We are in the midst of an unprecedented and atypical global adverse shock. While all attention must focus right now on overcoming the health crisis, we must take stock of our economic prospects this decade. This article is not about India’s underlying unconstrained potential. It is about how much of it may be realistically fulfilled over the 2020s.
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India has seen a digital revolution in public services and its payments system is one of the fastest in the world. The goods and services tax, though some hiccups remain, has been implemented, and so also the bankruptcy code. With what has been termed ‘the new welfarism’, access to basic amenities such as bank accounts, cooking gas, toilets and electricity has improved. While these improvements are critical because the end goal of a policy is to raise the well-being of people, it is doubtful if they would translate into measurable economic growth soon, as with the early impact of the internet or electricity.
To begin with, we need to minimize the social and economic cost of the pandemic itself. The key to influence citizen’s expectations and behaviour is the credibility of public policy. Super-spreader events such as election rallies or religious gatherings not only increase the risk of covid’s spread, but also erode policy credibility and the effectiveness of other social restrictions. Similar is the case with India’s vaccination drive, which is the cornerstone of victory against the pandemic. Flip-flops in terms of pricing, procurement and distribution do not help garner public trust.
Productivity improvements form the backbone of rising prosperity. Non-tradable sectors include healthcare and education, where production and consumption largely take place locally. While there is room for tele-healthcare, this sector, by the very nature of its services, will remain largely non-tradable.
Not only that, India’s healthcare capacity remains low, with just 133 beds per 100,000, coupled with a shortage of healthcare staff, but its distribution is also highly uneven across states. Bihar, Jharkhand, Odisha and West Bengal have the fewest beds on this matrix.
The other key service sector, education, has been disrupted enormously by the pandemic. Technology in this sector has leap-frogged in terms of online delivery, which now makes it a tradable sector. However, we have neither an institutional set-up yet, nor household affordability for it, resulting in unequal access to education. Although the National Education Policy has been announced, delivering on its promise will require sustained attention to its implementation and consensus building with states. Education and healthcare systems that lower existing inequalities are critical for a healthy and skilled workforce, and thus for median productivity levels.
The implementation of new farm laws has been deferred and the same may be the case with revised labour laws. In contrast, there seems to be a move towards restricting labour mobility within the country, with some states enacting quotas for local recruitment.
Reforms in sectors mentioned above will take time before they show up in Indian productivity gains.
Another issue is unequal regional development. Maharashtra, Tamil Nadu, Karnataka and Gujarat account for 38% of India’s output (and 54% of manufacturing), with just over 10% of India’s population. Restrictions on labour mobility would further encourage a pandemic-forced move towards capital-intensive production in prosperous states and make job creation tougher in a young labour surplus country.
India needs millions of productive non-farm jobs, and not merely more self-employment and low-skilled services where the potential to raise productivity, and hence real incomes, is minimal. And for that, India needs its unicorn startups to turn into sustainable big businesses since it is the big business that creates jobs, spurs innovation and rewards talent and work. While we have a flourishing startup ecosystem, sustaining expansion and creating large-scale jobs takes time and isn’t yet guaranteed.
Growth is notoriously hard to predict. As a big mis-forecast by the economist Rosenstein Rodan for 1961 to 1976 shows, forecasting an upside due to good luck by way of a sudden change in the implementation of an economic-policy regime is not possible. Or, for that matter, forecasting a severe stroke of bad luck, such as a natural or man-made catastrophe.
All said, barring dramatic changes in luck, and with a global move towards trade protectionism, a pandemic-induced loss of productive capacity and employment, constrained fiscal capacity along with the possibility of higher taxes and inflation, and the anaemic state of the banking sector, a key growth enabler, India is unlikely to improve on its growth performance of the past decade.
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- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)