5/8/2014 State of Governance – N C Saxena

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State of Governance – N C Saxena » Inclusion / July -September 2013 / Vol IV / Issue 3

Developm ent Perform ance

‘Why have some done better than others?’

Despite good achievem ent on the growth front, India faces significant

challenges as its social indicators continue to lag behind. Mere increase

in the social sector expenditure would not be enough, unless it is linked

with outcom es directed to the socially excluded groups and effectively

m onitored, say s NC Saxena

The yawning gap between India’s economic performance and its poor social

indicators is generally attributed to delivery issues at the State and district

level. It is believed the capacity to implement inclusive and pro-poor policies

has always been limited to Hindi-speaking and eastern States. Laveesh

Bhandari, in a recent interview, remarked, ‘if you draw a straight line from

Kanpur to Kanyakumari, the States to the right of it are not doing well

economically’. As he later clarified, this view is under challenge as after 2003

many poorer states – Bihar, Odisha, Chhattisgarh, and Madhya Pradesh –

have grown as fast as the developed States, though the historical disparity still continues.

Historical factors behind regional differences

The question why some societies generate growth and change and

others stagnate, was at the heart of 19th century sociology, especially

in the works of Karl Marx and Max Weber. This tradition has been

carried forward in India too to explain population densities and social

structure in terms of ecological variables of rainfall and irrigation, as

well as to explain association between oppressive power structures in

eastern India and its agricultural involution in the 20th century.

Till the early 19th century, the eastern region was more prosperous

than the west and peninsular India, because of better rainfall and

more fertile soil. Due to plenty of groundwater, it was easier to dig

wells and irrigate crops. Better productivity not only reduced mortality, but also attracted migration from less fertile

regions, leading gradually to high population pressure. As labour was available in plenty, landowners did not have to do

manual work themselves. Gradually, a tradition to associate status with leisure emerged, in which performing manual

work was considered polluting and a sign of low ritual status. High co-relation between caste and landownership in the

eastern region helped in the evolution of feudal customs, which determined everyday discourse and almost became part

of the religion.

In semi-arid west and peninsular India,

nature was harsher, soil was infertile,

labour was difficult to find, and

landowners had to work on the fields to

eke out a living. The situation started

changing from the mid-19th century,

when the British land tenure settlement

brought the west and southern India

under a ryotwari system, in which

property rights were assigned to

individual villagers. Also, the British

invested a great deal in infrastructure to

facilitate revenue collection.

On the other hand, in the zamindari

(and taluqdari) areas of Uttar Pradesh,

Bengal, Bihar, Orissa, and Central

Provinces, land taxes and property

rights were assigned to landlords, who

did little towards development. In the

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east, non-resident landlords often owned rights to numerous villages and developed extensive bureaucratic

organisations and policing forces to oppress and employ local villagers to farm the land under exploitative

sharecropping or wage contracts. Public investment by the colonial government in terms of ports, canals, roads, and

schools was more pronounced in the ryotwari areas and north-west provinces (including west UP), whereas this task

was often left to the zamindars in the eastern India. Thus, acute pressure on land and the introduction of British

institutions reversed the fortunes of ryotwari regions.

In addition, there emerged radical movements of social reform in Kerala, Tamil Nadu and Maharashtra, concerned

with fighting against the caste system and untouchability, and very often with female literacy and the status of

women. These led to higher level of literacy in these States; in 1961, Kerala (55 per cent), Tamil Nadu (36 per cent), and

Maharashtra (35 per cent) were far ahead of the national average of 28 per cent, or an average of 21 per cent across

the four big states of the Hindi heartland – Bihar, UP, Madhya Pradesh and Rajasthan.

A more pro-poor regime in Kerala and Tamil Nadu interacted with a more efficacious citizenry, creating what Amartya

Sen rightly called a “virtuous” cycle. This created both a supply of and demand for a variety of successful pro-poor

public policies, including land reforms, higher investments into and better implementation of education and health

policies, and greater gender equality. On the other hand, with long traditions of zamindari or taluqedari rule, the

quality of State-level bureaucracy that the Hindi heartland inherited was generally low. Virulent patronage politics

politicised the bureaucracy in the post-Independence years, further diluting the State’s developmental capacity. Land

reforms too were very poorly implemented in the Hindi-heartland States.

