Category: Development

Anand’s comment in response to a past posting prompts this one. He wrote:

The fact that manufacturing accounts for such a small percentage of India’s GDP is not a minus but a plus. All the industrialized nations have seen manufacturing as a percentage of GDP shrink.

There is much misunderstanding about the process of development and it may be worthwhile to start thinking about development. (What follows is partly from another article I had written some time ago.)
Continue reading “The Development Path of Economies”

In a special report on Andhra Pradesh in the Financial Express in May 2003 called Towards Swarnandhra Pradesh the focus of one article is on Hyderabad becoming India’s ITES capital :

With the telecom bandwidth in excess of deand, the focus would be towards creating high quality office space with amenities like high-speed telecommunication links, uninterrupted power supply etc which are critical to attract the ITES companies.

Towards this, the State government is holding talks with leading real estate developers including Rahejas of Mumbai, DLF of Delhi apart from Larsen and Tubro Infocity for high-quality office spaces in and around Hyderabad.

So what AP is trying to do is to create the environment so that businesses — ITES — would locate themselves there because of the lower cost of doing business. In a sense, it is a no-brainer: if you have the proper environment, business will develop. However, this environment will not emerge automatically on its own. That is, the market will not supply it spontaneously. Why the market fails to do this? It requires collective action. Or in other words, it is a coordination problem.

RISC is motivated by similar concerns in the rural arena. For doing business in rural India, you need to have adequate infrastructure. Given the immense investment needs, every village cannot be transformed. So a core-peripheri approach is required. Further, RISC also stresses the same coordination failure in the provisioning of infrastructure in rural India.

Mark Twain had once remarked that there are fundamentally only three archetypical jokes. (I forget what those archetypes are, but one of them was the ‘mother-in-law’ joke.) So also, there are a small set of basic problems. These show up repeatedly in various theaters in different guises. Once you recognize them, the solution is pretty much the same. Why people don’t get this is a question that I have not fully been able to fathom.

The United Nations Development Program (UNDP)website has a list of India Human Development Goals.

In the Tenth Five Year Plan the Planning Commission has outlined India’s human development goals and targets for the next five to 10 years. Most of these are related to and are more ambitious than the Millennium Development Goals.

Human development is a multifaceted and complex process. There are many dimensions along which development occurs and there are complex interdependencies and linkages between these dimensions. (In mathematical terms, you may say that these dimensions are not mutually orthogonal.) Due to these dependencies and linkages, attaining goals is not a simple process of randomly enumerating them and then arbitrarily attempting to work on each subgoal. The enumeration of the goals itself should reveal some of the dependencies. Care must be taken to distinguish between causes and effects, between underlying causes and their symptoms.

India’s Human Development goals (listed in its entirety in the extended part of this entry) enumerates them randomly. Indeed, the first “goal” is Reduction of poverty ratio by 5 percentage points by 2007 and by 15 percentage points by 2012. I disagree. Poverty cannot be reduced by declaring it as a goal. If indeed it were that easy, we should reduce poverty by 100 percent, and not pussy-foot around the place with goals of reducing it by only five percentage points.

Poverty reduction is the combined effect of a number of other ‘goals’ that one may have. For instance, poverty will be reduced if these were to happen.

1. Control population growth.
2. Increase access to education.
3. Provide access to credit.
4. Have a rational labor and industrial policy.

If you do all the above (and more, perhaps) successfully, the outcome will be reduction in poverty. Whether that is a 5 percentage points reduction or a 50 percentage points only time will tell.

Similarly the item about ‘Maternal Mortality Ratio’. The reduction in MMR is a result of other factors such as maternal nutrition, gaps between pregnancies, availability of pre-natal medical care, and so on.

To me, the goals ring hollow. Expect for the change in the dates (the 10th Five Year Plan runs between 2003 and 2007), something like this has always existed. Making up the plans occupy some bureaucrats and I don’t think anyone takes them seriously.

If there was an incentive for people to state realistic goals and achieve them, then we could have a honest goal setting exercise. For instance, suppose if the goals were not achieved, those setting the goals were to lose their jobs, they would not set these goals at all. They would then think very clearly and figure out what the factors are that, if obtained, would lead to certain results. These bureaucrats would then list out the factors and say in the end, “Don’t know by how many points exactly will poverty be reduced but it will be reduced if the factors are obtained.”

My (incomplete) list of factors need to be targeted for achieving development

education, primary as well as vocational

access to credit

access to markets

a transparent legal system and law enforcement

rule of law as opposed to rule by men

MONITORABLE TARGETS FOR THE TENTH PLAN AND BEYOND

* Reduction of poverty ratio by 5 percentage points by 2007 and by 15 percentage points by 2012;

* Providing gainful and high-quality employment at least to the addition to the labour force over the Tenth Plan period;

* All children in school by 2003; all children to complete 5 years of schooling by 2007;

* Reduction in gender gaps in literacy and wage rates by at least 50 per cent by 2007;

* Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2 per cent;

* Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002-3 to 2006-7);

* Reduction of Infant mortality rate (IMR) to 45 per 1000 live births by 2007 and to 28 by 2012;

* Reduction of Maternal Mortality Ratio (MMR) to 2 per 1000 live births by 2007 and to 1 by 2012;

* Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent by 2012;

* All villages to have sustained access to potable drinking water within the Plan period;

* Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.

HIV/AIDS targets within the Tenth Plan period:

80% coverage of high risk groups through targeted interventions;
90% coverage of schools and colleges through education programmes;
80% awareness among the general population in rural areas;
reducing transmission through blood to less than 1%;
establishing of at least one voluntary testing and counselling centre in every district;
scaling up of prevention of mother-to-child transmission activities up to the district level;
achieving zero level increase of HIV /AIDS prevalue by 2007)

Malaria targets within the Tenth Plan period

ABER (Annual Blood Examination Rate) over 10 per cent
API (Annual Parasite Incidence) 1.3 or less
25% reduction in morbidity and mortality due to malaria by 2007 and 50% by 2010 (NHP 2002)