INDIA IN COMPARATIVE PERSPECTIVE

Chapter 3, Uncertain Glory

By Dreze and Sen

COMPARISONS WITH THE NON-AFRICAN POOR

1. In a previous book, we noted that human deprivation was heavily concentrated in

two regions of the world: South Asia and sub-Saharan Africa. That has been true
for many decades now, and it is still largely true today.

2. For instance, most of the countries with a low 'human development index' are in

South Asia or sub-Saharan Africa. Cambodia, Haiti, Papua New Guinea and
Yemen are among the few exceptions of countries with high levels of extreme

poverty in other global regions.

3. Even though South Asia and sub-Saharan Africa share problems of high

incidences of poverty, they are not, of course, similarly placed in every respect.

a. Living conditions are now, in many ways, considerably better in South Asia
(including India) than in sub-Saharan Africa, partly reflecting a faster rate

of improvement during the last 20 years or so.

b. For instance, per capita income is now about 50% higher in South Asia
than in sub-Saharan Africa, unlike in 1990, when it was much the same in

the two regions.

c. More importantly, life expectancy is estimated to be about 10 years longer

in South Asia than in sub-Saharan Africa, and child mortality is almost

twice as high in sub-Saharan Africa compared with South Asia.

4. However, some social indicators are not much better — if at all — in South Asia

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5. For instance, female literacy rates are still much the same in South Asia and Sub

Saharan Africa, not only among adult women (50% and 55% respectively) but
also in the younger age groups (e.g. 72% and 67%, respectively, in the age group

of 15-24 years).'

6. Further, in at least one field — that of nutrition and especially child nutrition —

South Asia fares distinctly worse than sub-Saharan Africa. More than 40% of
South Asian children (and a slightly higher proportion of Indian children) are

underweight in terms of standard WHO norms, compared with 25% in sub-

Saharan Africa (the corresponding figure, incidentally, is less than 12% in every

other region of the world).

7. In fact, despite rapid economic expansion in recent years, India remains one of
the poorest countries among those outside sub-Saharan Africa. According to the

World Bank, only 15 countries outside sub-Saharan Africa had a 'gross national
income per capita' lower than India's in Afghanistan, Bangladesh, Burma,

Cambodia, Haiti, Kyrgyzstan, Laos, Moldova, Nepal, Pakistan, Papua New Guinea,
Tajikistan, Uzbekistan, Vietnam and Yemen.

8. How badly India does in terms of non-income features of living standards even

within this group of poorest non-African countries, as can be readily seen in

Table 3.1. (This table focuses on 16 countries with per capita GDP lower than or

equal to India's, outside sub-Saharan Africa. These are•. Afghanistan, Bangladesh,

Burma, Cambodia, Haiti, India, Kyrgyzstan, Laos, Moldova, Nepal, Pakistan, Papua

New Guinea, Tajikistan, Uzbekistan, Vietnam and Yemen.)

9. India's rank among these 16 poor countries is 10th or worse in most cases. Not
only are India's figures worse than the average for the other 15 countries for all
social indicators presented here (except for the total fertility rate and male

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 literacy rate), its rank in this group is an inglorious 10th for child mortality, 11th

for female literacy and mean years of schooling, 13th for access to improved
sanitation and DPT immunization, and absolutely the worst (along with Yemen) in

terms of the proportion of underweight children.

Table 3.1: Selected Indicators for the World's 16 Poorest Countries, Outside Sub-Saharan Africa

India Average for Other India’s Rank amongst

Poorest Countries 16 Poorest Countries

GDP per capita, 2011 (PPP, constant 2005 3203 2112 1

international $)

Life expectancy at birth, 2011 (years) 65 67 9

Infant mortality rate, 2011(per 1,000 live 47 45 10

births)

Under-5 mortality rate, 2011 (per 1,000 live 61 56 10

births)

Total fertility rate, 2011 (children per 2.6 2.9 7

woman)

Access to improved sanitation, 2010 (%) 34 57 13

Mean years of schooling, age 25+, 2011 4.4 5.0 11

Literacy rate, age 15—24 years, 2010 (%)

Female
74 79 11

Male
88 85 9

Proportion of children below five years

who are undernourished, 2006-10 (%)

