Correct Option
The correct option is 2 and 3 only.
Explanation
Government intervention in social infrastructure, specifically education and health, is necessitated by the nature of these services as "merit goods." These sectors generate significant positive externalities for society but are often subject to market failures, such as high costs and long-term return horizons, which deter adequate private participation.
Statement-wise Analysis
- Statement 1 is Incorrect. Private providers operate primarily on a profit-maximization motive, which generally results in higher prices compared to government institutions. Government spending is required to provide these services at subsidized rates or free of cost to ensure affordability for low-income groups.
- Statement 2 is Correct. Investments in human capital formation (education and health) have long gestation periods. The economic benefits of an educated and healthy workforce manifest over decades. Private investors, who typically seek shorter-term returns, may underinvest in these sectors, necessitating government expenditure.
- Statement 3 is Correct. In a welfare state, access to basic education and healthcare is considered a fundamental right of citizens (e.g., Article 21A for Right to Education in India). It is the moral and constitutional responsibility of the government to ensure these services are accessible to all, regardless of their ability to pay.
Key Takeaway
Public expenditure on education and health is justified to correct market failures, manage long gestation periods of human capital formation, and fulfill the constitutional obligation of providing basic rights to citizens.