Growth rates

From 1960 to 1987, output per capita in India (measured by net domestic product at constant prices) grew at an

average rate of only 1.3 per cent per annum. In marked contrast, from 1987 to 2011, Indian output per capita grew on

average at 4.9 per cent per annum. If the reference period is changed to 2000-11, the growth rate further improves to

about 7 per cent. Even the four poor and slow-growing States did quite well in the last decade, as shown in Figure 1.

The fact that growth rates have increased across the board means that the gap between rich and poor States has not in

general been narrowing. Though UP and Assam have shown disappointing results, Bihar, Jharkhand, Chhattisgarh,

and Odisha have done quite well, but so have Maharashtra, Gujarat, Haryana, Tamil Nadu and Kerala, thus negating

the possibility of convergence between the rich and the poor States.

Punjab, which both in 1987 and 2000-01, was the richest Indian

State, has had one of the weakest growth performances since the

turnaround. As a result, it has been overtaken by four States. But

the growth rates of other developed States were quite comparable

with the poorer States. In fact, the ratio of average growth rates

of five States with lowest per capita income (PCI), as against

those of five highest PCI States, did increase from 57 per cent in

the Eighth Plan (1992-1997) to 94 per cent in the Eleventh Plan

(2007-12), but still remained below 100, thus leaving inter-State

disparities unchanged.

Hum an Developm ent Indicators

India’s HDI value has improved by over 59 per cent, from 0.344

in 1980 to 0.547 in 2010, as against an improvement of about 22 per cent in the global HDI value, from 0.558 to 0.68,

during the same period. As expected, there is a great deal of inter-State variation (See Table 1).

Kerala is the best performer, witnessing a literacy rate of 94 per cent, sex ratio of 959 and infant mortality rate of 12 per

thousand. At the other end of the spectrum, the worst performing States are Bihar (lowest female literacy rate of 53 per

cent), Haryana (sex ratio of 830) and Madhya Pradesh (IMR of 59). Importantly, the BIMARU States, despite

witnessing impressive growth rates, continue to remain at the bottom of the distribution in terms of performance on

human development indicators (see Figure 2). However, the richer States too were not immune from poor

performance on some indicators. The below-average performance of Haryana and Punjab on gender-related indicators

points to the inadequacy of per capita output in measuring the economic and social progress in society.

Ironically, women’s status and child sex ratio is poorer in the richer states of the north and north-west regions,

including Rajasthan, Maharashtra and Gujarat, where harsher cultivation conditions discourage female participation,

in contrast to the eastern and southern region where double cropping of wet rice cultivation requires high female

labour for sowing, transplanting and harvesting. Moreover,

the north-west region in the medieval period was prone to

attacks from invaders, from whom women had to be

protected, leading to a perception that women are a

liability. This world-view unfortunately still persists as

witnessed by the lowest sex ratio in the region. Prosperity

of these regions also facilitates their access to medical

facilities leading to sex selective abortion.

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Ideas for Growth, October-

Decem ber 2013

You have raised several issues

like denial of social benefits to

socially backward classes and

other minorities in our society.

You have also raised other

issues relating to good

governance, which I have

noted and will take up these

with our leadership.

Kodikunnil Suresh, Union

Minister of State for Labour

& Em ploy m ent

I appreciate your

thoughtfulness.

Manohar Parrikar, Chief

Minister, Goa

I find that the fresh

ideas/opinions of eminent

personalities in government

and corporate world brought

out in the magazine for

resuming and accelerating

growth in India are very

useful.

Avinash K Srivastava,

Additional Secretary ,

m inistry of Agriculture

...read more

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Social Sector Expenditure

According to the

Economic Survey

2012-13, the total

social sector

expenditure by Centre and the State governments, combined as a percentage

of GDP, has almost remained stationary between 6 and 7 per cent. This is

despite the fact that GOI allocation for education, health and other sectors

relevant to MDGs has increased significantly over the past two decades.

