Nirupam Bajpai

Understanding Regional Economic Growth in India

This paper aims to explain the growth experiences of 14 major states of India between 1980 and 1998. Using two measures of convergence, -convergence and -convergence, we examine whether per capita incomes in the states have been converging or diverging. By both standards of convergence, India demonstrated overall divergence during 1980;98, as well as during both the pre-reform and post-reform subperiods. Interestingly, the richer states experienced a degree of convergence during the post-reform period, whereas the poorer states did not. Divergence was most notable within the poorer group of states. A remarkable 82 percent of the cross-state variation in growth is explained by just the urbanization variable in India, with no hint of any conditional convergence after controlling for the degree of urbanization. The regression estimate shows that a 10 percentage point higher rate of urbanization is associated with 1.3 percentage points per year higher rate of annual growth.

India in the Era of Economic Reforms

Written by economists and political scientists, essays in this volume not only analyze the impact of reforms on the economy as a whole, but also assess the state of Indias post-1991 public finances, agriculture, labour markets, exports, centre-state relations and the connection of economic reforms with Indias battle over caste and secularism. This book is intended for undergraduate, post-graduate students and researchers of economics and politics and also journalist, policy-makers and corporate executives as well as the general reader interested in the ongoing reforms process.

Foreign Direct Investment in India: Issues and Problems

In this paper, we have attempted to identify the issues and problems associated with Indias current foreign direct investment regime, and more importantly the other associated factors responsible for Indias unattractiveness as an investment location. Despite India offering a large domestic market, rule of law, low labor costs, and a well working democracy, her performance in attracting FDI flows has been far from satisfactory. A restrictive FDI regime, high import tariffs, exit barriers for firms, stringent labor laws, poor quality infrastructure, centralized decision-making processes, and a very limited scale of export processing zones make India an unattractive investment location.

Trends in Inter-State Inequalities of Income in India

An attempt is made in this paper to examine the tendency towards convergence of income levels among the states of India over the period 1961-93. We fmd convergence ofper capita income levels only during the first sub-period, that is, 1961-71. For the remaining two sub-periods, 1972-82 and 1983-93 we find evidence for per capita income levels to be diverging, although not significantly. We suggest that convergence during the period 1961-71 is primarily due to the impressive growth in the agricultural sector as a result of the green revolution. The slowing down of the industrial growth during the 1970s and the emergence of a city based pattern of industrial development which was concentrated only in a few regions seems to be the reason for the divergence seen during this sub-period. While there was a considerable step-up in Indias GDP growth over the 1980s, however, the poor states were not able to catch up with their rich counterparts and the income levels continued to show divergence as in the earlier period. Indias development strategy up until 1991 characterized by planning and state-led industrialization failed to reduce regional disparities in any meaningful manner. Four decades of planned economic development could not provide the necessary growth impetus for the poor and lagging states. With the launching of economic reforms in 1991 it may be reasonable to expect some states to surge ahead rapidly and that states, such as Kamataka, Kerala, Tamil Nadu and West Bengal may gain more from reforms in the initial stages rather than Uttar Pradesh, Madhya Pradesh or Bihar. Nirupam Bajpai is a Research Associate at the Harvard Institute for International Development. He received his Ph.D. in economics from the University ofLucknow in 1988. Jeffrey D. Sachs is the Director of the Harvard Institute for International Development and the Galen L. Stone Professor ofInternational Trade at Harvard University. Sachs serves as an economic advisor to several governments in Latin America, Eastern Europe, the former Soviet Union, and Asia. He has also been a consultant to the IMF, the World Bank, the GEeD, and the UNDP. Trends in Inter-State Inequalities of Income in India

The Progress of Policy Reform and Variations in Performance at the Sub-National Level in India

The reform process in India has so far mainly concentrated at the central level. India has yet to free up its state governments sufficiently so that they can add much greater dynamism to the reforms. Greater decentralization of decision making from the center to the states will lead to greater competition among the states and therefore to higher efficiency and productivity in these regions. Policy making at the sub-national level is essential in order for the state governments to be able to follow development strategies suitable to their socio-economic, cultural, and geographic characteristics. Coastal states, for example, can follow a more focused export-led growth strategy, or states with a large pool of trained manpower, such as IT professionals in Tamil Nadu or Karnataka can lay more emphasis on IT and service sector. A few of the Indian States have been more reform-oriented, such as Andhra Pradesh, Gujarat, Karnataka, Maharashtra, and Tamil Nadu, but states, such as Haryana, Kerala, Orissa, Madhya Pradesh, Punjab, Rajasthan and West Bengal have a lot to catch-up with. Of course, Bihar and Uttar Pradesh are even further behind. We analyze the state-level situation in fifteen major states based on the progress of state-level policy reform. Accordingly, we have divided these states into three categories of reformers. These are the reform-oriented states, intermediate reformers and the lagging reformers. We then examine the performance of these states in terms of SDP growth, foreign direct investment, industrial investment proposals, and software exports among other variables. Real annual average growth rates of per capita gross state domestic product bear testimony to the fact that our group of reform-oriented states are the fastest growing states in India in the post-reform period. Also, these states have performed better in attracting both domestic and foreign investment, software exports, and in the areas of primary health and education.