Underweight (Wasted)
43 30 15

Stunted
48 41 13

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Child immunization rates, 2011 (%)

DPT 72 88 13

Measles 74 87 11

10. Some of these comparisons are quite instructive. For instance,

a. Vietnam fares enormously better than India in terms of all these indicators,
in spite of being poorer than India.

b. So, incidentally, does Nicaragua, with virtually the same per capita GDP as
India (just a little higher, so that Nicaragua is not included in Table).

c. Uzbekistan, too, is far ahead of India in many respects, with, for instance,

universal literacy in the younger age groups, universal access to improved

sanitation, and (nearly) universal immunization of children — all goals that

are nowhere near being achieved in India.

d. Another striking contrast is between India and Nepal, which has much the
same social indicators as India, with barely one third of India's per capita

income.

11. It could be argued that one would expect India not to fare as well, in many ways,
as other countries at a similar level of per capita income, because India is growing

quite fast and it takes time for higher per capita incomes to translate into better
social indicators. In a country growing at 7% per year in per capita terms, per

capita income would double in 10 ten years, but it could quite possibly take
longer, even with significant efforts, to bring social indicators level with those of

countries that were once twice as rich.

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12. That is a point worth noting, and is itself a good reason not to rely on income

growth alone to bring about a transformation of living conditions

13. This is not to disparage India's achievements, but to put them in perspective, and

to focus on the deficiencies that plague India most and which have to be
overcome.

INDIA'S DECLINE IN SOUTH ASIA

1. One indication that there is something defective in India's 'path development'

arises from the fact that India is-falling behind every other South Asian country
(with the exception of Pakistan) in terms of many social indicators, even as it is

doing spectacularly better than these countries in terms of the growth of per
capita income.

2. The comparison between Bangladesh and India is a good place to start.

a. India's per capita income, already 60%higher than Bangladesh's in 1990,

was estimated to be about double that of Bangladesh by 2011.

b. However, during the same period, Bangladesh has overtaken India in

terms of a wide range of basic social indicators, including life expectancy,

child survival, enhanced immunization rates, reduced fertility rates, and

even some (not all) schooling indicators.

3. No less intriguing is the case of Nepal, which with all its problems of politics and
governance seems to be catching up rapidly with India, and even overtaking India

in some respects.

a. Around 1990, Nepal was far behind India in terms of almost every
development indicator.

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 b. Today, countries are more similar (sometimes a little better in India still,

sometimes the reverse), in spite of per capita income in India being about
3 times as high as in Nepal.

Table 3.4: India's Rank in South Asia

Indicators India's rank among six South Asian

countries

(Top = 1, Bottom = 6)

In 1990 Around 2011

1. GDP per capital 4 3

2. Life Expectancy 4 5

3. Infant mortality rate 2 5

4. Under-5 mortality rate 2 5

5. Maternal Mortality Rate 3 4

6. Total fertility rate 2 4

7. Access to improved sanitation 4-5* 5

8. Child immunization (DPT) 4 6

9. Child immunization (measles) 6 6

10. Mean years of schooling, age 25+ 2-3* 4

11. Female literacy rate, age 15-24 2-3* 4

12. Proportion of underweight 4-5* 6

children

*Ambiguous rank due to missing data for Bhutan (or Nepal, in the case of 'underweight

children').

4. In terms of the rate of expansion of income per head, India is now at the top of
this group (as it is of most groups of countries in the world). But in most other

6
 respects, India's rank has worsened, in fact quite sharply in many cases. Overall,

only one country in South Asia (Sri Lanka) clearly had better social indicators than
India in 1990, but now India looks second worst, ahead of only Pakistan.

5. The comparative perspectives in South Asia tend to be commonly overlooked in

development studies, especially in India.

6. Yet there is a great deal to learn from looking around us within South Asia. Many

other policies and achievements in neighbouring countries merit attention from

Indian planners — and the Indian public generally. Notwithstanding its enormous

size and rapid economic growth compared with its neighbours, India may have
much to learn from them.

BANGLADESH'S PROGRESS AND THE ROLE OF WOMEN

1. Bangladesh is still one of the poorest countries in the world, and large sections of
its population continue to lack many of the bare essentials of good living. Still,
some particular features of the Bangladeshi experience are of special relevance to

India.

