Social Sectors For Harmonized Development In India Economics Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

India is a welfare state since Independence and the primary objective of all government policies and programmes in our country has been the maximum welfare of millions of its citizens. Elimination of poverty, ignorance, diseases and inequality of opportunities and providing a better quality of life have been the basic premises upon which all the plans and blueprints of development were made. These objectives become all the more important for rural areas where majority of our population lives.

In the beginning of the 21st century, Public Private Partnership (PPP) has become a refined strategy for societal governance [1] . PPP is a logical transformation of a mixed economy like India. [2] Both Public and Private Sectors have matured in the last half century and have developed competencies in their respective spheres. PPP is a creative enterprise where the best of two sectors is brought together to achieve fruitful results. [3] 

Today, there has been a rapid rise of Public Private Partnership (PPP) across the world. Governments in developing as well as developed countries are using PPP arrangements for improved delivery of infrastructure services. Governments are improving infrastructure (roads, railways, power), education (schools and universities), health care (hospitals and clinics), waste management (collection, waste-to-energy plants), and water supply (collection, treatment and distribution) etc. through Public Private Partnerships. PPP is becoming the preferred mechanism for infrastructure development and service delivery throughout the world and PPP has become the buzzword in all developing nations including India. [4] The public-private partnerships have been seen in diverse fields, ranging from poverty alleviation and environmental protection, to the communication and transport sector. [5] 

1.2 The Concept of Public Private Partnership

A Public Private Partnership is a contractual agreement between a public agency (federal, state or local) and a corporation. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. New Public Management (NPM) is a liberal replica of PPP signifying a pattern of reform of public management per se. [6] 

Public Private Partnership is essentially a collaboration between the government and the private sector to create a structure in which improved value-for-money can be achieved through the involvement of private sector due to enhanced scope for innovation and allocation of risk to the party best able to manage it without undermining the government's overall responsibility to the tax payer for the quality of the service provided. [7] 

The interplay between two sets of factors - endogamous and exogenous paved the way for PPP. The endogamous factors among others, include failure of the state-driven, socialist-command model of development policy as in India during the Nehruvian era (1947-1990), poor performance of most public sector undertakings, bureaucratic bungling, increasing corruption among political leaders and officials and poor delivery of public services resulting in growing discontentment among the people. In India, in addition to the above, the balance of payment crisis precipitated the transition of government's ongoing socialistic pattern of policy since the adoption of the Industrial Policy of 1956 to the liberalization, privatization and globalization (LPG) policy in 1991. The most important among the exogenous factors was the paradigm shift to the LPG model strongly advocated by the World Bank for governments of the developing countries availing credit and financial assistance from the Bank. Another influential external factor was the New Public Management paradigm strongly advocated by the New Right (Neo-Liberal) scholars and management scientists and accepted by planners and policymakers in developing countries. [8] 

PPP projects ensure efficient use of resources, availability of modern technology, better project design, optimal risk allocation, improved delivery of public services and thrust to public sector reforms. Under the PPP format, the government role gets redefined as one of facilitator and enabler, while the private partner plays the role of financer, builder and operator of the service or facility. PPPs aim to combine the skills, expertise and experience of both the public and private sectors to deliver higher standards of services to customers or citizens. The public sector provides assurance in terms of stable governance, citizens support, financing and also takes care of social, environmental and political risks. The private sector brings operational efficiency, innovative technologies, managerial effectiveness, access to additional finances, and construction and commercial risk sharing.

What is needed to transform India into a developed economy is the integration of vital sectors, networking, convergence of technologies and connectivity of rural-urban economies. The Golden Triangle of Industry, Government and the Research and Development institutions is crucial for competing in global markets and for bringing wealth and prosperity to the nation. [9] 

1.3 Public Private Partnerships in India

A welfare state has a much expanded role ensuring its citizens basic services as education, health services and public utilities like road, power and water supply etc. Under the Constitution of India, States are called upon to shoulder most of these responsibilities. The Government of India is making efforts for these welfare functions as shown in Table 1.

