Archive | September, 2013

Census Towns and Toilets

The Transition State returns to examining sanitation data today and we take a look at toilets in the odd entities called ‘Census Towns’. (For previous analyses see this and this.)

Census towns are formed by villages that show an increasingly urban character in terms of density, size and economy. They are considered towns only by the Census and not by state governments and are hence called ‘Census towns’ as opposed to ‘statutory towns’. Census towns are governed locally by village panchayats.

Why are census towns relevant from a sanitation perspective? Rural sanitation in India is still stuck at a level where a majority of people continue to defecate in the open, and less than 1 in 3 households have a toilet. Understanding what drives people to build and use toilets is necessary to change this. Urban India fares much better in toilet ownership – but fails quite spectacularly in other aspects of sanitation like waste collection and disposal.

Census towns are of interest here because they are places which have *just* urbanised, and are still at the margin. Census towns get called so when they have crossed all three of the following thresholds: a population density of 500 people per square kilometre, village size of 5,000 residents and 75 percent of the working age male population employed in non-agricultural sectors.

So how do census towns fare in toilet ownership compared to their rural surroundings? I compare census towns with the rural taluk (sub-district) in terms of toilet ownership for the state of Karnataka. The taluks are ordered in an ascending order of toilet ownership.

Toilets-Census-Towns-Karnataka

Census towns in Karnataka appear to have much higher toilet ownership than their rural surroundings. And when the rural base goes higher than 20 percent, most of the census towns cross the 80 percent mark in toilet ownership.

Several things change between census towns and other villages. The services sector would have taken off in census towns, likely also resulting in higher incomes. But the most important change is that of population density. This increase in density results in a reduction in open spaces where people can defecate conveniently. If people have to go more than say 200 yards every time they need to relieve themselves, then the case for a toilet becomes a lot stronger. The ‘call of nature’ becomes more difficult as nature is beating a retreat out of the census town.

Urbanisation seems solve the toilet ownership problem. But toilets are far from sufficient in a city to achieve the public good that is sanitation. Waste collection and treatment become vital – be it through a sewerage network, local treatment plants, septage management or some other means.

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In Pragati: Understanding India’s Defence Spending

I restarted the infographics column in Pragati last week by creating one on defence spending:

India Defence Spending preview

[Pragati, September 2013]

You can read the full text of the infographic below:

India has the 3rd largest armed forces in the world in terms of active personnel, and is the 8th largest spender on defence. India has been spending more on defence in the last 20 years, but so has the rest of the world.

In the last 10 years, China, Russia and Saudi Arabia have all increased their defence spending faster than India. In the mean time, India’s defence expenditure is steadily falling: as a percentage of both GDP and total government expenditure (union + states). But then, why is so much written about India’s high defence expenses? The answer lies in India’s arms imports. India’s defence imports have been steadily rising and it was big news when in 2011 India became the largest arms importer in the world. This is reflective of India’s weak defence manufacturing ability at home rather than any aggressive military expansion by the India. Both private and public sector defence manufacturing houses in India lack capacity and technological ability. While India needs to become more self-reliant in defence equipment, this can be achieved by greater foreign direct investment entering India’s defence sector, rather than closing it off to foreign competition.

What does India spend its defence budget on?

About half of India’s defence expenses go to the army, a quarter to the air force and the remaining for the navy, R&D, ordinance factories and more.

Broadly, one can classify expenses into capital and revenue: Capital expenditures are investments, for future benefits and improvement. In defence, they can be on new aircraft, battleships, tanks, rifles and more. Revenue expenses are those that are recurring and for salaries, pensions and consumables.

Generally, higher the Capital-to-Revenue ratio is, the more competitive and modern the armed forces are. Before 2004-05, India’s armed forces had a C:R ratio of 27:73 but since then it has increased by about 12 percentage points to 39:61.

The Capital-to-Revenue ratio is very different in the three armed forces. While the Indian Navy and the Air Force spend more than half their budgets on capital assets, the Indian Army spends less than 20% on average on capital. Worse still, in 2011-12, the Capital-to-Revenue ratio in army expenses reduced from a 17:83 in the budget estimate to 11:89 in the actual expenditure, implying that higher than expected revenue expenses were eating away at the already sparse capital funding.

The Indian Army’s revenue expenses are increasing rapidly over the past few years. Since the sixth pay commission came into force around 2008-09, both salaries and pensions for army soldiers have become ballooning numbers for the exchequer. As a result, while budget estimates for capital expenses have flattened out, the actual expenditure on capital is actually declining rapidly in the army. What is particularly alarming is that the army’s capital expenditure is decreasing even in nominal terms – and is far worse once inflation is factored in.

Even in the navy and the air force, there is an increasing divergence between budget estimates and final expenditures by the end of the financial year.While the fiscal deficit is often used as a reason for this in parliament standing committee reviews, the real reasons could be more alarming.

What is evident here is the decreasing ability to plan and follow through with defence procurement and manage the finances of India’s armed forces.