2. The roots of Bangladesh's social achievements are not entirely transparent, and
deserve much greater scrutiny than they have received so far. However, some

likely clues are immediately worth noting. Perhaps the most important clue is a
pattern of sustained positive change in gender relations.

3. As Table 3-5 shows, many gender-related indicators are now much better in

Bangladesh than in India.

a. For instance, women's participation rate in the workforce is almost twice as

high in Bangladesh as in India (57% and 29%, respectively).

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 4. This, along with greater female literacy and education, has led to Bangladesh

making remarkable strides towards gender equality in elementary education, so

much so that school participation rates and literacy rates of Bangladeshi girls are

now higher than those of boys, in contrast with India where a substantial gender
bias (against girls) persists. Indeed, Bangladesh is now one of the few countries in

the world where the number of girls exceeds the number of boys in school.

5. Even the share of women in Parliament, while much below one half in both

countries, is higher in Bangladesh than in India.

Table 3.5: Gender-related Indicators in India and Bangladesh

India Bangladesh

Female labour force participation rate aged 15+ 2010 (%) 29 57

Female-male ratio in the population 2011 (females per 1000

males)

All ages 940 997

Age 0-6 years 914 972

Ratio of female to male death rates 2009

Age 0-1 1.01 0.89

Age 1-4 1.55 1.25

Ratio of female to male school enrolment 2010 (%)

Primary 100 104

Secondary 92 113

Literacy rate age 15-24 years 2010 (%)

Female 74 78

Male 88 75

Proportion of adults (age 25+) with secondary education 2010

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(%)

Women 27 31

Men 50 39

Women's share of seats in national Parliament 2011 (%) 11 20

Total fertility rate 2011 (children per woman) 2.6 2.2

6. Women's agency and gender relations may partially account for the fact that

Bangladesh has caught up with, and even overtaken, India in many crucial fields

a. For instance, the fact that both female literacy and women's participation

in the workforce play an important role in the 'demographic transition

(from high to low mortality and fertility rates) is fairly well established.

b. The subjugation of women in South Asia has also been plausibly invoked

in the past as a major explanation for the 'South Asian enigma' — the fact
that child undernutrition rates are higher in this region than in many

countries that are much poorer.

7. It is thus entirely plausible that Bangladesh's recent progress has been

significantly driven by positive changes in gender relations and by the new role of
women in Bangladeshi society.

8. Some of its achievements, in fact, build in a fairly direct and transparent way on
women's agency. For instance, very large numbers of Bangladeshi women have

been mobilized as front-line health workers (both by NGOs and by the

government).

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 9. According to the authors no comparable change can be observed in India as a

whole, and especially in its northern heartland'. There, women's participation in

the workforce has been stagnating at very low levels for decades.

10. A second pointer, particularly relevant to health achievements, is Bangladesh's

apparent ability to focus on the basic determinants of health care and elementary

education in ways that have not happened in India. Bangladesh's endeavours

have been helped by flourishing NGO activities, from comprehensive

development efforts to specialized micro-credit initiatives (led by organizations

such as BRAC and Grameen Bank).

11. Even though the overall size of public expenditure on health on health is still very

low in Bangladesh, there have been substantial progress with essential, low-cost
measures, particularly related to public health.

Table 3.6: India and Bangladesh: Selected Indicators of Public Health

India Bangladesh

Proportion of households practising open defecation (%) 5.5 8.4

Proportion Of children aged 12—23 months who are fully 44 82

immunized (%)

Proportion of children who started breastfeeding within 24 55 89

hours of birth (%)

Proportion of children aged 9-59 months who received 18 88

Vitamin A supplements (%)

Proportion of the population with sustainable access to an 88 97

improved water source (%)

Proportion of diarrhoea-affected children treated with 'oral 39 81

rehydration therapy' (%)

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12. Another area of particular interest is family planning in the two countries.

Bangladesh has implemented a fairly effective, non-coercive family planning

programme which has led to a dramatic reduction of fertility in a relatively short

time - from around 7 children per woman in the early 1970s to 4.5 in 1990 and
2.2 in 2011 (very close to the 'replacement level' of 2.1).