Roughly 70 to 80 per cent of the total expenditure on social sector is still borne

by the States. But they have not been able to improve social expenditure as a

proportion of total expenditure (See Table 2).

Ironically, social sector expenditure as a percentage of GSDP is higher in

poorer States when compared to the richer States. This is because staff costs

are a significant proportion of such expenditure, and with low GSDP they

form a higher proportion for the poorer than for the richer States (See Figure

3).

However, the poorer States’ per capita plan expenditure (See Figure 4) is much below that of the prosperous States, as

their revenue collection is insufficient, and the devolution from the Finance and Planning Commissions, based on 1971

population, is not sufficiently equitous. States like Bihar, UP, and Rajasthan, which have not been able to control

population growth, suffer a great deal when compared with Kerala and Tamil Nadu. For instance, Kerala’s share in

India’s population is now 2.8 per cent, but for the purpose of central devolution of funds the share is calculated at 4 per

cent, which was the position in 1971.

Freezing the population criterion to a level it was 40 years ago is seen as a significant dilution of the equity principle by

the Hindi-speaking states. The southern States, on the other hand, see this as a necessary complement to their ongoing

efforts on population control. Interestingly, the new 14th Finance Commission has an added mandate that “the

Commission may also take into account the demographic changes that have taken place subsequent to 1971”, which

may give rise to north-south divide on this cantankerous issue.

There are two surprises in the inter-se position of the States of West Bengal and Chhattisgarh (See Figure 4). Tax

collection in West Bengal has always been very poor – at about 5 per cent of GSDP. This has also led to huge

borrowing by the West Bengal government (often from private parties), which means much of the State revenues are

used up in paying interest on State debt. On the other hand, Chhattisgarh, because of mineral wealth, is a revenue

surplus State and it is able to spend on food subsidies and other social subjects liberally.

Health

India is likely to miss achieving the Millennium Development

Goals in respect of health indicators. For instance, infant

mortality rate (IMR) is to be reduced to 28 by 2015, but the

decline has been from 60 in 2002 to only 44 in 2011. Rural

healthcare in most States is marked by staff vacancies,

absenteeism of doctors/health providers, low levels of skills,

shortage of medicines, poor management, inadequate

supervision/monitoring, and callous attitudes. There are neither

rewards for service providers, nor punishments for defaulters.

Indian public spending on health is amongst the lowest in the

world, whereas its proportion of private spending on health is

one of the highest. The private sector health care is

unregulated, pushing over-medication and the cost of

healthcare up, thus making it unaffordable for the poor.

As expected, Madhya Pradesh and UP define the bleak end of

health parameters, while Kerala and Tamil Nadu provide the

beacons of hope (See Figure 5). It is interesting to note that

after nearly 30 years of CPM rule, 44 per cent of children less

than 3 years in West Bengal are underweight for age. In Bihar,

while Additional PHCs continue to exist on paper, many centres

are derelict and abandoned sites, while others stand mined of all

human resources that have been diverted to ‘upgraded PHCs’

performing the function equivalent to CHCs in other States,

and still others have been contracted out on a public-private

partnership (PPP) basis. Similarly, 20 per cent of sub-centres at

the village level in Bihar were found to be functioning on an adhoc basis out of a primary school building or a room in

a construction site, with the ANM operating out of here only on immunisation days.

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The Planning Commission in 2009 evaluated National Rural Health Mission (NRHM) in four states – UP, Bihar,

Rajasthan, and AP. Its finding was that the human resource gap remains the singular most important challenge in

strengthening the public health system and meeting the NRHM goals. Medical professionals available in the country,

especially specialists, are not joining public services. Nursing colleges are far short of requirements, and ANM Training

Centres have been non-functional for about a decade in several States, leading to non-availability of staff nurses and

ANMs for recruitment.

