In a recent edition of the Economist, the economics focus on the "two BIG" clouds hanging overIndia's shining prospects. I recently debated on Indian Model on this blog. Here is the complete story:
….. big picture, and India's future seems assuredly bright…banished famine and cut absolute poverty by more than half. Economic growth is among the fastest of any country. Its newly confident businesses are spreading their wings. Having long been “hyphenated” with Pakistan as a dangerous trouble-spot, the country is now seen as half of an “India-China” pairing (Bhai-Bhai) that is transforming the global economy. If this were a race, India, as the younger country, and a vibrant but stable democracy, would seem to many the better long-term bet.
….at the detail, however, …despair at the depth and complexity of the problems India faces. For all its achievements, poverty remains entrenched. Some 260m people survive on less than one dollar a day. Nearly half of the country's children below the age of six are undernourished. More than half of its women are illiterate. Half its homes have no electricity, and in one state, Chhattisgarh, 82% are not even connected by road. Nor is there a huge pot of money to throw at these shortages. The government's average budget deficit, from 2000 to 2004, was exceeded only by that of Turkey. Even when it does spend money, the pipeline between government coffers and the intended beneficiaries is corroded by corruption, and cash seeps out.
…World Bank notes …. this contradiction puzzles fresh observers in three ways. First, they find the rampant economic optimism hard to swallow: it seems to exaggerate changes in the fundamental shape of the Indian economy. Second, even though the economy is booming, the performance of the public sector seems to go from bad to worse. Third, India “is the best of the world, it is the worst of the world—and the gaps are growing.” India's top technology colleges set global standards. Yet “many, if not most, children finish government primary schools incapable of simple arithmetic.”
…. identifies the two most pressing needs for action by India's government: to make the public sector better at delivering basic services; and to sustain growth at high levels and extend its fruits to more people. From this simple but persuasive analysis come the two biggest dangers to India's future. Failure to reform public-sector services will render even high growth and farsighted policy ineffective in ending poverty; and, unless checked, growing inequality between regions, and between town and country, will heighten social tensions.
The shortcomings of the public sector are evident in almost all its functions. India, for example, has a government committed to providing all its people with health care. But there are only five countries in the world where a lower proportion of spending on health comes from the government—just 21% (compared with, for example, 45% in America). So even the poor are paying for private health care. A survey has also found that health care absorbs a bigger share (27%) of low-level “retail” bribery than any other government function. (This may shock some policemen.) Another found that between 1999 and 2003 the percentage of children fully immunised against childhood diseases had fallen from 52% to 45%.
Similarly, in many of India's towns, more than half the children are in private schools. A nationwide survey, based on unannounced visits to government schools, found that less than half the teachers on the payroll were there and teaching. Whereas, in many poor countries, city residents enjoy a 24-hour water supply, in many Indian cities the taps are dry for all but a few hours a day. The rich pay for pumps, bore-wells and storage tanks. The poor queue for hours at standpipes and water lorries.
The public sector tends to be worst at delivering services in India's poorest states. These are, in relative terms, becoming poorer, not because their growth is declining, but because they have failed to match the acceleration achieved since 1991 by India's richer regions and cities. Parts of the country are, in terms of living standards, on a par with Mexico. Parts are as poor as sub-Saharan Africa.
The gaps are showing
Although India has, compared with other countries, a relatively equal distribution of income, it is a deeply unequal society, partly because of its legacy of social stratification and exclusion. The caste system is proving resilient, and there is evidence that, in some respects, the prejudice against girl children is worsening. In rich areas, sex-selective abortion is leading to highly skewed sex ratios at birth. Nor is the bias any less among the poor. A girl born in the early 1990s was 40% more likely than a boy to die between her first and fifth birthdays.
… The beauty of reducing the country's myriad problems to two big, related, ones, is that of all simplification: it makes the solutions seem simpler, too, even if this economic diagnosis of India's ills suggests cures that are mainly political.
