate the poor for deficits in nutrition and health services during adjustment periods of limited duration and improve monitoring of the conditions of affected low income groups particularly children.

While macroeconomic adjustment programmes undoubtedly can be carried out in ways that give more attention to the plight of the poor, a more funda­mental solution to the problem of poverty in Third World countries that have not been grow­ing is resumption of economic growth itself, combined with the provision of basic social services to the poor and policies that seek to increase their participation in the development process. It is against this backdrop that we evaluate India’s progress in sustaining reform and reducing poverty, with particular reference to development of social services and social in­frastructure.

India’s Performance in Developing Social Infrastructure:

India continues to make good progress in increasing incomes and improving living standards over the past decades. Since the adoption of economic reform programmes in July 1991 in the context of the structural adjustment programmes, poverty continues to decline and many social indicators—in particular literacy—continued to improve.

Assessing Development Outcomes:

While poverty and education indicators have improved, those for maternal and under-five mor­tality have not. Also, the new threat of HIV-AIDS is spreading quickly with more than a billion people and one-third of the world’s poor, India needs rapid growth to reduce poverty and create enough jobs to sustain income increases for its population This demands development of social infrastructure at an accelerated rate.

Improving Social Infrastructure (Health and Education for the Poor):

In LDCs like India, development of SI is vitally important for achieving faster economic growth and alleviating poverty. India’s Five Year Plans have failed to eliminate poverty for at least four reasons- malnutrition, poor health, a lack of learning opportunities, and limited choices Good education, health and nutrition and low fertility help reduce poverty by increasing opportunities to generate the right income. By the same token, an improved standard of living leads to gain in health and education, freeing people from the trap of ignorance and exposure to disease.

There are also positive connections between health and education. Education empowers people to use information better to make healthy behavioural choices; the healthy are more likely to attend school or go to work and can learn and work effectively.


But the sad truth is that costs of illness keep people in poverty and poor quality education limits their opportunities to escape poverty Progress in providing social infrastructure is both a vital yardstick of and a key element in the reduction of poverty.

In a broad sense, health includes physical conditions, sanitation, as also health-related areas such as sanitation and water supply. However, Indian economy is still characterised by low levels of literacy and school enrolments and high levels of infant mortal­ity, maternal mortality and malnutrition, relative to China and Indonesia and even other low- income countries. It will be difficult to reduce poverty substantially in the absence of major improvements in spending on and delivery of health and education services.

The delivery of public services in health and education is fraught with problems related to limited accountability for performance, low management and worker incentives, inadequate materials and equipment for effective health care and education, demands for payment for public services and poor targeting of services and subsides at the poor. As a result, private delivery of health and education is expanding rapidly-to the public in general and even to the poor.

Educational Outcomes:

In India as in other developing countries, greater coverage and more effective elementary edu­cation in grades 1-8 would be the education sector’s most significant contribution toward alleviating poverty.


No doubt—average educational attainment has improved in India. Yet India still lags behind other developing countries in average educational attainment—particularly among the poor. No doubt large benefits arrive from achieving a critical minimum level of education across the population.

It appears that mass expansion of primary education to raise India’s currently low educational participation levels (averaging two years) to four-five years of primary education per worker would have high economic and social pay-offs. The pay-offs would be particularly high for the poor, less than 20% of whom currently complete one to eight primary grades.

A major indication of India’s recent progress in education is the significant rise in literacy rates within a decade from 52%-64%. Progress is still slow but the number of illiterates (aged seven and above) which had actually risen from 1981 to 1991 declined from 1991 to 2002.

Among the States, some poorest—for example UP, Bihar and Rajasthan—registered signifi­cant improvements in literacy from low bases. In most of these States, female literacy rose even faster than overall literacy. Although India has raised literacy rates, it still has a long way to go. Even China and Indonesia have overtaken India in literacy rates.


Gross enrolment ratios have also improved reaching 90% at the primary stage in which girls’ enrolment being 73%. In spite of this, 33 million children in the age group 6-11 are still out of school. Moreover, 7.8% girls and 6.9% boys in the age group 6-11 are in the workforce, mostly in rural areas. Children of poor families are less likely to be enrolled in schools. This is a major factor behind the low enrolment rates. Moreover, primary-level learning achievement is low.