Education

Enrolment levels for the 6-14 age-group have improved in all States in rural India. However, in Rajasthan and UP, the

percentage of girls (age 11-14) not enrolled in school has risen from 8.9 per cent and 9.7 per cent, respectively, in 2011,

to more than 11 per cent in 2012. Female literacy is quite low for tribal girls, and in some central Indian districts it may

not have crossed 10 per cent. The number of children actually attending schools is also quite low in poorer States, and

varies between 50 to 70 per cent. Increases in private school enrolment are seen in almost all States, showing

deterioration of quality in government schools. In 2012, more than 40 per cent of children (age 6-14 year) in Jammu

& Kashmir, Punjab, Haryana, Rajasthan, UP, Goa and Meghalaya were enrolled in private schools. This percentage

was 60 per cent or more in Kerala and Manipur.

In 2010, nationally only about half (53.7 per cent) of all children in Standard V were able to read a Standard II level

text. This proportion fell to 48.2 per cent in 2011, and further to 46.8 per cent in 2012. The decline in reading levels is

more visible among children in government schools compared to those in private schools. For all children in Standard

V, major decline in reading levels (of 5 percentage points or more) between 2011 and 2012 is seen in Haryana, Bihar,

Madhya Pradesh, Maharashtra and Kerala. There is evidence of a more than 10 percentage point drop in the ability to

do basic subtraction in almost all States. Exceptions are Bihar, Assam and Tamil Nadu; and AP, Karnataka and Kerala

where there has been either improvement or no change since 2011.

Kerala’s historical success in education has been largely attributed to the actions of organised collective movements,

both in the formal and informal sectors, in the form of militant peasants associations and labour unions. Lately, due to

budgetary deficit, the percentage of public spending on education to total government expenditure – which was 29 per

cent in 1982-83 – declined to 18 per cent in 2005-06. In 1990-91, out of a total student population of 5.9 million,

private unaided schools accounted for only 2.5 per cent. By 2005-06, this rose to 7.4 per cent. The enrolment in

government schools declined from 39 per cent in 1990-91 to 31.5 per cent in 2005-06. The people of Kerala seem to be

losing faith in the government system.

Reduction in poverty

The Planning Commission estimates poverty based on consumption that was fixed at 1.63 for rural and 1.90 per

capita per day for urban India at 1973-74 prices. The poverty line has been indexed upwards in subsequent years to

reflect the impact of inflation, but the civil society is not happy with the low poverty cut-off line of 27 per day per

capita for rural areas and 33 for urban areas at 2011-12 prices. However, one must remember that the Indian line

compares well with the International line of US$1.25 a day, taking the PPP value of dollar at 22. Surely the present

cut-off is too low – it could be called the destitute or starvation line – but still 27 crore people were surviving in 2011-12

on such a meagre amount. One should worry more about them rather than attack the line itself.

India’s poverty remained stagnant at about 65-70 per cent level throughout the period 1951-75 (based on the

Tendulkar methodology), when per capita incomes rose by less than 1.5 per cent a year. Perceptible decline in poverty

during the next 15 years was associated with high annual growth rate in agriculture of more than 2 per cent in per

capita terms, benefitting regions with fertile soils and irrigation (see Table 3).

Several features of poverty in India stand out. First, poverty is getting concentrated in the poorer States. Out of the total

number of people below the poverty line, share of the five states of UP, Bihar, Madhya Pradesh (all undivided), Odisha,

and Assam went up from less than 50 per cent in 1973-74 to more than 65 per cent in 1993-94. In terms of absolute

numbers, UP and Bihar account for around 27 per cent

of the country’s population, but 30 per cent of India’s

poor lived there in 1973-74, which increased to over 41

per cent by 1999-2000.

Second, in 1973-74, except for the States in the north-

west region, all other States in India had almost similar

poverty levels – between 60 and 70 per cent – with

even higher levels in the eastern states of Bihar, West

Bengal and Odisha. The decline during the next 20

years was the highest in Kerala, followed by West

Bengal and AP. In fact, Kerala was the poorest state in

India till the early 1960s, followed by Tamil Nadu. The

poor benefited in these States due to strong public

action, spurred by informed citizen action building on

high literacy in Kerala, and acute political rivalry

between DMK and AIADMK in Tamil Nadu which led

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between DMK and AIADMK in Tamil Nadu which led

to announcements of a number of populist programmes

by successive governments.