13. As one commentator put it to us, family planning is now as familiar to

Bangladeshi women as 'dal-bhat' (rice and lentils — the staple foods of the

country).

14. Bangladesh has also made early strides in the development and distribution of
low-cost generic drugs through public or non-profit institutions. It is partly by

focusing on these and other 'basics' that the country has been able to improve
people's health in spite of its very low per capita income.

15. A third pointer relates to the importance of social norms in health,education and

related fields, and to the role of public communication and community

mobilization in bringing about changes in social norms. Tens of thousands of

grass-roots health and communityworkers(mobilized by the government as well

as by NGOs) have been going from house to house and village to village for

many years.

16. India, of course , has also initiated programmesof this sort, but it still has much to
learn from Bangladesh, both about the required intensity of these

communication and mobilization efforts, and about the need to overcome the
social barriers that often stand in the way of such initiatives.

INDIA AMONG THE BRICS

1. The BRIC countries (Brazil, Russia, India and China) do have some important
features in common, starting with their gigantic populations.

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2. As Table 3-7 illustrates, however, India is actually an exception within this group,

in important ways. For instance,

a. while every country in the set has achieved universal or near-universal

literacy in the younger age groups, India is still quite far from this goal.
Twenty percent of all Indian men in the age group of 15-24 years, and 25%

all women in the same age group, were unable to read and write in 2006.

b. Similarly, child immunization is almost universal in every BRIC country

except India.

c. India also stands out dramatically in terms of the extent of

undernourishment among children(more than 40% per cent of all children

below the age of 5 are underweight, and close to 50% are stunted).

d. To some extent, this pattern reflects the fact that India is still much poorer
than other BRIC countries: India's per capita GDP (adjusted for PPPis less

than half of China's, one third of Brazil's, and one fourth of Russia's.

3. In other words, the required catching up pertains not only to per capita incomes
but also — very importantly — to public services, social support and economic

distribution. It is, in fact, worth noting that among these 4 countries, India is the
only one that has not (at least not yet) gone through a phase of major expansion

of public support or economic redistribution.

4. Dreeze and Sen emphasize that China made enormous progress (especially in
comparison with India) very early towards universal access to elementary

education, health care and social security — much before embarking on market-
oriented economic reforms.

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5. They are quick to point out that while there were some setbacks in some of these

fields in the 1980s and 1990s, notably in the field of health care, China's growth-
oriented policies during that period benefited a great deal from the solid

foundations of human development that had been laid earlier. Further, the
undoing of socialized health care in the 1980s and 1990s, for which China paid a

heavy price, was reversed again from around 2004.It appears that nearly 95% of
the people are now covered by the revamped, publicly funded health system.

6. Russia, too, had put in place a comprehensive system of social protection and
public services during the Communist period. As in Chinathe system came under

heavy stress after economic reforms — of a more extreme variety — were

introduced in the early 1990s.

a. There was, eventually, an economic take-off of a limited sort (in the 2000s),

but, according to Dreze and Sen, only after the economy and social
infrastructure had been substantially ruined, or handed over to business

magnates. This prolonged economic crisis was associated with an equally

catastrophic deterioration of the health of the Russian population,

particularly men, who now have the same sort of life expectancy as Indian
men (see Table 3-7).

b. And as in China, there have been major efforts to rebuild public services

and the social security system in Russia in recent years, with help from
sustained economic growth from the turn of the century.

7. In Brazil, progressive social policies are comparatively recent, and followed a

period of rapid economic growth, instead of preceding it as in China; it is perhaps

interesting that the social indicators of Brazil and China look quite similar today

13
 (see Table 3-7), even though they reached a Similar situation through very

different routes.

8. According to Dreze and Sen, for a long time, Brazil combined rapid economic

growth with what they call repressive governance, massive inequality and
endemic deprivation. However, as discussed in the next section, this picture has

radically changed after the year 2000 AD.

THE OLD AND NEW BRAZIL

9. Dreze and Sen in an earlier book, we also discussed the pitfalls of 'unaimed
opulence', which they define as - the indiscriminate pursuit of economic

expansion, without paying much attention to how it is shared or how it affects

people's lives.