Table 1: Budgetary Allocations to Social Sector (2008-09)

Ministries/Departments Budgetary Support

(Rs. crores)

I. Ministry of Agriculture

1.1 Department of Agriculture & Cooperation 10734

1.2 Department of Agriculture Research & Education 2680

1.3 Department of Animal Husbandry & Dairying 1062

II. Ministry of Human Resource Development

2.1 Department of School Education & Literacy 27850

2.1.1 Sarva Shiksha Abhiyan 4250

2.1.2 Mid Day Meals Scheme 2073

2.1.3 Secondary education

III. Ministry of Women & Child Development 7260

3.1 ICDS 5665

IV. Ministry of Environment & Forests 1707

V. Ministry of Health & Family Welfare 16968

5.1 National Rural Health Mission 12050

5.2 Total Medical Education and Training 1659

5.3 T.B. Control Programme 263

5.4 Leprosy Control Programme 41

5.5 Trachoma & Blindness Control programme 205

5.6 National AIDS control programme 993

VI. Ministry of Rural Development

6.1. Department of Rural Development 31524

6.2 Department of Land Resources 2403

6.3 Department Drinking water supply 8502

VII. Ministry of Social Justice & Empowerment 2459

VIII. Ministry of Urban Development

8.1 Department of Urban Development 3007

8.2 Public Works 1072

*Note: Figures have been rounded for simplification

Source: Report of PPP Sub-Group on Social Sector, Planning Commission, 2004 and Expenditure Budget 2004-05, Ministry of Finance, Government of India.

As the governments want to improve costs and expedite delivery of public services, they are resorting to various kinds of partnerships between the state, industry and the civil society. In addition to providing better services, such partnerships are expected to tap community resources so that the decision-making is more responsive to the community needs and also provide additional capital for public activities. Ideally all partnerships benefit from establishing joint investment and long-term relationships. By working together, they can achieve their own objectives and a cooperative synergy builds between the partners.

According to the World Bank Survey 2006, there were 86 PPP projects in India in various sectors as Roads and Bridges, Urban infrastructure, Railways, Airports and Ports. The total amount involved was Rs.339.5 billion. Figure 5.2 shows the total project cost of awarded PPPs by sector costing Rs.339.5 billion. Figure 5.3 reflects the number of awarded PPPs sector-wise out of a total of 86 projects. [10] 

On analyzing the targets we find that over 70 per cent of the total PPP projects were of Roads and Bridges but they accounted for only 36 per cent of the total project cost. On the other hand, ports were 9 per cent of the PPP projects awarded but accounted for 55 per cent of the total project cost. This was due to larger size of the project.

Successful PPP models are a recent phenomenon. The Tirupur project in Tamil Nadu is a shining example. It is a Build Operate Own and Transfer (BOOT) project, the first privately financed water and sewerage project in India. A Special Purpose Vehicle was set up for the purpose. The project took more that ten years from concept to financial closure. The US $100 million Delhi-Noida Bridge Project, implemented on a BOOT framework of a 30-years concession, is India's first major PPP initiative. Also NHAI, port development and telecom industry are some notable examples of successful PPPs. The Committee on Infrastructure headed by the Prime Minister is tasked with steering initiating policies that would ensure time bound creation of world-class infrastructure delivering services matching international standards, developing structures that maximize the role of PPPs, and monitoring progress of key infrastructure projects to ensure that established targets are realized. [11] 

The emerging issues in the PPP arrangements are the power and the limits of PPPs, competitive edge of public and private initiatives, private provisioning of public services, disinvestment dilemma, social obligations of private sectors, equity and welfare interfaces in PPPs, human face in PPP and societal transformation. The different Ministries of Government of India in recent years have been implementing their various schemes through PPP. India has seen real progress in the last 12 years in attracting private investment in the infrastructure sector, in telecommunication, ports and roads etc. There is a potential for PPPs to contribute more and help meet the infrastructure gap in India. [12] 

There is a massive scope for expansion of the use of PPP in nearly every sector and also the role of PPP as another way of promoting better services, is not limited to infrastructure. In health, education and even in the implementation of poverty reduction programmes there are promising ways to use the empowerment generated by allowing people to make their own choices by channeling funds to the people rather than to the providers. Maintaining transparency is paramount and hence the government has consciously moved towards competitive bidding and maintenance of transparency in the award to infrastructure projects. [13] 

1.4 Public Private Partnership in Social Sectors in India

The Government of India is planning to use the public private partnership (PPP) route more effectively to finance projects in the social sectors especially health and education. According to Planning Commission, the government is developing a generic framework for various categories of PPPs at primary, secondary and tertiary levels of health care aimed at improving cost-effectiveness, enhancing quality and expanding access through extensive stakeholder consultations. Currently, the health sector gets only government investment which is just about 1 per cent of GDP. The Centre wants to increase funding to 2 per cent of GDP. The government would look at contracting out well-specified and delimited projects such as immunisation to help enhance accountability. Diagnostic and therapeutic centres set up by private players in hospital premises would be encouraged. The government may consider giving them infrastructure status by giving incentives such as land at concessional rates, increasing floor area ratio and ground coverage, tax holiday and loan at lower rate. [14] Here, Public Private Partnerships for various sectors are discussed to give an insight into the initiatives of the government.