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In Business Standard: Cartel Breaking

I write in the Business Standard today about the demise of the Russian-Belarusian Potash cartel.

The world witnessed a shake-up of the global potash industry last month, with the Russian-Belarusian cartel Belarusian Potash Company(BPC) disintegrating. Russia‘s Uralkali decided to break away from BPC and sell potash independent of its counterpart Belaruskali at higher volumes for lower prices.

If the Eurasian cartel had remained stable, potash prices would have stayed up and all suppliers would have benefited. Cartels ensure that by fixing prices, by coming to an agreement over market shares and the total industrial output. With collusion trumping competition, cartels are considered illegal within most domestic economies but national or international cartels are quite commonplace globally. The most prominent of these is the Organisation of Petroleum Exporting Countries (OPEC), which has successfully controlled the global oil market for over 40 years.

Potash is but one commodity on the international market where supply has been cartelised. India is on the wrong side of international cartels most of the time, and it is in our strong economic interest to champion the cause of free global trade. In the meantime, we can do our best to reap the dividends of lower potash prices. To ensure India’s economic growth in the long run, the nation will have to do its best to destabilise global cartels, or at least secure favourable terms.
[Full Article: Potash – From Russia With Love, September 13, 2013]

Over the next few months I will be studying how cartels work, with a special emphasis on OPEC. Expect more posts on cartels on this blog in the coming weeks and months.

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The Age of India

Census of India released its year-wise age data from 2011 last Friday. Data is available for India and all states. The Transition State takes a look at how India and its states have been ageing.

The median age of India in 2011 was a young 24 years, with the median age ranging from 19 years in Meghalaya, 20 in Bihar and UP to 31 years in Kerala. This is good news for India as even it’s most aged state is still younger than China or the United States. Below is a map of median ages of individual states.

Median Age in India 2011

Median Age in India, 2011. Map made using Gramener’s free mapping tool.

What the above spread of values also shows is that India’s youngest states could be as much as 25 years behind its most aged states in terms of their demographic profiles. In theory, this gives states a good amount of time to learn from each other’s employment and economic policies to do their best in taking advantage of the upcoming ‘demographic dividend’.

Plenty has been said about the idea of a demographic dividend that India needs to take advantage of. I will just reprint an excerpt from a good article by Kaushik Basu several years ago on the subject:

In the year 2004 India had a population of 1,080 million, of whom 672 million people were in the age-group 15 to 64 years. This is usually treated as the “working age population”. Since outside of this age group very few people work, it is reasonable to think of the remainder, that is, 408 million people, as the “dependent population”.

A nation’s “dependency ratio” is the ratio of the dependent population to the working-age population. In the case of India this turns out to be 0.6.

What is different about India is the prediction that it will see a sharp decline in this ratio over the next 30 years or so. This is what constitutes the demographic dividend for India. [Kaushik Basu, BBC]

If we plot the working age population (anyone between the ages of 15 and 64) versus the median age, what we get is a tight correlation between the two. This implies that most Indian states are yet to reach their maximum working age population ratios. The possible exception to this might be Kerala, which might have already peaked.

Median Age and Working Age Population

The age structure profiles of Bihar, India and Kerala also illustrate the different stages of demographic development India’s states are: from a very young, bulging child population in Bihar to a more youth/young-adult heavy national population, to a far older population in Kerala.

India Age Structures 2011

If you were wondering what those spikes in the above graphs were, it pays to remember that the Census records reported ages and not actual ages. Ordinarily, such age structures must be quite smooth if accurate – there is no cause for spikes unless for some strange reason people decided to have a lot more kids in a particular year. Usually one member of a household (who is at home) is asked to provide the age of everyone in that household – and predictably, certain numbers get rounded up.

The graph below shows you that people round up ages to numbers 10, 12,18, 20 and every subsequent multiple of five. Curiously enough, the mis-reporting of ages is much lower in Kerala than the rest – showing that the state’s higher literacy has at least resulted in people knowing the age of their immediate relatives a lot better.

Reported Age 2011

PS. Do not miss the slides of Dr. Mukul Asher’s keynote ‘Preparing for an Ageing India‘, which he gave at the IIMB CPP conference a few years ago. Data used in this post can be accessed here.

Addendum. Census of India also released their own presentation on the age data on their website today. However, many of the numbers that they have put up (like % people in working age population) do not match up with what can be calculated from the raw data. (Hat-tip to Rukmini Srinivasan for directing me to it.)

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The Centralisation of Public Expenditure

The Ministry of Finance released the Indian Public Finance Statistics 2012-13 earlier today on their website. Drafted by a team under the direction of the Chief Economic Advisor to the Finmin (currently the RBI Governor Raghuram Rajan), the statistics are of very high value as they are a collation of union and state government expenditures and revenues from the past several years.

When we hear the union budget every March, we get only a partial picture of what is planned for India in the coming year, as states play a significant role in allocating public resources.