On the other hand, basic universal services in schooling,

healthcare, child immunisation, public food

distribution, and social security in the BIMARU states

appear to have been comprehensively neglected, with

no particular efforts to ensure results. By the 1980s,

electoral competition in UP and Bihar had become

intensely socially polarised, with voting decisions

overwhelmingly based on a candidate’s identity. Public

spending on education and health accounted for 45 per

cent of public expenditure in Kerala in the 1970s, while

it was less than 30 per cent in the Hindi-speaking

States, with the exception of HP and Uttarakhand which have a high literacy levels (See Figure 6).

Whereas AP, Tamil Nadu, and Rajasthan have done quite well, Assam and Chhattisgarh’s performance was

disappointing. In the period of 2004-12, the steepest decline in poverty was in India’s poorer States. Bihar has

experienced a substantive decline with the percentage of the BPL population coming down from 55 per cent in 2004-05

to some 35 per cent in 2011-12.

Policy instruments thus should be designed to address not only the low income and consumption aspect of poverty, but

also the complex social dimensions.

Food security & PDS

According to the latest Global Hunger Index Report, India continues to be in the category of those nations where

hunger is ‘alarming’. What is worse, despite high growth, hunger index in India between 1996 and 2011 has gone up

from 22.9 to 23.7. The scores for Indian States range from 13.6 for Punjab to 30.9 for Madhya Pradesh, indicating

substantial variability. All 17 States have hunger scores that are well above the ‘low’ and ‘moderate’ hunger categories.

Twelve of the 17 States fall into the ‘alarming’ category, and one – Madhya Pradesh – into the ‘extremely alarming’

category.

The Public Distribution System (PDS), which is the most important programme to fight hunger, suffers from several

weaknesses – ration cards being mortgaged to ration shop owners, large errors of exclusion of BPL families and

inclusion of APL families, prevalence of ghost BPL cards, weaknesses in the delivery mechanism leading to large-scale

leakages, and diversion of subsidised grains to markets and unintended beneficiaries. As per the 2004-05 NSS Round,

households in the bottom obtained only 17 per cent of their foodgrains consumption from the PDS for the country as a

whole. The percentage varied from 2 per cent for Bihar, 6 per cent for UP to 50 per cent for Tamil Nadu and 68 per

cent for Karnataka. The heartening news is that leakages have come down from 55 per cent in 2004-05 to 43 per cent

in 2007-08 to about 30 per cent in 2011-12.

PDS had always worked quite well in Tamil Nadu, Kerala, HP and AP, but now States like Chhattisgarh, Odisha and

Rajasthan have undertaken State-level PDS reforms by extending coverage, improving delivery and increasing

transparency. The best results are seen in Chhattisgarh because of replacement of private dealers by panchayats,

increased commissions, coverage of more than 80 per cent families under the scheme as opposed to only 40 per cent

who are officially recognised as BPL by GOI, and regular monitoring and grievance redressal mechanism that leads to

swift action if foodgrain does not reach the people. Gujarat has made FPS multi-product shops, but no such order exists

in many other States.

Political initiatives in som e States to im prove indicators in last 10 y ears

States’ poor record in human development indicators is primarily due to lack of political will. Right from the grassroots

and upwards, politics in India has become a business. Politicians put pressure on the system with a view to maximise

private gains. Politicians think that electoral behaviour can be manipulated through precipitating caste or other

populist wave at the time of elections. At the same time, elections require funds which have to come through the

looting of the government treasury. People too contact MLAs for seeking personal favours, but not for improving the

quality of public services.

The political system in many States is accountable not to the people, but to those who are behind the individual MLAs;

these are often contractors, mafia, corrupt bureaucrats, and manipulators who have made money through using the

political system, and are, therefore, interested in the continuation of chaos- and patronage-based administration. The

fact that half of the politicians in some States are either criminals or have strong criminal links and thus have no faith

in the rule of law, further compounds the problem.

