07 August 2017 National Cover Story

The Black Hole In The Heart

West Bengal is the new Orissa, while UP, Bihar and MP remain poor, distorting the India growth story
The Black Hole In The Heart
A Pot To Scrape
Income is an indicator of survival chances at the poorest end
Photograph by Vijay Pandey
The Black Hole In The Heart
outlookindia.com
2017-07-29T11:04:40+0530

If only metaphors could heal. It’s been 32 years since the late demographer Ashish Bose coined that famously disparaging phrase ‘Bimaru states’, in a one-page report to the then prime minister Rajiv Gandhi. The acronym for Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, which referenced the Hindi word for ‘sick’, would now be seen as a form of naming and shaming, done perhaps with the intention of prodding the guilty into trying to change. But this burden of guilt—if we assign it to human failure, which is what a failure of vision and commitment in governance would be—is not an easy one to redress. The term continues to cause offence, and there are periodic claims of this state or that having escaped the infamy, but the harsh reality is that, at the root, the sickness seems endemic—and it endures.

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Review the medical condition as it obtains now. What Bose was referring to in 1985—to bundle all development indices into a simple demographic—was the huge ratio of the poor in these states, accounting for nearly 40 per cent of India’s population at the time. These intervening decades have seen India go through some epochal changes, and it’s now routinely referred to as an engine of global growth. These states too have not been immune to the tidal churn unleashed, yet they lie at the heart of a big set of disturbing economic challenges the country faces.

In 1960, the top three states were 1.7 times richer than the bottom three. By 2014, this gap had almost doubled.

Bose’s ailing states, especially UP and Bihar, remain laggards in terms of prosperity and income, judged by the par­ameter of net state domestic product, read along with a few other factors. Despite robust growth rates, and despite Mandal politics creating new forms of social mobility, they haven’t been able to reduce the gap with the club of rich states. It’s a troubling gap, and speaks of a huge, unfair skew in India’s economic map. The picture of regional imbalance is so acute that it forms, as chief economic advisor Arvind Subramanian puts it, India’s biggest “political-economy puzzle”.

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Take UP, India’s most populous state and a political bellwether. In every general election, it decisively tilts India’s political scales. But on income, it still hugs the bottom of the graph. A couple of quick juxtapositions. If UP were a country, the size of its economy would be like that of Qatar. That would have been impressive, except for one minor detail: Qatar has only 2.5 million inhabitants, whereas UP has 215 million. This massive population, about the same as Brazil’s, means its ave­rage per capita income is no more than that of Burkina Faso, a landlocked sub-Saharan country. That implies, by common allusive practice, the gold standard in poverty.

In 1960, the richest state Maharashtra was twice as rich as Bihar. In 2014, Kerala was 4 times richer than Bihar, the poorest.

What’s cause for worry is how India has been unable, for decades now, to put into motion any kind of targeted policy thrust to address the regional imbalance. For, the handful of states that climbed the income ladder real quick since the 1960s have ensured that they stay up there—Kerala, Gujarat, Tamil Nadu and Karnataka. And Kerala, despite its lower level of industry presence and dependence on remittances, has a model that spreads its prosperity fairly evenly (though it too is not without a gap between the creamy layer and the outliers). All this is in sharp contrast with the states that exhibit a strong developmental inertia.

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One piece of evidence is the share of ‘Bimaru’ states in the total income of all states. In 2013-14, UP had a mere 1.2 per cent share! Again, throw in a few juxtapositions and the picture becomes starker. The share of Chhattisgarh, a new entrant in the race, was way higher at 14.5 per cent. Tripura, admittedly a poor state, improved its per capita income nearly six times between 1984 and 2014. (In 1984, the average Tripura resident earned Rs 11,537, according to India’s Economic Survey, which increased to Rs 64,712 in 2014). Himachal Pradesh, which in the ’80s ranked in the middle, upped its per capita income four-fold. Orissa, once synonymous with the starvation deaths of Kalahandi, has cut rural poverty twice as fast as Bihar, and has consequently jumped three spots.

Its neighbour West Bengal, though, offers reasons for despair. A rich, industrialised state in the 1960s, it has slid down the ranks, letting states like Andhra Pradesh and Maharashtra take its place. One reason: de-industrialisation. Between 1998-1999 and 2004-2005, Bengal recorded a fall of 4 per cent in the number of people employed in the industrial sector. With a renewed emphasis on attracting investment, this figure improved to 3.5 per cent between 2005-06 and 2012-13. But barring this exception, the composition of the rich/poor clubs has remained largely unc­h­anged over the past four decades, according to Sanghamitra Bandyopadhyay of the London School of Economics.