Today I take a quick look at the decentralisation of public expenditure in India, between the union government and the states. Local bodies are outside the purview of the current analysis. Below is a graph of share of union and states in the total public expenditure in India.

Public Expenditure Centre and States

A few things stand out. The union government used to be a massive 65 percent of the overall government expenditure in 1990-91, which was continuously declining for the subsequent decade, until 2003-04. This is good evidence of financial decentralisation. However, the union government share started increasing from 2004-05 onwards, around the time the first UPA government came into power. The latest two years’ numbers are tentative as they refer to budget and revised estimates rather than actual expenditure, therefore we can say that union share has shot up to around 55% of the total in the recent past.

Below is a second graph, this time on the union-state shares of the total development expenditure over the past two decades. Development expenditure refers to expenses on infrastructure, health, education, agriculture, power and more; and leaves out defence, police, administration, interest repayments and several other items.

Development Expenditure - Centre and State

On the whole, union government expenditures are lower here because a few big-ticket, union-only expenses don’t get counted: defence and interest payments being the largest of them. The trends here are a little different.

While the union government share reduced from about 47 percent in 1990-91 to about 37 percent in 1996-97, it started steadily increasing from then to about 2006-07. It has spiked up even more since then, and it is notable that union government share was highest in the last 23 years in 2008-09 at 49.7 percent. This is strong evidence that fiscal decentralisation as a national policy is dead in the water.

Many commentators have noted the relentless centralisation of financial flows in the past few years, with ‘centrally sponsored schemes’ becoming bigger and more numerous by the year. The components that have contributed to this union government expenditure need to be unpacked further to understand what exactly is happening.

Government for 1.2 billion people needs as much flexibility and adaptability as one can give, and this dangerous re-centralisation of public expenditure needs to be reversed.

Notes.

  1. Data collated from Indian Public Finance Statistics Reports 2004-05, 2006-07 and 2012-13.
  2. Data is unavailable for the years 1991-92 to 1994-95.
  3. 2012-13 numbers are budget estimates and 2011-12 numbers are revised budget estimates, so they must be interpreted with care. The rest are actual expenditures.
  4. The y-axes were cropped in the graph to better illustrate the changing trends in the union/state expenditure share.
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The Best Form of the Argument

For the past few days and weeks, I have been wracking my brains to find the best form of the argument for the national food security bill for India.

Let’s leave aside for the moment the fiscal cost of the bill, any distortions of agricultural markets, inefficiency of the supply systems, mis-targeting of the grains and the signals it sends to investors. These are all serious problems of various magnitudes, and those magnitudes are contested. However, they still refer to the unintended consequences of the FSB rather talk about its stated or intended benefits.

The best form of the argument that I can come up with for the food security bill is this:

Inexpensive cereals can address malnutrition and hunger.

Readers are welcome to contest this one line statement and suggest one of their own. Hunger is a problem that we have all but solved in India, thanks in large part to the Green Revolution, better infrastructure and a rise in incomes. Only 2 percent of India self-report that they do not always get to eat 2 square meals a day, compared to 67 percent of the population that the FSB wants to cover. Make no mistake, 2 percent of India’s population is still a whopping 24 million people. These 24 million people are also largely concentrated in pockets that have several other problems such as maoist violence and the lack of even basic infrastructure. Their needs, however, are perhaps best addressed by an idea that Arvind Virmani proposed: an ‘elimination of hunger’ act that works in a targeted manner to address just this problem.

Malnutrition remains a large national problem that hasn’t been sufficiently addressed to date. I have argued in the past in Pragati that malnutrition is largely a sanitation problem (and perhaps a nutritional knowledge problem) and not one of insufficient grain supply. Several others have written on the nutrition-sanitation link as well.

Thus if malnutrition and hunger are set aside from the primary outcomes of the food security bill, all that remains is a government-sponsored income supplement to 67 percent of India’s population. If we were to openly admit that as the goal – then we can discuss as to how best we can go about providing that income supplement. (The Acorn calls it theft – which it is, legitimate or no.) Unconditional cash transfers, conditional transfers and food vouchers are all means of providing an income supplement. To impose a monopoly supply of cheap grains through a leaky government setup on 800+ million people who range from the residents of an isolated hamlet to urban slum dwellers is ludicrous.

Malnutrition and ‘food security’ have been subjects of national debate for the better part of 2013. The sanitation community missed a great opportunity to shift some of the national focus onto sanitation, a debate which has remained fixated on a the idea of a public grain supply system. Sanitation is one of the toughest public policy challenges that India faces, and opportunities that have been squandered are very difficult to come by.

There are two difficulties with public drives and investments in sanitation: first, it isn’t a problem you can just throw money at. It needs a change in public behaviour and attitudes, and it requires a rethink on some of the systems. Second, it gives very poor political and electoral returns. But to even get there we need sustained public attention and rigorous debate that isn’t restricted to department officials, think tanks and sectoral experts. Jairam Ramesh remains the sole politician who has been persuaded to the cause of sanitation to date. It’s a shame that this opportunity was missed to persuade a few more.

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