Health Outcomes:

These have also improved but have a long way to go, particularly among the poor. No doubt life expectancy at birth improved from 51 to 61 between 1973 and 2003 and the infant mortal­ity decreased from 137 to 74 per 1,000 live births. On the demographic front, fertility had declined to 3.6 births per woman in 2003 compared to 6 in 1951.

Nutrition is a particular problem area. India has a percentage of malnutrition and some segments of the population have among the highest levels of malnutrition in the world. Wean­ing children and women are particularly affected. There have been only modest declines in the levels of severe and moderate malnutrition in children in the last 20 years.

The poor suffer from health and poverty related problems – high infant mortality rate, high mortality rates, high fertility rate and high rates of child malnutrition. The reduction in infant mortality has slowed down during the 1990s.

The proximate reason is the slowdown in poverty reduction. Another reason is the impact of the stubbornly high levels of disease and malnutrition as also poor sanitation and water supply, particularly in the poorer States.

India’s health programmes need to improve their services for females. India’s ratio of fe­males to male is below one – 927 females to 1,000 males. This gender disparity suggests a need to make India’s health care, nutrition and social rights of women more equitable.


The relative neglect of women’s health is also reflected in poor reproductive health indicators: maternal mortality is over 430 deaths per 100,000 live births in India, compared to an average of 350 among low and middle-income countries. Health and education outcomes are inter-related. Educated people take more care about their health. And healthy workers are more efficient than workers with ill-health.

Major Challenges:

India’s social services are facing major challenges. A growing population, industrialisa­tion and a globalizing economy that places a premium on information and technology are stretching the capacity of India’s educational system to deliver relevant and effective serv­ices.

Yet enormous tasks remain: getting 33 million children from poor families into pri­mary schools, increasing the retention rates so that more children finish primary grades and upgrading the average quality of the schooling received. In health, the country is un­dergoing an epidemiological transition.

There continue to be high rates of communicable diseases, malnutrition and maternal; and parental illnesses, representing a large unfinished agenda that predominantly affects the poor. There are also growing rates of non-communi­cable diseases, while rapid urbanisation is creating new health problems. New diseases, notably AIDS, are placing great strains on society and the health of the poor in particular! Even though the social sectors are changing dramatically, the role played by the public sector has changed little.

Institutional Arrangements:

Elementary education in India has seen two positive developments in the past decades. First, it has been brought to the fore as a priority issue. Second, with a series of externally funded and centrally sponsored projects including the District Primary Education Programme, it has seen a great deal of innovation and experimentation aimed at qualitative improvement of the services offered by the system including partnerships with some NGOs. Although there are some exam­ples of successful programmes and practices, the larger system continues to raise challenges and concerns related to quality and management.

Joint Responsibility:

Education and health are joint responsibilities of the Central and State Governments, with funds provided by both levels of government and delivery of services, largely a State responsi­bility. There is need for planning and training to ensure effective financing and management at the decentralised levels. Public education and health involve enormous infrastructure and are thinly spread across the country. Day-to-day management of services of the size, not to speak of training and up­grading, is a major task, even at the state level.

Public Sector Financing of Health and Education:


In education, Central and State Government expenditures in 1996-97 were 4% of GDP. In 1999-2000 budget the Central Government’s Plan Expenditure on education were 6.6% of its total Plan Expenditure and its overall expenditure on education was 2.5% of its overall expen­ditures. The Central Government’s share is still a small part of overall government spending on education.

In the distribution of general government expenditure among educational levels, elementary education (which most benefits the poor) receives per student a much smaller level of funding and subsidy compared to secondary and tertiary education.


The need to broaden the coverage of elementary education among the poor and to improve its quality, including the targeted goal of universalizing it, means that more funding is needed. States have to provide most of this funding.

The Central Government will also need to expand its role in elementary education in view of the low level of resources that many State Governments devote to primary education and the large number of children not enrolled in schools. There is also a need to build, in States and districts, the capacity to plan and manage education more effectively and the need for research to identify more cost-effective strategies.

Moreover, due to the poor financial (budgetary) position of the States, there is need to reduce implicit and explicit subsidies on education.

Achievements so Far:

A. Health:


In health, India’s public spending is very low – only 1.2% of its GDP. Public spending on preventing and promotive primary care services has not kept up with the growth of demand for services, particularly for people below the poverty line.