10. According to Dreze and Sen, in the late 1980s, Brazil was in many ways a fitting

illustration of this pattern. In the 1960s and 1970s, it had one of the fastest-
growing economies in the world, but living conditions remained deplorably low

for large sections of the population.

11. In the mid-1990s, Dreze and Sen had commented that

in contrast with a more equitable and participatory growth pattern in South

Korea, 'India stands in some danger of going Brazil's way, rather than South
Korea's'.

a. They feel that there is a fair amount of unaimed opulence in India today.

12. On the other hand, Brazil has substantially changed course, and adopted a more

inclusive approach based on active social policies. This change has been largely
driven by the flourishing of democracy.

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13. Notable aspects of this new orientation include

a. a commitment free and universal health care,

b. bold programmes of social security and income support, and

c. efforts to expand the reach and quality of elementary education.

14. The right to health was included in the new democratic constitution. It is aimed at

providing free health care to everyone without discrimination, and also launched
an ambitious Family Health Programme.

a. The system involves both public and private health care providers, but is

publicly funded.

b. It has led to a major expansion of access to health care, particularly for the
underprivileged — according to the World Health Organization, 75% of

the population 'rely exclusively on it for their health care coverage'.

c. Brazil's health indicators are reasonably good., with, for instance, universal

immunization of children, an infant mortality rate of only 14 per 1,000

(compared with 47 in India), and only 2% children below five being

underweight (compared with a staggering 43%in India).

15. A special feature of Brazil's new health care project is that it is rooted in strong
popular movements. Brazil's experience also reminds us that, in a democracy

health care can be a lively political issue, as it is in the experience of Western

Europe (and to some extent, more recently, even of the United States).

16. Martin Ravallion (2011) compared the speed and causes of poverty reduction in

Brazil, India and China between 1981 and 2005. During the 2ndhalf of this period
(between 1993 and 2005), Brazil's per capita GDP grew at just 1% or so,

15
 compared with nearly 5% in India. Yet the share of poverty reduction was much

larger in Brazil, where this was also a period of substantial redistribution, in

contrast with India where economic inequality went up.

17. The redistribution included various social assistance programmes (including

large pension schemes), minimum wage policies, and, from 2003 onwards, the

well-known Bolsa Família programme of targeted cash transfers, which covers

about 25% of the population — mainly those outside the formal sectorof the

economy.

18. Indeed, Brazil is still one of the most unequal countries in the world (along with
India, China and South Africa).

19. Less well known than Bolsa Família or Fome Zero (Zero Hunger), Brazil's food

security initiative), but no less important, is the sustained expansion and

improvement of Brazil's schooling system during the last 20 years or so.

a. Even in Brazil's highly unequal society, the proportion of children

attending private schools at the primary level (about 10%) is much smaller

than in India (nearly 30%).

b. Government schools, for their part, have gone through major reforms. For
instance, municipalities have started assuming the main responsibility for

school management; a 'funding equalization law' has been enacted to

ensure a fair distribution of education funds.

c. Pupil achievements have been carefully monitored through regular,

standardized country-wide school tests; conditional cash transfers (initially.

Bolsa Escola, and later Bolsa Família) have been used to promote school

16
 attendance; and (very importantly) Brazil has invested heavily in pre-school

education, which has been extended to more than 80% of young children.

20. The results have been impressive. At least 3 major educational improvements

have been well documented.

a. First, there was a large increase in school attendance and schooling

attainment in the younger age groups. By 2009, school attendance in the

age group of 6-14 years was 98%, and literacy in the age group of 5-24
years was also 98%.

b. Second, this period also saw a sharp reduction in educational inequality.

For instance, the Gini coefficient of years of schooling dropped from 0.41
in 1995 to 0.29 in 2009. Education reforms helped the lagging regions

catch up with the rest of the country.

c. Third, pupil achievements (as measured by test scores) dramatically

improved, albeit from what was, in an international perspective, a low

base.

21. Social spending as a proportion of GDP is now higher in Brazil (about 25%) than

in any other Latin American country except Cuba (about 40%), and about four
times the corresponding ratio in India (6% or so).