India's economic reforms: some lessons from East Asia

In this paper we suggest further steps that India needs to take in the process of her economic reforms. While the reform measures undertaken during 1991-96 have led to considerable deregulation and liberalization of the Indian economy, a lot still remains on Indias unfinished reform agenda. The experience of East Asian countries along with that of China is taken into account in suggesting relevant lessons for the future course of Indias economic reforms. Among other things, we highlight the need for much greater openness of the economy, deregulation of the private sector, exit policy, and reform of the labour and land laws. Besides, in our view, the government needs to focus its attention to, and provide larger resources for, primary health and primary education. The main quantitative conclusion is that India can expect per capita economic growth of a mere 3.5% per year under current policies, but could raise the overall per capita growth rate to as much as 7% per year under extensive market reforms that delivered a national saving rate and efficient market institutions similar to those of East Asia.

India's Decade of Development

We believe that India has a chance for a tremendous breakthrough in economic development during the current decade. India’s political system is more than ever in consensus about the basic direction of reforms. The current government enjoys a strong electoral mandate. A decade of opening of the economy has produced new dynamism, most dramatically in the Information Technology sector, but in others as well. The world is waking up to India’s crucial role as the largest democracy and as a dynamic economy, if still a low-income one on average. The new technologies (especially information technology and biotechnology) give new opportunities for economic and social development. We suggest that India should set major national goals of development. These goals will help to galvanize domestic public opinion in support of the objectives of development, provide a gauge against which to judge the progress of policies, and help the world community to appreciate the efforts underway, and support them through increased flows of foreign investment. To make the first decade of the 21st Century a true Decade of Development will require a broad-based program of economic and social actions. We highlight ten crucial initiatives in this regard.

Primary Education in India: Quality and Coverage Issues

An attempt is made in this paper to analyze the state of primary education in India. Using various data-sources and secondary research, we provide a description of the salient features of the public education system in India for primary schools (grades one through five) as well as educational outcomes, both in terms of quantity and quality. Literacy rates, especially in the younger age groups, for both boys and girls are on an upward trend. This is an extremely positive outcome as historically India has suffered from endemic illiteracy. However, rising literacy rates have been accompanied by unevenness of achievements: across Indian states and across various socioeconomic groups. States in the Western and Southern zones of India outperform those in the East and Center. Moreover, the densely populated states of Uttar Pradesh, Bihar and Rajasthan continue to lag behind the rest of India. Literacy rates for girls, rural residents, and especially members of scheduled castes and scheduled tribes also lag behind those for boys, urban residents and the upper castes. In terms of physical access to schools, more than ninety percent of the Indian population now has a primary school located within one kilometer of their place of residence. However, many schools have only one or two classrooms and most lack running water and toilets. These features are not conducive to a learning environment. The really critical aspect of the Indian public education system is its low quality. Even in educationally advanced states, an unacceptably low proportion of children who complete all grades of primary school have functional literacy. There is a lot of ‘waste’ in the school system as evidenced by the large percentage of children who drop-out before completing primary schooling. Such inefficiency is compounded by teacher apathy, teacher absenteeism, very high pupil-teacher ratios and inadequate teacher training. Public expenditure on education in India has been rising over time. After the District Primary Education Programme (DPEP) which was launched in 1994, the federal government launched the Sarva Shiksha Abhiyan (SSA) in 2001 with the goal to universalize primary education (grades one to five) by 2007 and elementary education (grades one to eight) by 2010. Unlike the DPEP, SSA is funded entirely by domestic resources and provides the states with a strong initiative backed by funding to tackle illiteracy among the young members of their population. Another policy that has been very successful in increasing enrolments, attendance and retention of students in primary school is that of the provision of mid-day meals. There are lessons to be learnt from the diverse experiences of Indian states in terms of their achievements in literacy. While in Kerala, strong social intermediation by the government has proved successful, in Himachal Pradesh, social capital and community participation seem to have led to similar success. Nirupam Bajpai is a Senior Development Advisor and Director of the South Asia Program at the Center on Globalization and Sustainable Development, Columbia University. Sangeeta Goyal is a visiting Assistant Professor at the School of International and Public Affairs at Columbia University.