The legislative assemblies have been meeting for very few days despite holding the State to account for results through

informed debates in the assemblies. Today, many legislative assemblies meet only for 20 to 30 days in a year. Most

MLAs are not interested in the legislative functions; they all want a share in the executive! Most of the time they

interfere in the executive wing of the government with no sense of accountability, but they have the nuisance value for

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influencing through the back-door transfers and posting of officials, contracts, and licenses. Such backseat driving

means informal control over the bureaucracy and it also promotes irresponsible decision-making and encourages

corruption. This has resulted in erosion of internal discipline within civil servants who think that government is not a

level-playing field and that one cannot expect fairness from the government. In some north Indian States, parallel

authority structures and mafia gangs have emerged. In such a situation, it is no surprise if the bureaucracy too is in a

bad shape. Thus, poor governance generates and reinforces poverty and subverts efforts to reduce it. Many States in

India, especially the poor ones, have lost the dynamism and capacity to undertake reforms on their own.

However, there is a perceptible change in the electoral

behaviour of Indian masses in the last 10 years that

gives the hope that improving programme delivery

may overcome incumbency and lead to electoral

victories, as in Gujarat, Bihar, Chhattisgarh, Odisha,

and MP.

There has been a growing realisation among some

chief ministers on the need to improve governance, but

unfortunately only a few have been able to translate this into concrete action. This would necessarily involve keeping

the MLAs and ministers under check, which is difficult when the State is under a coalition regime, or the ruling party is

constrained by a thin margin in the assembly, or is divided into factions. The reformist chief minister is often at odds

within his own party officials, who hate getting sidelined in the process of establishing rule-based policy procedures. In

many other States even chief ministers seem to be averse to professionalising administration. But, some chief ministers

(and their number seems to be on in the increase)

are able to drive policies that are much more coherent and cohesive than typically what’s seen in the past. But, in order

to improve delivery, they seem to be centralising power within the chief minister’s office.

Among the States not doing well is West Bengal. One would have expected things to improve with the new

government, but actually things are worsening in terms of economic freedom,

which has an impact on investment and on growth in the medium to long term, though immediately it may not show

up.

But Bihar, which was lagging behind earlier, is improving at a tremendous pace. During the last seven years, 2004-05

to 2011-12, due to superlative growth in the construction sector, the economy has grown at an annual rate of more

than 10 per cent; but agriculture, the bedrock of Bihar’s economy on which the large majority of households depend,

has performed poorly. This has resulted in the lack of growth of employment within the State.

The power sector is another area of concern. Only 41 per cent of its villages and 10 per cent of the households are

electrified. The supply is erratic and small towns reportedly receive power for less than 10-12 hours a day. One critical

issue is the management capability of the Bihar State Electricity Board to take over

the created assets and manage them efficiently.

Sum m ing up

Despite good achievement on the growth front, India faces significant challenges as its social indicators continue to lag

behind. Mere increase in the social sector expenditure would not be enough, unless it is linked with outcomes directed

to the socially excluded groups, and effectively monitored. The reforms, which have been put in place, are essentially

‘soft’ reforms, which have not seriously addressed the issues of lack of accountability, corruption, criminality and

collusion within the government.

The constraints to growth are rooted in lack of political and administrative will, bad policies, faulty design of

programmes, lack of appropriate monitoring and evaluation, poor governance, and lack of political will. The success of

targeted development schemes in India is dependent upon proper identification of the beneficiaries, transparency,

supervision of field staff, and social mobilisation. Funds have more than tripled in the last 10 years for poorer districts,

but neither GOI nor donors have studied whether there is capacity at the district and sub-district level to absorb the

funds and produce quality results.

Governance reforms are intractable under a ‘kleptocracy’ that exploits national wealth for its own benefit and is, by

definition, uninterested in transparency and accountability. A pliable and unskilled civil service is actually desirable

from its point of view – public employees dependent on the regime’s discretionary largesse are forced to become

corrupt, cannot quit their jobs, and reluctantly become the regime’s accomplices. Providing financial assistance from

GOI to such States without linking it with performance and reforms, would be a waste of resources. In all other cases,

reform is manageable, albeit difficult, complex, and slow. Therefore, considering that the States would need external

pressure on them to improve outcomes, certain control by GOI over funds and policy domain in social sector is

necessary, till such time that the States show signs of improvement in governance.

N C Saxena is Distinguished Fellow, SKOCH Development Foundation

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