1.4.1 PPP in Education

The access to education needs to be considerably improved if we are to catch up with the burgeoning demands from various sectors. Budgetary allocation for education by the Central Government for both for school education and higher education in 2008-09 amounts to Rs.38,703 crores which is an increase of 20 per cent from the the previous year. Combining the government and private expenditure, the total expenditure on education is approximately 5.3 per cent of GDP and private sector share works out to be 47 per cent. [15] 

India ranks 115th in the world in terms of investment in education as a percentage of GDP. The foundation of good quality education only be laid by sound and widely accessible primary and secondary education. The government can meet the challenges of globalization with political commitment and by maintaining a high level of expenditure in social sector, especially in the field of education. [16] 

For quantitative expansion and improvement in quality, educational sector will require large inflow of fresh capital which can not be met from government finances alone. This calls for huge investment in the higher education which the government may not do on its own. Even if the government increases the allocation for higher education upto six per cent of the GDP, there will still be a huge gap in the demand and supply of finances for higher educational institutions. The only way to bridge the yawning gap between the available and required educational infrastructure is to place greater reliance on PPP in terms of attracting private capital as well as to improve efficiencies in the provision of educational services. [17] 

Public Private Partnerships have distinct advantages and can help to achieve desired education outcomes. It should not, however, be considered an end in itself but as a means to achieve desired education outcomes. It should not, however be considered as an end in itself but as a means to achieve certain specific results. There are many successful examples of PPPs in the education sector of a number of countries - developed and developing. These examples include: [18] 

Relocating or building new schools, colleges, universities and providing management facilities for the new building/campus; projects might involve land swaps or enable the private sector provider to generate a third party revenue stream.

Building facilities for education institutions (on the education institution's land or elsewhere) that will have potential for third party income generation such as sports or academic/conference facilities.

Refurbishing existing assets or providing facilities management.

Providing Information Systems - such projects may be to ensure the continued availability of hardware and software over a period of time, or may go further with the private sector provider taking on some administrative functions. There may be opportunities for third party income generation by selling spare capacity at off-peak times. In addition, the private sector partner might provide catering facilities in a Cyber-Cafe format.

In a study conducted on Public-Private interface in Primary Education in West Bengal, it was found that both private and public schools had their pros and cons. On one hand, the poor quality of education delivered in many of government primary schools forced some parents to opt for private schools which were perceived to deliver better quality on the other hand, the negative correlation of annual expenditure and quality of education in some private schools created a reverse trend among some private school parents. [19] 

1.4.2 PPP in Health Sector

Public-Private Partnerships in the Health Sector is important and timely in the light of the challenges the public sector is facing in health care finance, management and provision. Improvement in the health status of the population has been one of the major thrust areas for the social development programmes of the country. This was to be achieved through improving the access to and utilization of health services with special focus on under-served and under-privileged segments of the population. [20] 

Public Private Partnerships (PPP) in health sector are emerging across the country. India spends about 39 per cent of its total public expenditure on health which is less than one per cent of its GDP. The current allocation on health in the budget stands at Rs.16,968 crores. As funds are crucial for the maintenance of health, a search is on for new policy alternatives in the domain of health. A joint study undertaken by FICCI and Ernst & Young entitled 'Fostering Quality Health Care for All' estimates that country needs 17.5 lac beds, 700,000 doctors by 2025 to achieve the goal of health for all. While new initiatives like National Rural Health Mission are trying to find out the remedies to the existing situation, state governments are showing interest in PPP to tackle multiple ills afflicting the health sector. This situation persists despite a national policy commitment of atleast seven per cent. Public Private Partnerships are tried out in some parts of the country not only for mobilizing funds but also to explore the possibilities of replicating the successful and best practices adopted by private sector into the public arena. [21] 

