Archive | October, 2013

Politics begins at home

We spend a lot of time talking about national politics in India, with the general elections in 2014 being a subject of conversations for well over a year now. Conversations on state level politics take up the remainder of our time. In contrast, many of the problems that we face on a day to day basis are municipal in nature: be it the lack of good roads and public transport, unreliable power supply, unsafe drinking water or garbage that lines our streets.

Who becomes your next corporator or local council member is perhaps as important as who becomes the next prime minister of India, but a curious inversion of interests means that we care a lot more about the latter than the former. When municipal elections took place in Karnataka earlier this year, much of the analysis and debate was about what the results meant for the soon-to-come state assembly elections. Who became corporators, won control of municipal councils and what they planned to do for their towns and cities remained a distant afterthought in most of our minds.

Cities are also complex systems that require sophistication and professional input. To improve Bangalore’s roads, for example, needs our elected representatives to ensure multiple things. The roads need a high quality of construction and functioning drains that clear the roads of stagnant water. The roads also need a well-planned traffic network accompanied by a good backbone of public transport. We also need better systems of coordination for what roads get dug up and when, along with a schedule of work that is sensitive to the monsoon.  All this cannot happen without trained and motivated elected representatives, who manage existing public employees like engineers, planners and administrators.

The popular understanding that our cities are poor is also quite mistaken. Indian cities are rich in assets and in vibrancy, and this is evident in how Bangalore and others have grown rapidly in the last decade. It is due to mismanagement and neglect that we are unable to extract value from municipal assets. This mismanagement makes it difficult to finance urban infrastructure and public services, and again requires well-trained leadership to reverse the trend.

Bangalore has woken up to the reality that things cannot continue the way they have been, so far. Agitations from the past few years have proved that. While performance of elected representatives has been underwhelming, there is a dawning realization that the supply of good politics does not grow on trees. In a democracy, people are governed no better than they deserve. We need better political engagement by citizens to change this – with more people voting, more good people entering politics and by financial contributions in the support of good candidates. If we want ‘black money’ to leave politics, it is time that some honest, well-earned money enters to replace it.

India being a young country also provides an incredible opportunity where a large number of youth will be coming of voting age in the next few years. How well they engage with city politics and governance can determine the future of Bangalore and other cities.

Beyond corruption and vested interests, urban governance needs the management of multiple stakeholders with interests that are often at odds with each other. The ability to persuade a diverse set of people for the betterment of a neighbourhood, a ward or a city is in short supply. Managing a city also needs astute application of economic reasoning, where an unpriced good like free parking or free water can turn out to be enormously expensive, all things considered.

Big cities like New York or London have famous mayors who have the ability to transform their cities. There is no reason why Bangalore’s leaders cannot reach a similar position in the next 10 years.

Disclosure: I am a part of the Takshashila Institution’s team that is developing the curriculum for Bangalore Political Action Committee (B.PAC)’s Civic Leadership Incubation Programme (B.CLIP), a non-partisan initiative that seeks to train professionals and aspiring civic leaders to enter city governance and politics.

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Infographic – Growth and Poverty in India

A lot of heat was generated in the Sen vs. Bhagwati debate that took place a few months ago, along with some rays of light. The same followed after the release of the latest poverty numbers. Here’s a look at how Indian states have fared in both economic growth and poverty reduction between 2004-05 and 2011-12.

Poverty and Growth in India - A Story in Five Charts

Gross Domestic Products are the most common estimates of economic growth. GDPs of Indian states (called “GSDP”) matter, but bigger states obviously have larger GDPs. To compare states, one needs to look at GDP per person (“per capita” for those who like to use Latin). It should be noted that GDP per person is different from the average or median income.

In the 2000s, states raced against each other on per capita GDP. While almost all states grew well, not all of them could keep pace with others close to them. The chart below shows you how state rankings have changed between 2004-05 and 2011-12.

GSDP Slopes

Between 2004-05 and 2009-10, the biggest relative gains were made by Sikkim and Uttarakhand, with Punjab, Arunachal Pradesh, Jammu & Kashmir and Karnataka losing significant ground.

If the same chart is made for how states have fared on poverty reduction, a different picture emerges. States have been ordered below based on the percentage of population in the state that lives below the poverty line.

Poverty ratio Slopes

There appears to be a lot more dynamism in poverty reduction, perhaps because there are several states that are much closer to each other. Between 2004-05 and 2009-10, the biggest relative gains in poverty reduction relative to each other were made by the states of Andhra Pradesh, Rajasthan, Maharashtra, Himachal Pradesh and Orissa. While no state’s poverty headcount increased in this time period, the relative underperformers were Assam, Delhi, Jammu & Kashmir, Jharkhand and Karnataka.