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Bihar is at the heart of the puzzle. It’s now one of India’s fastest growing states, mainly because of the low-base effect, a statistical phenomenon. If growth rates had been very low, even a small increase would arithmetically show up as a high figure. The state posted the highest average growth rate during the whole of the 11th Plan period (ending 2011-12). Consider these peaks: 15.69 per cent in 2006-07 and 14.48 per cent in 2012-13. Bihar even topped all states in terms of growth of per capita incomes. Yet, the catch-up distance is the largest for Bihar. Adjusted for inflation, its net per capita income was the lowest (Rs 26,801 in 2015-16). UP came in just one spot above (at Rs 38,234). By comparison, Kerala was 365 per cent richer than Bihar.

What would be the impact of such uneven progress on people’s lives? If you are a young job-seeker in, say, Bihar or UP, you would be better off moving to Kerala, Gujarat, Karnataka or Maharashtra because you will likely end up being four times richer. Ordinary Indians know this. Railway passenger traffic data, collected by the finance ministry, shows annual internal work migration doubled to about 9 million between 2011 and 2016. Loads of people are shifting out from these disadvantaged states.

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This picture of inertia inverts global trends. Everywhere, poorer regions are climbing up. No Chinese province has been stuck at the poverty levels of three decades ago. This is precisely how it should be, according to what economists call “convergence”: a region with poor income and consumption data sees fast growth on those counts if its markets are linked to those of richer regions. India’s economy has those linkages, yet paradoxically its states show a polarising picture of “divergence”—judging by net state domestic product (NSDP) in per capita terms, the most common measure that indicates the average income of a state’s resident.

Where Time Stands Still

This glimpse of a Bihar village in 2008 could well have been from a ­century earlier

Photograph by Jitender Gupta

The NSDP is a variant of state GDP, with subsidies, interests and taxes subtracted. Distributed per capita, it becomes a handy proxy for average income—a statistically kosher method. It’s not without flaws, of course. The total economic activity in a state, which is what state GDP or NSDP show, would obviously include high-value activity—mining, for example—concentrated in a tiny segment and may not accurately reflect the lack of prosperity outside it. Bengal’s slide after the flight of industry shows that—once you take away those pockets, the data starts reflecting the actual immiseration outside. Maharashtra, minus Mumbai and Pune, would surely fare differently—its ranking does not reflect the distress in the farm sector. Kerala’s ranking, similarly, hides the destitution in its adivasi pockets. Still, assuming any wealth will inevitably percolate to some deg­ree, NSDP is one way to generalise.

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India often likes to compete with China. Poverty reduction would be a good arena to do so. China’s current catch-up rate of about 3 per cent means Gansu province—whose spectacular mountain and desertscapes host the highest poverty levels in the country—will reach midway to the level of the richest provinces, the coastal Guangdong and Shanghai, in 23 years. What about us? Subramanian, who analysed the problem in the annual Economic Survey, provides a grim answer. “The evidence so far suggests that, in India, catch-up remains elusive.”

Trouble is, this stayed static through the liberalisation period. Economists Vivek Dehejia and Praveen Chakravarty of the Mumbai-based IDFC Institute, in a landmark recent study, show how “pre-1990 and post-1990 look like almost two different eras”. They blended traditional methods with a new, cutting-edge tool used for the first time in India: “night-time lights or NTL luminosity”, which uses satellite imagery of glowing specks of night-time light as a marker of prosperity. The results were, well, illuminating.

Four times are the earnings of an average person in the richest state compared to his counterpart in the poorest state.

Altogether, 12 large states were analysed, including Bengal, Bihar, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu and UP, using US satellite data for 1960. They noticed that the richest state in 1960, Maharashtra, was twice as rich as the then poorest state, Bihar. By 2014, the richest state was Kerala, but its income was four times that of the “still poorest state of Bihar”. Their conclusion: “the initially richer states grew more rapidly in the liberalisation period” and stayed the course.

Kerala and Tamil Nadu have often been cited by economist Amartya Sen as models. These two have famously focused big on social spending, enhancing the state-led expansion of education, food security and health. These became critical inputs for a productive workforce and, in the case of Kerala, job emigrations. If Kerala were a country, it would rank alongside developed European economies. Life expectancy in Kerala is 82 years, the same as Sweden. Its infant mortal­ity rate of 12 per 1,000 live births is low, same as China’s.

There are signs of life in the Bimaru states too: consistently high growth in recent years shows Bihar is structurally changing. “But per capita income continues to be low, just as it was decades ago. I would blame our poverty load and last-mile hiccups,” says Vishnu Dayal Pandit, deputy director of Bihar’s directorate of economics and statistics.

Pandit has a point. A World Bank study in 2014 found Bihar limping with a huge “unmet demand” for rural jobs under NREGA. The scheme’s impact on rural poverty in Bihar was just 1 percentage point against a potential of 14 percentage points, the study found. Bihar’s population below the poverty line of about 54.4 per cent in 2004-05 came down only marginally to 53.5 per cent in 2009-10, according to erstwhile Planning Commission data.