22. These achievements and the speed of change — most of this happened within 20

years of a democratic constitution being promulgated — are important facts

from which encouraging lessons can be drawn.

COMPARISONS WITHIN INDIA AND THE INTERNAL LESSONS

17
1. While India has much to learn from international experience, it also has a great

deal to learn from the diversity of experiences within this large country. The
regional records are very diverse indeed.

a. A number of Indian states - Kerala and Tamil Nadu, for example - would
be at the top of the South Asian comparisons if they were treated as

separate countries, and others - Uttar Pradesh and Madhya Pradesh, for
example — would do enormously worse.

b. These contrasts are indeed sharp. For instance, whereas female life

expectancy is 77 years in Kerala, it is still below 65 years in many of the

large north Indian states.

2. Dreze and Sen believe that the Indian states that have done well tend to have

been those which had laid solid foundations of participatory development and
social support early on, and actively promoted the expansion of human

capabilities, especially in terms of education and health.

3. Seven major states (with a combined population of 545 million in 2011, about

50% of India's population) have had poor social indicators for a long time, as well

as high levels of poverty: Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh,

Odisha, Rajasthan and Uttar Pradesh.

a. For instance, that less than 50% of all children aged 8-11 years are able to
pass a very simple reading test (going a little beyond liberal definitions of

'literacy') in some of these states, only 23% of young children are fully
immunized in Uttar Pradesh, and more than 50% of the population in Bihar

lives below the Government of India's extremely low poverty line.

18
 b. In international perspective, some of these states are not very different

from the poorer countries of Africa in the intensity of human deprivation.

c. For instance, multi-dimensional poverty index' (MPI) place states like Bihar

and Jharkhand in the same category as some of the poorest African

countries like Mozambique and Sierra Leone.

d. The seven states mentioned earlier (Bihar, Chhattisgarh, Jharkhand,

Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh) are more or less on
a par — taken together — with the 27 poorest countries of Africa, and

have roughly the same population.

4. What the multi-dimensional poverty figures suggest, roughly speaking, is that

living conditions in the poorer half of India are not much better, if at all, than in

the poorer half of Africa.

5. Looking at the other end of the scale, (Table 3-.9), three major states distinguish

themselves with relatively high levels of human development:

a. Kerala,

b. Himachal Pradesh and

c. Tamil Nadu.

6. Punjab and Haryana are not very far behind.

7. In fact, in terms of multi-dimensional poverty'. Punjab actually does a little better

than both Himachal Pradesh and Tamil Nadu.

8. Arvind Subramanian is of the opinion that Prior to 1980, the growth rate of the
Indian states was mediocre but relatively uniform. After 1980, however, the
fortunes of the states diverged considerably (Ahluwalia 2000).

19
9. There is clear evidence of fortunes of the States diverging in the 1980s but

especially in the 1990s and beyond.

10. What explains this divergent pattern of growth?

11. It appears that two sets of factors played a role.

a. First, different states had different pre-existing capabilities. But these

remained latent and could not find expression until the economic
environment changed.

b. The trigger—the second set—was the liberalization that began in 1980,

and especially the decentralization of economic power that was forced by

the changing political landscape after 1980.

12. Thus it was the interaction between pre-existing capabilities and the twin triggers
of liberalization and decentralization that explains how the different states fared.

13. What was this pre-existing capability?

14. According to Subramanian, this capability was something more than a state's
level of development or educational level or geography.

a. It is best captured by how diversified a state's manufacturing base was.

This diversified base is probably a proxy for some generalized capability—

human capital, entrepreneurial spirit, organizational capital—that could

exploit a favourable economic environment.

15. If we calculate the Herfindahl coefficient of concentration within manufacturing in

the different states in the early 1980s against their subsequent overall growth

rates. The relationship is strongly negative, that is, the less concentrated the

20
 manufacturing base to begin with (or the more diversified it was), the faster the

subsequent growth.

16. Note: The Herfindhal index is defined as the sum of squares of individual shares i.e. if
there are 2 firms with 50% share each then H Index is defined as (50)2 + (50)2 = 2500 +
2500 = 5000. Anything above 1000 is considered high concentration. The Herfindahl
Index measures concentration of value added across three-digit industries in 1982; the

lower the index, the lower the concentration, or the higher the diversification.