… It is not the policies that are failing so much as the machinery for implementing them. In electoral politics, good policy is often forgotten for vote-grabbing promises of jobs, contracts and subsidies. …India is big enough to have plenty of stories of successful reform that can be imitated: most involve making providers of taxpayer-financed services more accountable for their delivery. Spreading those lessons should not be beyond the world's biggest democracy.
….at the detail, however, …despair at the depth and complexity of the problems India faces. For all its achievements, poverty remains entrenched. Some 260m people survive on less than one dollar a day. Nearly half of the country's children below the age of six are undernourished. More than half of its women are illiterate. Half its homes have no electricity, and in one state, Chhattisgarh, 82% are not even connected by road. Nor is there a huge pot of money to throw at these shortages. The government's average budget deficit, from 2000 to 2004, was exceeded only by that of Turkey. Even when it does spend money, the pipeline between government coffers and the intended beneficiaries is corroded by corruption, and cash seeps out.
…World Bank notes …. this contradiction puzzles fresh observers in three ways. First, they find the rampant economic optimism hard to swallow: it seems to exaggerate changes in the fundamental shape of the Indian economy. Second, even though the economy is booming, the performance of the public sector seems to go from bad to worse. Third, India “is the best of the world, it is the worst of the world—and the gaps are growing.” India's top technology colleges set global standards. Yet “many, if not most, children finish government primary schools incapable of simple arithmetic.”
…. identifies the two most pressing needs for action by India's government: to make the public sector better at delivering basic services; and to sustain growth at high levels and extend its fruits to more people. From this simple but persuasive analysis come the two biggest dangers to India's future. Failure to reform public-sector services will render even high growth and farsighted policy ineffective in ending poverty; and, unless checked, growing inequality between regions, and between town and country, will heighten social tensions.
The shortcomings of the public sector are evident in almost all its functions. India, for example, has a government committed to providing all its people with health care. But there are only five countries in the world where a lower proportion of spending on health comes from the government—just 21% (compared with, for example, 45% in America). So even the poor are paying for private health care. A survey has also found that health care absorbs a bigger share (27%) of low-level “retail” bribery than any other government function. (This may shock some policemen.) Another found that between 1999 and 2003 the percentage of children fully immunised against childhood diseases had fallen from 52% to 45%.
Similarly, in many of India's towns, more than half the children are in private schools. A nationwide survey, based on unannounced visits to government schools, found that less than half the teachers on the payroll were there and teaching. Whereas, in many poor countries, city residents enjoy a 24-hour water supply, in many Indian cities the taps are dry for all but a few hours a day. The rich pay for pumps, bore-wells and storage tanks. The poor queue for hours at standpipes and water lorries.
The public sector tends to be worst at delivering services in India's poorest states. These are, in relative terms, becoming poorer, not because their growth is declining, but because they have failed to match the acceleration achieved since 1991 by India's richer regions and cities. Parts of the country are, in terms of living standards, on a par with Mexico. Parts are as poor as sub-Saharan Africa.
The gaps are showing
Although India has, compared with other countries, a relatively equal distribution of income, it is a deeply unequal society, partly because of its legacy of social stratification and exclusion. The caste system is proving resilient, and there is evidence that, in some respects, the prejudice against girl children is worsening. In rich areas, sex-selective abortion is leading to highly skewed sex ratios at birth. Nor is the bias any less among the poor. A girl born in the early 1990s was 40% more likely than a boy to die between her first and fifth birthdays.
… The beauty of reducing the country's myriad problems to two big, related, ones, is that of all simplification: it makes the solutions seem simpler, too, even if this economic diagnosis of India's ills suggests cures that are mainly political.
… It is not the policies that are failing so much as the machinery for implementing them. In electoral politics, good policy is often forgotten for vote-grabbing promises of jobs, contracts and subsidies. …India is big enough to have plenty of stories of successful reform that can be imitated: most involve making providers of taxpayer-financed services more accountable for their delivery. Spreading those lessons should not be beyond the world's biggest democracy.
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