Today, PPPs in the health sector focus on preventing diseases such as sexually transmitted infections and malaria, developing and facilitating access to vaccines and drugs, improving health service delivery. In 1993, the World Health Assembly called on to mobilize and encourage the support of all partners in health development, including non-governmental organizations and institutions in the private sector in the implementation of national strategies for health for all. Public-Private Partnerships are a central feature of the global health landscape and there seems no reason to believe that the current trend will not continue. India should establish "enabling task forces" at the central, state and local body levels for implementing public-private partnership schemes. [22] 

1.4.3 Drinking Water and Sanitation

Availability of potable water in rural areas is strongly interlinked with rural development and growth and displays direct, positive results for human health and well being, especially for women and children. Sanitation facilities improve the health of rural inhabitants and their quality of life. The rural environment also benefits from better drainage and waste management practices. [23] 

Traditionally, the programmes for supply of drinking water in rural areas in India have been government funded. But there have been several lacunaes in the existing system. The Government of India introduced reforms in the sector and started a new programme 'Sector Reforms Project (SRP)'. The Project envisaged community participation in creating and maintaining drinking water sources and sanitation facilities. It redefined the role of the government from being a 'provider' to that of a 'facilitator'. The public-private-community partnerships could be an effective solution for the problems of drinking water in rural areas of India. [24] 

1.4.4 Environment Protection

Kofi Annan, Former UN Secretary General in 'In Larger Freedom' remarks that "Our efforts to defeat poverty and pursue sustainable development will be in vain if environmental degradation and natural resources depletion continue unabated. At the country level, therefore, national strategies must include investments in improved environmental management and make the structural changes required for environmental sustainability."

India supports approximately 16 per cent of the world population and 20 per cent of its livestock on 2.5 per cent of its geographical area, making its environment a highly stressed and vulnerable system. The pressure on land has led to soil erosion, waterlogging, salinity, nutrient depletion, lowering of the groundwater table and soil pollution - largely a consequence of thoughtless human intervention. Deforestation with shifting agriculture, over-exploitation for fuel wood and timber collection, and mining activities are also causes of serious concern. Perhaps the most widely recognized environmental problem is the pollution of water resources by industrial discharge, household waste, sewage, and agricultural chemicals. Water scarcity induced by mounting population density and growing economic activity in the face of fixed resources, depleting water tables, and silting of reservoirs has led to rapid decline in the quality of life in rural India. [25] 

Many corporate practices contribute to environmental damage. With the increase in the scale of industrialization around the world, the degree of environmental damage is much. With the advancement of scientific research and development, there is an increased awareness among companies and community about the harmful environmental impacts in measurable terms. There is an urgent need for corporate houses to take proactive measures through innovative policies and practices for reducing the harmful environmental effects. The scope of these practices can extend beyond the internal practices of business to include those which can be implemented in collaboration with other organizations/entities. Corporate houses around the world have demonstrated different levels of activity to promote green corporate practices. Moreover globalization is leading industries to become eco-centric and thereby achieve a relatively level playing field at the global platform as this is becoming a key competitive edge for international commerce. [26] 

1.4.5 Women & Child Development

Women as an independent group constitute 48 per cent of the country's total population as per the 2001 Census. The importance of women as an important human resource was recognized by the Constitution of India which not only accorded equality to women but also empowered the State to adopt measures of positive discrimination in their favour.¬†Also, India is home to the largest child population in the world. The development of children is the first priority on the country's development agenda, not because they are the most vulnerable, but because they are our supreme assets and also the future human resources of the country. The future of India lies in the future of Indian children - across income groups, geographical locations, gender and communities. The involvement of voluntary organizations, associations, federations, trade unions, non-governmental organizations, women's organizations, as well as institutions dealing with education, training and research will be ensured in the formulation, implementation, monitoring and review of all policies and programmes affecting women and children. Towards this end, they will be provided with appropriate support related to resources and capacity building and facilitated to participate actively in the process of the empowerment of women. [27] 

1.4.6 Agriculture Development

The private sector (Corporates, NGOs and the Industrial Associations etc.) is collaborating with the government in order to work for agriculture development in India. Certain key associations like the Bharat Chambers of Commerce, East India Cotton Association, The Federation of Andhra Pradesh Chambers of Commerce and Industry and Indian Chambers of Commerce etc. are extensively working for agriculture development. The efforts of these associations have been towards production of high yielding varieties of crops, formulating innovative irrigation projects, production of medicinal, herbal and aromatic plants, improving cotton production, encouraging social forestry, fish farming and development of wastelands etc. The contribution of these associations has helped the farmers to a great extent. Today, various companies like ITC etc. are working for welfare of farmers by information dissemination through the E-Choupal initiative and also providing marketing support to them with the help of the government machinery too. Thus PPP can go a long way in the field of Agriculture Development and can change the face of rural India on the whole.