17. Consider next the triggers of liberalization and decentralization.

18. According to Subramanian eventhough the Congress Party returned to power at

theCentre through much of the 1980s, a number of stateswere captured by the

opposition, often by regional oreven single state parties.Simply put, the

centrifugalforces created by the dispersion of political power inIndia did not sit

well with the enormous centralizationof economic power, and the inter-state

cross-subsidiesthe Centre effected through its investment strategy.Something

had to give, and it was the centralization ofeconomic power.

a. Greater economic decentralization meant statescould differentiate

themselves, not least in their abilityto attract private-sector investment.

This was, of course,facilitated by the gradual dismantling of the

industriallicensing system.

b. Furthercontributing to differentiation over this period was therising trend

in private investment, as well as the fallingtrend in public investment, with

private investment likelyto be more sensitive to differences in policies

across states.

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19. The decentralization dynamic canbe seen in yet another way: if decentralization

was indeedimportant, then states’ economic performance should bemore closely

tied to state-level policies and institutions inthe post-1980s period than before.

20. This is exactly what theevidence shows.

21. As a measure of state policies and institutionsaffecting the quality of

infrastructure and the businessenvironment, the transmission and distribution

losses(T&D losses) of State Electricity Boards are used. T&D losses refer to
powerthat is generated but not paid for—in part because someof it is lost

naturally along power lines in the process ofT&D, but also in part because it is
stolen.

22. In other words, we are looking at T&D losses as a proxy for state efficiency.In

areas whereT&D losses are high, the quality of power is low. Thus T&D lossesare
not directly related to capacity, but are determinedby state-level political

decisions. They broadly reflectthe quality of both infrastructure and

institutions(politicians turning a blind eye to power theft by theirconstituencies,

or politicians’ unwillingness to enforcelaws, as well as viability and level of

corruption in StateElectricity Boards).

23. We find that there is a negative correlationbetween the average T&D losses in

1980–2000 in a stateand its growth during that period.

24. In short, economic development results from the interaction of growth triggers

with the right fundamentals that allow the triggers to be exploited.

25. According to Subramanian, the boom in the IT sector first awakened observers to
the fact that important cumulative elements (the fundamentals) were had been
built before 1980s and they yielded rewards with a lag.

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26. In other words, these fundamentals were as important as the triggers that

sparked the IT boom.

27. The fundamentals were not just the pools of skilled human capital, they also

consisted of the meta institutions of democracy, rule of law, free press, and
technocratic bureaucracy.

28. Looking ahead, Subramanian feels that a big uncertainty relates to the quality of

these institutions. Institutional decline will not just need to be averted at the
national level but also at the level of the states. Higher growth in India is leading

to more divergent growth, with more populous states lagging considerably

behind.

29. So a key question is how the process of divergence within India can be reversed.

a. In theory, free mobility of capital and labour should facilitate convergence.

But capital will not flow into the lagging states, which are stuck in a

governance trap. Because basic state functions such law and order, an
efficient bureaucracy, and competent courts have not been provided, they

have remained poor, which in turn has led to exit of the middle class and

the skilled, leading to a further hollowing out of state capabilities.

b. If this continues, the process of arresting divergence could take the form

of large labour outflows from the backward states. This would create its
own tensions.

c. Hence Subramanian concludes by saying averting these tensions by

creating the conditions (law and order, institutions, infrastructure,

education, health) for greater economic convergence across states and
skill groups will be a big challenge for India in the years ahead.

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30. Coming back to the analysis by Dreze and Sen, keeping in mind Subramanian’s

emphasis on law and order, institutions, infrastructure, education, health, it is

interesting to note that Dreze and Sen say that there are, two particular reasons

to give special attention to Kerala, Himachal Pradesh and Tamil Nadu.

a. First, they do much better than Punjab and Haryana by gender-related and

child-related indicators.

b. Second, Kerala, Himachal Pradesh and Tamil Nadu are all states that were
very poor not so long ago (say in the 1950s and 1960s) — unlike Punjab

and Haryana, which have been relatively prosperous regions of India for a
long time.

