Modern state is a welfare state, but if borrowing for spending could make countries rich, then no country would be poor. State governments must sustainably create high-paying jobs by raising the productivity of five places — three are of them are not geographic.
There are no poor people, only people in poor places.
An electrician moving from Kanpur to Bangalore gets three times more salary; on moving from Bangalore to Switzerland, she earns 20 times more.
The higher salaries reflect the higher productivity of the electrician’s customers in Bangalore (if every Indian lived in Bangalore, India’s GDP would be more than China’s) and Switzerland (their nine million people produce more GDP than India’s 220 million farmers).
Switzerland – their nine million people produce more GDP than India’s 220 million farmers
Harvard economist Lant Pritchett suggested global wage differences for identical workers are a policy-induced price distortion. Extending his thinking to India, the country’s wage differentials reflect massive productivity differences between five areas — states, cities, sectors, firms, and skills. Let’s dive deeper.
States
In the next decade, more people will die than be born in Karnataka.
In the next 20 years, six states in South and West India will account for almost 35 per cent of GDP growth but only 5 per cent of population growth because economic complexity breeds higher wages.
Economic complexity is like a game of scrabble — to win, you must make more, and longer words — and the government provides vowels while the private sector offers letters. States that provide more vowels — it’s unviable for employers to provide public goods — will attract more high-paying jobs.
Cities
Hyderabad has a higher GDP than Odisha and four times that of J&K.
Pillars of governance – out of tune ?
The 299 remarkable people who wrote our Constitution got many things right, but their mental model of the three pillars of governance — PM, CM, and DM — is no longer fit for purpose.
District magistrates — or their synonym collector — are unelected, inexperienced, and unempowered for the complex trade-offs needed to breed well-paying jobs. Cities that blunt the bad urbanisation that creates a divergence between nominal wages (what employers care about) and real wages (what employees care about) will attract high-paying jobs.
Sectors
Software – employs only 0.8 per cent of our labour force but generates 8 per cent of GDP
Agriculture has 42 per cent of our labour force but only generates 16 per cent of GDP.
Software — an oasis of high firm productivity — employs only 0.8 per cent of our labour force but generates 8 per cent of GDP, while agriculture has 42 per cent of our labour force but only generates 16 per cent of GDP.
Our large population, colossal farm employment, and self-exploitation pair our fifth total GDP with the 138th per-capita GDP country ranking.
China raised its per capita income 80 times in 40 years by moving 700 million people from farm to non-farm employment.
States that increase manufacturing and service jobs will have more high-paying jobs; the only way to help farmers is to have fewer of them.
Firms
We fought with our parents, who said, “he has found a good job; he now works for a multinational company,” believing it was racism. But we now recognise that “MNC” was their proxy for the higher wages paid by higher productivity firms with more capital, technology, and meritocracy.
The pre-1991 unfair labour market advantage of multinationals no longer exists as Indian firms have raised their game. But the problem persists — our 6.3 crore enterprises only translate to 23,500 companies with a paid-up capital of more than Rs 10 crore, and our largest and smallest manufacturing companies have a 24 times difference in productivity. States that replace deals with rules by reducing regulatory cholesterol will attract high-paying jobs.
Skills
Indian cricket players have 100 times higher lifetime earnings than hockey players
There are many reasons — fair and unfair — that Indian cricket players have 100 times higher lifetime earnings than hockey players.
The wage difference between a good and lousy electrician is five times, but it’s fifty times between a good and bad programmer, CEO, or investor.
It is impossible to predict wage premiums, but Grade 12 is the new Grade 8. English fluency is like Windows, an operating system that is a vocational skill.
Wages are higher for using minds than muscles. States with high populations of residents with skills in demand will attract more high-paying jobs.
Fixing these five places requires a chief ministerial agenda. Police reforms, or how the rule of law is experienced.
Empowered mayors — this pertains to devolution of funds, functions, and functionaries.
Fixing government schools — raise their 45 per cent share of enrollment.
Creating the supply that will attract demand (providing skills to workers in advance for the manufacturing boom just like South India did for software with its 1980s engineering college deregulation).
Agriculture reform — prices and distribution. Uninterrupted power (generators are unaffordable by small employers. Reliable public transport — this helps the environment, women, and youth).
Formalisation — state governments generate more than 75 per cent of India’s 67,000 plus compliances, 6,700 plus filings, and 26,410 employer criminal provisions.
A rational HR in the Civil Services — don’t punish good performers by promoting bad performers.
Digitise: Set a 12-month target for paperless and cashless for all citizen interfaces by leveraging India’s unique stack of digital public goods.
India’s problem is not jobs but wages. Wages will not rise without the balanced targeting of the five poor places. State governments must restore policy balance by combining targeting poor people with transforming poor places.
Recent Posts
- 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)