Social sector spending short of target Spending dissection

India’s social sector spending deficit could increase to ₹15 trillion by fiscal year 2028, below the Niti Aayog’s recommended spending threshold of 13% of gross domestic product (GDP).

According to a joint report,

India Philanthropy Report 2024, by philanthropy organization Dasra and global management consulting firm Bain & Co., India’s social sector spending in FY23 was around ₹23 trillion ($280 billion), accounting for 8.3% of GDP.

“Inequalities persist in India despite strong GDP growth, a burgeoning middle-class, and a goal to become a $5-trillion economy by FY25… Despite robust growth over the last five years in social sector spending, India still falls 4.7% short of Niti Aayog’s annual social funding target,” it said.

In FY23, member countries of the Organization of Economic Co-operation and Development (OECD), and Brazil, Russia, India, China, and South Africa (Brics) nations reported significantly higher spending rates of 24% and 11%, respectively (FY22 numbers).

However, India has not been able to keep pace with its OECD and Brics counterparts due to moderate growth in corporate social responsibility (CSR) and donations from high-net-worth individuals (HNIs) or affluents, despite a growing donor pool, the report added.

While Niti Aayog estimated a 57% disparity between demand and supply in India for FY23, over the next five years, this could decrease to 35% as the country’s social sector funding deficit rises to ₹15 trillion, the report said.

Public sector spending accounted for 95% of the ₹23 trillion, with the sector’s contribution growing from 6.7% of GDP in FY18 to 7.8% in FY23. Health (26%) and education (36%) spending were the primary drivers of this growth, with respective five-year compound annual growth rates (CAGRs) of 18% and 9%.

“India’s social sector needs to focus on improvement in the quality of social spending, especially public spending. It’s also crucial to balance allocations across sectors by directing funds towards underrepresented sectors and geographies while looking at solving for improving societal outcomes,” said Amit Chandra, the founder of ATE Chandra Foundation.

Private sector spending in FY23 saw 10% growth, reaching ₹1.2 trillion, fuelled by rising contributions from family philanthropy and retail donors. This trend is expected to persist, driven by them and CSR. In FY23, CSR reported moderate growth of 7% complying with the mandate, to an estimated ₹28,000 crore, while share of domestic private spending rose to 30% following increased compliance and profit growth.

Healthcare and education were key funded sectors, with environment and sustainability witnessing a substantial inflow of CSR funds in recent years. “There has been a notable increase in corporate givers, as evidenced by the proportion of companies complying with the CSR mandate (2% of profits), which increased from approximately 30% in FY18 to more than 60% in FY22,” it said.

Private sector spending in FY23 saw 10% growth, at ₹1.2 tn, on rising contributions from family philanthropy