Orissa, by contrast, shows a faster dec­line in poverty rates. Udit Sharma of the Institute for Studies in Industrial Development cites National Sample Survey data that shows the wages of casual workers there rising 17 per cent annually between 2009-10 and 2011-12—one of the highest.

Does economics alone explain the resistance of Bihar and UP to mobility? There is a social corollary to all this, difficult though it is to disentangle cause and effect here. Soc­iologists point to caste—the persistence of discriminatory feudalist structures that don’t allow the markets to function independently, causing growth to disproportionately benefit the dominant castes.

In India, a “tension” exists between democracy and development, says Jeffrey Witsoe, author of Democracy Against Development, a landmark work that looked at the economic impacts of feudalism in Bihar. Caste empowerment politics, he says, increased “democratic participation”, but “radically threatened the patronage state by systematically weakening its institutions and disrupting its development projects”.

Richer states grew more in the liberalisation period, so the gap between richer and poorer states has been widening.

“Caste, landlessness and bonded labour are big culprits,” says Allahabad University sociologist Kunal Keshri, who specialises on migration and social mobility. “Studies show lack of inter-caste marriages hampers social mobility. Even in my city, Allahabad, or Varanasi, only recently have inter-community marriages become noticeable.” Internal migration from poor states has been of two types, Keshri says. The skilled, educated classes mostly move out permanently. The second type—seasonal casual workers—is driven by both better income prospects and the chance to escape village-level shackles of caste.

UP continues to have the highest share of India’s total population below the poverty line—at 22.17 per cent. The state anyway has the highest share of marginalised groups, such as Dalits (20.5 per cent) and Muslims (22.34 per cent, of whom only a small fraction are elite). UP’s poverty profile is spread across about 50 districts. According to its annual plan document, 15 districts remain abysmally poor: Jaunpur, Ballia, Lalitpur, Mau, Ghazipur, Bahraich, Maharajganj, Hardoi, Deoria, Azamgarh, Balrampur, Shrawasti, Kushi Nagar, SK Nagar and Mirzapur.

Land ownership patterns hold another clue. “In most assessments of Bihar, hurdles in land reforms are often overlooked,” says Ashok Kumar Sinha of Bihar Agricultural University, Bhagalpur. On paper, Bihar was one of the first to prioritise implementation of the Abolition of Zamindari Act in 1949 to redistribute land, he says. Yet, powerful elite-caste zamindars secured many waivers after a series of court battles, including continued rights. “Remember, zamindars were successful in exploiting the loopholes because successive governments were in reality their representatives. It was precisely to circumvent the Zamindari Abolition Act that the Bihar Land Reforms Act, 1950, was passed,” he says. Even the Ceiling on Landholding (Amendment) Act was sponsored by zamindars to prevent transfer of excess lands. “The only way to change is to create non-farm-based employment and that’s happening now,” he says.

In its pursuit of growth, India tends to ignore two facts, clinging to the well-worn shibboleths of the reform years. One, farm growth can actually cut poverty twice as fast as industrial growth. Two, they are NOT mutually exclusive areas of priority in a zero sum game: a 1 per cent rise in agricultural output in fact raises industrial production by 0.5 per cent and natio­nal income by 0.7 per cent, according to one calculation.

The rate of investment in agriculture in the 1980s and ’90s was an abysmal 8-12 per cent, so farm growth hobbled at 2.4 per cent or so. Other sectors not only saw reforms but got public investments over 35 per cent. This was reversed only with the 10th and 11th five year plans (2002-07 and 2007-12). Even today, only 40 per cent of India’s net sown area is irrigated, leaving farmers vulnerable to droughts. And according to the government’s own findings, only 14 per cent of farmers are able to get minimum support prices.

Chakravarty and Dehejia say one simple way to “understand this complex issue of economic divergence” is to take the recent example of Apple wanting to set up a manufacturing base in India. Land and labour costs for Apple would be much cheaper in Bihar than in the “much richer states of Karnataka or Tamil Nadu”, they say. Yet, it has chosen to go south. The “real political economy question”, they contend, is whether Bihar will continue to “tolerate” the development gap. “The best response is to allow maximum policy freedom to the states to innovate. The states, in turn, should allow greater freedom to the regions within, such as by empowering municipal cor­porations,” Dehejia says.

The whole paradigm of ‘growth’, of course, is not without its sceptics. Sociologist Ashis Nandy thinks there’s something fundamentally wrong about modern economic development. In a scholarly work, The Beautiful Expanding Future of Poverty, Nandy says the effects of development have been such that poverty, which always existed with India, has given way to utter destitution. He says he stands by it. “One can stick out one’s neck and claim the dominant model of development, whatever else it can do, cannot abolish poverty…. Otherwise, there would be no poor people in America,” he says.

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