India also lags in addressing the determinants of good health that lie outside the health system such as in water and sanita­tion, nutrition and education. For example, at 0.5% of GNP, India spends far less on nutri­tion programmes than what is needed to reduce the high rates of malnutrition.

B. The Private Sector’s Role in Education and Health:

In education, total private spending (excluding overseas education) is estimated at about one-third of education expenditure.

Private spending on elementary education is expanding rapidly because of:

(a) The inability of the public system to deliver; and


(b) Parental inability to pay.

Private schools are unlikely to improve the education of the poor directly, because they remain outside the reach of the vast majority of the poor. Other critical issues are the ab­sence of adequate information and regulations on private school quality, the possible shift of the more articulate/education oriented parents to private schools creating less pressure on the public system and the vast differences in the standards of schooling.

Although India’s public spending on health is low, overall health spending is high because of private spending. Private spending on health is four times public spending that is about 80 % of health spending in India. As a result, India’s overall expenditure on health is about 6% of GDP, one of the highest in developing countries.

There are large inter-State variations in private financing and provisions. For example, the lowest proportions of private hospital care are in rural Orissa and West Bengal (9% and 18% of hospitalizations, respectively), compared to over 75% in rural Andhra Pradesh and Bihar.

Despite the high levels of spending on health reflecting high private spending, India’s health indicators are relatively poor. The private health sector, as currently organised, is unlikely to improve the health and nutritional status of the poor substantially. Private spending and delivery neglect ‘public goods’ or inequality-reducing characteristics of key preventive and promotive health services.

The private sector remains virtually un­organised and has a widely variable quality of care. Moreover, much of the private sector is dominated by profit motives often resulting in over education, inappropriate use of technology and overcharging of patients. These problems are really serious for the poor who lack information on the quality of care and have a hard time paying for private care.

On the other hand, as in education, the failings of the public sector health services are leading to rising demand for private services. So the public sector has an important role to play in enhancing the effectiveness and access to individual health services, and in developing and implementing comprehensive policies addressing pri­vate financing and delivery.

Summary and Conclusion:

1. The poor are often not reaping benefits from public health and education services. In con­trast, education and health costs are enormous burdens for the poor.

2. Health care also absorbs a major portion of poor families’ incomes but often the spending and public health services do not yield much benefit. In such a situation, health gaps be­tween the rich and the poor are likely to increase.

3. Special attention is to be paid to the role of basic education in social transformation as well as economic expansion.

4. No doubt health and education services are a public responsibility. But the goal of reduc­ing poverty in India will remain elusive as long as the poor have low utilisation of preven­tive and curative health services, poor hygienic conditions, low school enrolment and at­tendance and poor quality schools and health services.

5. The rapid expansion of the private sector in health and education is partly a result of the public sector’s problem in providing quality services. But private sector activities in these areas are not effective in providing public goods and are beyond the reach of many of the poor.

6. Improvements in education must emerge from the community and at the school level. What is of paramount importance in reducing poverty is faster economic growth. This can be achieved by making more investment on human capital.

However, stress should be not on a crash programme of educational expansion beyond the capacity of a limited number of teachers but on purposive education to meet the changing needs of India’s new economy characterised by ongoing structural transformation. The focus should be on the quality of education which helps in raising total factor productivity.

7. The resources that are applied to improving primary education need to be targeted at those groups in the population that are most in need of support.

8. Public investments in health are critical for the sustainability of India’s development and poverty alleviation.

Three broad strategies for reforming the health sector are:

a. Using public information more strategically to empower consumers of health care and enable people to be better providers of their own health care

b. Rejuvenating the public sector to better deliver its core services, and

c. Engaging the private sector to better meet societal health goals.

The private sector needs to be engaged as an agent to meet the basic societal goals of good health, particularly for the poor. Private providers and government should develop forums to form a common agenda for action.

No doubt more spending on health and education is needed. But three most important steps are to be taken to improve education and health services that would not only help India to grow faster but would also contribute to reduction in poverty in all its dimensions:

a. Spend more effectively on elementary education and basic health systems, with better targeting to the poor and with more public funding.

b. Focus public education and health services on meeting consumer needs, which will help improve the quality of public spending.

c. Realign the role of the state with a focus on primary education and health (in view of interdependence between health and educational standards) and water and sanitation, while making efforts to upgrade private education and health services and to use them effectively.

Progress on Social Indicators

Absentee Rates from Primary Facilities

Health Spending in India and Comparator Countries, 2001