Dave Donaldson’s ‘Railroads of the Raj: Estimating the Impact of Transportation Infrastructure’ shows that the arrival of railways caused real GDP in India’s agriculture to increase by around 17%.
Suresh Prabhu may not have heard of Dave Donaldson, but the Indian railways minister would do well to read an insightful paper by the Stanford University economist who has been awarded the prestigious John Bates Clark medal for American economists under 40.
The John Bates Clark medal is a good predictor of future achievement. Twelve of the 39 economists who have won the medal have gone on to win the Nobel Prize in economics. The strike rate increases to almost one in every two if one considers only medal winners before 1993. The more recent winners are obviously too young to be in the running for a Nobel right now, so what happened to the first 25 winners is a better gauge.
One of the works by Davidson that is specifically cited by the American Economics Association in their press release last week is his paper on how the spree of railway building by the British Raj impacted the Indian economy.
Some 60,000km of track was laid in the 75 years after the first train chugged out of Bori Bunder station in Mumbai in 1853. The military intention is well known. A network of railways was seen as a convenient way to move troops across India by a colonial establishment that had been rattled by the first war of independence in 1857.
There were economic benefits as well. Karl Marx wrote presciently in 1853 that the railways would be the forerunner of modern industry. He added that trains would also dissolve traditional social arrangements.
The British funded the expansion of the railways network by floating bonds in the London market—at a guaranteed return of 5% a year. The early nationalist critics of colonial economic policy such as Dadabhai Naoroji argued that the high cost of capital was more than the returns from the railways, and hence amounted to a drain of national resources.
Donaldson is one of the new generation of development economists who use unique data sets to examine what happened in the past. His research on the economic impact of railways uses some innovative district-level data sets that he has constructed on prices, output, rainfall, domestic trade and international trade. These are based on digitized records of the British Raj. Davidson has also developed a digital map of the railways network. Each 20km stretch is coded with its year of opening.
His three key conclusions: railway expansion led to a fall in trading costs, it increased the volume of goods shipped and the economic benefits greatly exceeded the cost of construction.
“When observing the railroad network in India, I estimated that in a typical district, the arrival of railroad access caused real gross domestic product in the agricultural sector (the largest sector of India’s economy at that time) to increase by around 17%,” writes Davidson. This estimate was arrived at after taking into account both the positive and negative impact of the train on economic activity in a district.
There are two important lessons from the sort of innovative work being done by economists such as Donaldson.
First, debates about the past can be enriched if the data is carefully examined. Second, there are contemporary policy lessons as well. Railroads of the Raj: Estimating the Impact of Transportation Infrastructure, which Davidson wrote in September 2012, as well as his later work on the expansion of railways in the US, provides ample proof that ramping up investment in railways and roads is one of the best ways to promote development in the hinterland.
This lesson should be even more resonant at a time when the new goods and services tax will remove obstacles to internal trade by creating a truly integrated Indian market.
Six Major findings-
- Railroads signi cantly reduced the cost of trading in India.
- Railroad-driven reductions in trade costs increase bilateral trade flows.
- Railroads reduce the responsiveness of prices to local productivity shocks:
- Railroads increase real income levels.(That is, when a district is connected to the railroad
network its real income rises; however, improvements in the railroad network that by-pass
a district reduce the district’s real income (a negative spillover effect) - Railroads decrease real income volatility (When a district is connected to the railroad network,
its real income is less responsive to stochastic productivity shocks in the district (which reduces
volatility) - There exists a sufficient statistic for the welfare gains from railroads.
Pictorial Representation of historical development of railroads in India:-
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)