Note that the states of Arunachal Pradesh, Goa, Manipur, Mizoram, Nagaland, Sikkim, Puducherry and Tripura were removed from this list as their 2004-05 poverty numbers were based on poverty lines of other states (like Assam and Maharashtra) and hence the numbers are not comparable to the 2011-12 numbers. Some news stories and opinion pieces had erroneously talked about how several northeastern states had worsened in poverty. Such observations are sadly mistaken.

The two charts from earlier tell us only about relative performance of states – using their closest competitors as benchmarks. However, absolute performance on growth and poverty reduction matter just as much, if not more. The next few graphs examine just that: examining the growth in GSDP per person, and reduction on poverty in percentage points between the years 2004-05 and 2011-12.

Poverty and Growth - States

The above graph shows a clear correlation between economic growth and poverty reduction.Higher the growth, higher is the poverty reduction observed. The only major outlier to this is the National Capital Territory of Delhi – which is so because Delhi started with a low poverty rate of 13.1 percent in 2004-05. The graph also clearly shows that the high poverty reduction, high growth state of Uttarakhand is far removed from all the other states.

On Uttarakhand, many are quick to jump to the conclusion that this high “reckless” growth caused the disaster earlier this year. What we can conclude from data is that Uttarakhand grew exceptionally well in the past decade and reduced poverty equally rapidly, but failed to reduce any vulnerability it had to natural disasters. Had an event like the Kedarnath disaster happened a decade ago, there would be a lot fewer residents, tourists and property to be affected as greatly.

The next two graphs look at comparable groups of states: large, higher income states and lower income states of India.

Poverty and Growth - Higher Income States

When both growth and poverty reduction are looked at in concert, Maharashtra and Andhra Pradesh come off as the best perfomers, well above the national average on both parameters. It is also noteworthy that while Gujarat grew faster than Maharashtra in terms of its GSDP during the 7 year period under consideration, Maharashtra did slightly better on a per person basis.

Following on the previous charts, Punjab and Karnataka’s poor performance comes as no surprise. Karnataka grew quickly in the early 2000s with the IT boom, and hasn’t quite been the same since. Punjab’s agrarian prosperity also seems to have peaked, with insufficient dynamism in services or manufacturing sectors to sustain high growth.

Poverty and Growth in India - Lower Income States

Odisha had the highest rate of poverty reduction in India of all states, and is among the top performers alongside Bihar, Rajasthan and MP among the lower income states. Chattisgarh grew well, but failed to reduce poverty as much as the other lower income states, and Jharkhand did poorly on both fronts.

Economic growth is clearly necessary but not sufficient for poverty reduction. Our conversations on economic growth have to evolve from “Growth or Something else” to “Growth AND Something More“. What can be observed over each of the last three charts is the absence of states on the “Low Growth, High Poverty Reduction” quadrant. Evidently, there are many states who grew well, but failed to provide sufficient public goods for significant poverty reduction. However there are no states that managed to reduce poverty to a great extent without strong economic growth during the mid 2000s. What has been well known in economist circles is confirmed again for Indian states.

Between 2004-05 and 2011-12, the Indian economy grew at an average rate of about 8.5 percent (CAGR, Compound Annual Growth Rate), and thus at 6.7 percent per person. Indian states were spread around this number. In 2013 the growth rates have fallen to about 5 percent nationally – and there are no signs of going back to an 8 percent growth rate in the near future. It is not difficult to imagine how abysmal poverty reduction will be over the next few years. We may end up failing another generation of India’s poor.

Postscript. There are some caveats to keep in mind, while interpreting the performance of individual states. First, while poverty reduction and growth are compared across the same time period, there can be a lag between the two. New wealth generated can take time to percolate through the economy. Second, GSDP numbers are generated by state economics and statistics departments based on central guidelines. The competence and independence of different states’ economics departments can vary a lot, and it is possible that GSDP numbers from some states could be overestimated.

Third, there are many discrepancies between poverty ratio numbers calculated from NSS surveys from  2009-10 and 2011-12. States such as Bihar show little poverty reduction between 2004-05 and 2009-10, but phenomenal decrease in the next two years. While 2009-10 was a drought year and might have underestimated the overall reduction in poverty, the planning commission needs analyse and provide clarifications on the latest state-level poverty numbers presented. However, these caveats do not affect the overall observation that there are no Indian states that grew poorly but reduced poverty greatly.

Many thanks to Dr. Mukul Asher for discussions that helped shape this piece.

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