Primary Health Care in India: Coverage and Quality Issues

India’s achievements in the field of health have been less than satisfactory and the burden of disease among the Indian population remains high. Infant and child mortality and morbidity and maternal mortality and morbidity affect millions of children and women. Infectious diseases such as malaria and especially TB are reemerging as epidemics, and there is the growing specter of HIV/AIDS. Many of these illnesses and deaths can be prevented and/or treated cost-effectively with primary health care services provided by the public health system. An extensive primary health care infrastructure provided by the government exists in India. Yet, it is inadequate in terms of coverage of the population, especially in rural areas, and grossly underutilized because of the dismal quality of health care provided. In most public health centers which provide primary health care services, drugs and equipments are missing or in short supply, there is shortage of staff and the system is characterized by endemic absenteeism on the part of medical personnel due to lack of oversight and control. As a result most people in India, even the poor, choose expensive health care services provided by the largely unregulated private sector. Not only do the poor face the double burden of poverty and ill-health, the financial burden of ill health can push even the non-poor into poverty. On the other hand, population health is instrumental for both poverty reduction and for economic growth, two important developmental goals. India spends less than 1% of its GDP on public health, which is grossly inadequate. Public investment in health, and in particular in primary health care, needs to be much higher to achieve health targets, to reduce poverty and to raise the rate of economic growth. Moreover, the health system needs to be reformed to ensure efficient and effective delivery of good quality health services. Nirupam Bajpai is a Senior Development Advisor and Director of the South Asia Program at the Center on Globalization and Sustainable Development, Columbia University. Sangeeta Goyal is a visiting Assistant Professor at the School of International and Public Affairs at Columbia University. This paper has been prepared for the United Nations Millennium Project on the Millennium Development Goals. Nirupam Bajpai presented this paper to His Excellency, Dr. A P J Abdul Kalam, President of India, the Honorable Dr. Manmohan Singh, Prime Minister of India, Dr. Anbumani Ramadoss, Health Minister of India and P Chidambaram, Finance Minister of India during his two day visit to New Delhi on June 17 and 18, 2004.

Economic Reforms in China and India: Selected Issues in Industrial Policy

In this paper we compare the reform experiences of China and India focusing on three specific areas of industrial policy. We begin with a comparison of the macro economic performance of the two countries and find that except on the inflation front China is better placed than India. China has grown at almost double the rate of India largely because of very high savings and investment rates. Of course, economic reforms have provided the necessary policy environment for China to attain and sustain high growth. First we compare the extent of deregulation in China and India in the areas of prices, labor and land laws, and exit policy for firms. We find that the non-state sector of China, which is the main driving force of China’s impressive growth has performed so well largely because it operates primarily under market conditions. China has gone far ahead of India in respect of deregulation of their nonstate sector. Price reforms have been extensive, labor is mobile, labor laws are liberal, and firms are free to enter and exit from the market. The results achieved in the process speak for themselves. In India, by contrast, much needs to be done for private sector deregulation, price reform has been limited, labor and land laws are stringent, and while firms have no entry barriers, they do, however, face strong exit barriers. Second, we draw comparison between the Chinese township and village enterprises and the Indian small scale industries. While these have been promoted in both the countries through preferential policies, however, their objectives have been different, and hence the results. Chinese small enterprises are given initial support only as against the policy in India wherein incentives are available as long as a firm remains in small scale. Moreover, in India, items are reserved to be produced exclusively by the small scale industry. While both have grown overtime, the ones in China have grown much faster. Finally, we compare special economic zones of China with export processing zones of India. We find that although both the countries have offered similar incentives to prospective investors, the story is very different in the two countries. The zones in China have been highly successful in attracting foreign investment, promoting exports, and generating employment than they have been in India. We identify a number of factors for the performance differentials in the two countries. Nirupam Bajpai is Development Associate at the Harvard Institute for International Development. Tianlun Jian was a Research Associate at the Harvard Institute for International Development when this paper was written and is now a investment analyst at the Caspian Asset Management, New York. Jeffrey D. Sachs is the Director of the Harvard Institute for International Development and the Galen L. Stone Professor of International Trade at the Department of Economics, Harvard University.