31. Kerala's social achievements have a long history and have been widely discussed.

What is interesting is that Kerala continues to make rapid progress on many

fronts. The improvement of living conditions in Kerala has not only continued but

even accelerated, with help from rapid economic growth, which in turn has been
assisted by Kerala's focus on elementary education and other basic capabilities.

32. Like Kerala, Himachal Pradesh launched ambitious social programmes, including

a vigorous drive toward universal elementary education, at a time when it was

still quite poor — the early 1970s. The speed of progress has been truly

impressive: Himachal Pradesh is now on a par with Kerala as far as elementary

education is concerned, and other social indicators are also catching up.

33. Within 40 years or so, Himachal Pradesh has made the transition from severe
social backwardness and deprivation (as the region was seen then) to a relatively

advanced state with a widely shared freedom from abject deprivation.

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34. Tamil Nadu started from appalling levels of poverty, deprivation and inequality.

Throughout the 1970s and 1980s official poverty estimates for Tamil Nadu were
higher than the corresponding all-India figures, for both rural and urban areas

(about 50% of the population).

35. Tamil Nadu, initiated social programmes such as universal midday meals in

primary schools and started putting in place an extensive social infrastructure -

schools, health centres, roads, public transport, water supply, electricity

connections, and much more. According to Dreze and Sen this was not just a
reflection of kind-heartedness on the part of the ruling elite, but an outcome of

democratic politics, including organized public pressure. Disadvantaged groups,

particularly Dalits, had to fight for their share at every step.

36. Today, Tamil Nadu has some of the best public services among all Indian states,

and many of them are accessible to all on a non-discriminatory basis

37. While each of these experiences tends to be seen, on its own, as some sort of
confined 'special case', it is worth noting that the combined population of these

three states is well above 100 million. Tamil Nadu alone had a population of 72
million in 2011, larger than most countries in the world.

38. The notion that these states are just 'outliers' overlooks the fact that their

respective development trajectories, despite many differences, have shared

features of much interest.

a. First, active social policies constitute an important aspect of this shared

experience.

b. Second, these states have typically followed universalistic principles in the

provision of essential public services.

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 i. The basic principle is that facilities such as school education,

primary health care, midday meals, electricity connections, ration

cards and drinking water should as far as possible be made

effectively available to all on a non-discriminatory basis, instead of

being 'targeted' to specific sections of the population.

ii. In fact, in many cases the provision of essential services and

amenities has not only been universal but also free.

c. Third, Comparatively efficient administration. The governments involved

have delivered their services in traditional lines, and

i. There has been little use of recently favoured short-cuts such as the
use of para-teachers (rather than regular teachers), making

conditional cash transfers, or reliance on school vouchers for private

schools (rather than building government schools).

ii. The heroes in these successful efforts have been 'old-fashioned'

public institutions — functioning government schools, health

centres etc.

iii. These traditional public institutions have left much room for private
initiatives at a later stage of development.

d. Fourth, dealing with social inequality has also been an important part of

these shared experiences. In each case, the historical burden of social

inequality has been significantly reduced in one way or another.

i. Sustained social reform movements as well as fierce struggles for

equality on the part of under-privileged groups.

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 ii. Himachal Pradesh benefited from a more favourable social

environment, including relatively egalitarian social norms and a

strong tradition of cooperative action.

iii. While substantial inequalities of class, caste and gender remain in

each case, the underprivileged have at least secured an active —

and expanding — role in public life and democratic institutions.

e. Fifth, these experiences of rapid social progress are not just a reflection of
constructive state policies but also of people's active involvement in

democratic politics.

f. Finally, there is no evidence that the cultivation of human capability has

been at the cost of conventional economic success, such as fast economic

growth. While many of their big social initiatives and achievements go

back to earlier times, when these states were not particularly well-off,

economic growth, in turn, has enabled these states to sustain and

consolidate active social policies.

39. Thus while not so long ago, Kerala was considered as an anomaly of sorts among

Indian states. Its distinct social history and political culture appeared to set it
apart, and to make it difficult for any other state to follow a similar route. Today,

the situation looks a little different. Other states have also made great strides in
improving the quality of life — not in exactly the same way.

40. Other [remaining] states have good reason to learn from these positive
experiences, even as India also learns from the successes and failures in the rest

of the world.

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