PPP possesses great potentials of application in social development. There are huge benefits from a PPP scenario wherein the social development programmes and their administration could be from the government side; but the technological input, marketing and financial support could be from the private industry side. Similarly, the developmental needs of local communities can be taken care of both by the private and the public sectors. Public Private Partnership for harmonized social development provides both challenges as well as opportunities. It is for us how we convert these challenges into opportunities to usher in a win-win situation for all.

Issues and Constraints in Public Private Partnership in India

In an attempt to explore the new paradigms of governance as reflected in the PPP model of development in India in the backdrop of a high growth state, it is found that there has been an asymmetry in the flow of funds and an overarching emphasis on infrastructure in the hard sectors. Wherever PPPs are implemented in the social sectors like health, education and water resources, old issues remain and newer concerns emerge.

There is a huge policy gap in this area. The reasons are multifarious. First, partnership between the public and the private sector is of recent origin. As a result, a large section of public sector is still skeptical about the gains from such a partnership. From the point of view of the private sector, there are concerns about political and economic stability and transparency of laws and regulations. There is also lack of capacities within the public as well as the private sector to carve out, operationalize and monitor such partnerships. The institutions required for facilitating implementation of PPP projects, e.g. independent regulatory bodies, dispute settlement mechanisms are also not in place. Secondly, infrastructure projects involve crossover issues. Projects spill over several sectors and implementation agencies. For instance, a road project would typically involve agencies like public works department, revenue department, forest department etc. This means that the policy framework should, inter alia, address inter-departmental coordination issues to facilitate quick decision-making. Thirdly, PPP spans the entire gamut of infrastructure in all sectors. In sectors like power and roads, comprehensive policy framework has been developed. In certain other sectors like railways, irrigation, water and sewerage, industrial estates etc. very little work has been done. [28] 

The private sector now co-exists with the public sector in the field of infrastructure and social sectors, both subjecting themselves to the scrutiny of constitutionally appointed regulatory authorities. Infrastructure financing is a challenge to both the private and public sectors. Given the externalities, high risks and low rates of return, such financing cannot be left solely to the private sector. At the same time, given the budget constraints and inherent inefficiencies, the public sector too, cannot be fully relied upon. The solution, therefore, lies in public private partnership where the two complement each other's efforts in providing infrastructure services. The fundamental principle of PPP is that while the private sector is responsible for the design, financing, building and operation of the services, the government puts in place the legislative framework and provides institutional and political support. All successful PPPs suggest the need for effective communication with the stakeholders - the community, the political establishment and specific user group both before and after commissioning of the project on all sensitive issues, including rehabilitation and resettlement. It must be remembered that political consensus, even if initially achieved, tends to be fragile and needs to be continuously strengthened. But the cornerstone for all successful PPPs is trust and mutual respect. [29] 

It is becoming increasingly important that government policies are continuously reviewed and modified to fill up this policy gap and create an environment which is conducive to PPP.


Owing to enormous problems faced by developing countries, there is no alternative but to seek private sector partnership in providing the infrastructure and basic services to the citizens. There is an urgent need of involving the private sector and NGOs in supplementing the efforts of the government to achieve socio-economic development of the country at an accelerated pace. On the whole, the state with its resource crunch can not neglect the affluent private sector looking for avenues to invest and hence, augment its sphere of activities. Developing India, with paucity of basic infrastructure and essential services is a new horizon for private sector. The governments should try and encash on the increasing importance being given to Corporate Social Responsibility by the industry and should find out ways and means of collaboration to accelerate multi-faceted development. Thus PPP emerges as an inevitable mode of providing infrastructure and other basic services. Of course there are doubts on the credibility and efficiency of PPPs. However, for a country like India, poised to be one of the leading economies of the 21st century, PPP is perhaps the best available option. The need is to use PPP extensively both for infrastructure development as well as for social development to transform India into a developed country. PPP is a tool for all-round development and the benefits depend on how such tools are utilized by the policy and decision-makers.