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COPY FOR ‘COMMENTARAO’ IN “THE TELEGRAPH” OF JUNE 29 2009 “WIDENING REGIONAL DISPARITIES” BY S L Rao The Public affairs Centre in Bangalore has completed a preliminary study on the Northsouth regional differences. It examines the generally held belief in recent years that there is an economic divide between India’s north and south. The study compares the four major states of Tamil Nadu, Karnataka, Andhra Pradesh, and Kerala with Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan, termed the BIMARU states by Ashish Bose many years ago. A more exhaustive comparison is between Tamil Nadu and Uttar Pradesh. In 1960-61, TN’s per capita income was Rs.5,053 versus Rs.3,338 for U.P., a difference of 51%. In the early 1980s, the gap narrowed to 39 % but in 2005-06, the gap widened to 128%. The gap became pronounced from 1992-93. Thus TN moved far ahead of UP by 2005. Poverty ratios between the two states show that till about 1985, TN was the same or worse than UP. A 1998 report by Datt and Ravallion estimated nearly 70 percent rural poverty in Tamil Nadu in 1960, versus only about 48 percent in Uttar Pradesh. Economic deprivation and inequality were much higher in TN but it reduced them rapidly. By 2005, TN’s per capita income exceeded UP’s by more than before, and poverty ratio declined below UP. How does one explain this differential growth? The question has been attempted by economists who have explained differential economic transformation of countries by many factors. Early on they focused chiefly on the role of capital as an accelerator of economic growth. However, many developing countries demonstrated that investment does not by itself achieve economic growth. Technical progress enhanced productivity and then with the emphasis on human development by the UNDP, other factors have been brought in to explain growth. They include the stock of different types of infrastructure; human resources such as skilled labour, power and roads. Non-economic factors like quality of public governance, its efficiency in developing infrastructure, delivering social services, etc, are seen as key factors. This is apart from more familiar factors like stability of the financial system, availability of skilled labour and technology locally or through import, substitutes like diesel generated power, using railways when roads are poor or limited, moving to other states where there is better law and order, but the quality of governance in the state in which investment is made provides no substitutes. Literacy, higher education, institutional quality, etc., are all part of human resource development. Factors that impact on economic performance are those that are essential and those that are enabling, for growth to occur. The enabling factors would be literacy, health, public investment, infrastructure, etc. The essential precondition to growth creates the enabling environment. It has to do with governance. Most investors assess both sets of factors in making strategic decisions. the categories of factors which may have created the initial conditions for the observed income divergence between the two states: The study looks at the comparative data on human resource capabilities, urbanization, Infrastructure, development expenditures by governments and their efficiencies in resource use, and governance. For human resource capabilities, it compares rates of literacy, infant mortality, proportion of graduates and technical manpower. TN’s literacy rate has always been at a higher level when compared with that of UP. Infant mortality rates indicate the level of health care services, ignorance of good health practices, poor maternal health and poor family health. TN’s IMR has always been lower than that of UP, though the disparity has been declining over the last thirty years. The proportion of graduates was higher in UP in 1971 and 2001. Enrolment in technical courses (B.E./B.Sc. (Engg/B.Arch.), Medicine, Dentistry, Nursing, Pharmacy, Ayurvedic & Unani, B.Ed. & B.T) as proportion of the 15 plus age group is a proxy for the extent of technical manpower. Technical enrolment in TN is well above UP for recent years and clearly technical manpower has increased significantly in TN because of encouragement to setting up engineering and other technical colleges. TN has always been ahead of UP on urbanization and since 1991 it has been growing at a faster rate than UP. The study uses installed generation capacity as proxy for infrastructure and finds that TN’s installed capacity was much higher in the 1960s than UP and since the 1980s it has grown faster. TN’s telephone penetration is higher than that of UP. There is little disparity between the two states on food grain yield per hectare perhaps because of the spillover effect of the green revolution from prosperous agricultural areas of Punjab to western UP. . While TN had greater food grain yields than UP for many years, UP scores over TN for many recent years. Relative efficiency of the governments in resource utilization show for example that TN spent Rs.22,389 during 1980-85 for creating every additional KM of road during 1985-90, while UP spent 10 times more than TN, Rs.232,365 over 1980-85 to create an additional KM of road during 198590. An example from the social sector in UP is primary education that showed schooling infrastructure expanded rapidly but, classroom activity levels had not improved. Between 1996 and 2006, one out of every four existent government schools were set up, the proportion of schools with at least two pucca rooms rose from 26 percent in 1996 to 84 percent in 2006, ifree uniforms and textbooks were provided in 1996 to 10 percent and less than half of schools and went up to nearly 99 percent of schools in 2006. But the results were poor. In 2006 half the government schools had no teaching activity. In 2006 the percentage of children out of school in TN was 4.9 in the age group 7-16, 3.6 in the age group 11-14 and 15.8 in the age group 15-16 (both boys and girls), compared with 8.9, 8.9 and 22.6 respectively for UP during that year. Similarly, the proportion of children not going to any government, private school, balwadi or anganwadi, was 57.7 percent in UP for children in the age group 3, whereas it was only 13.1 for TN. Poor efficiency in the deployment/utilization of resources may also have led to economic growth in UP being slower than in TN. Governance was measured by political stability as the tenure of Chief Ministers, law and order measured by the number of police firings, and functioning of the judiciary measured by the number of cases pending in Courts. The average tenure of chief ministers in TN and UP till 1967-68 was similar and since then has declined in both states. The decline was steeper in UP, with average tenure in UP being substantially below that of TN. Available data shows police firings per million populations to have been significantly higher in UP than in TN. Similarly, pending cases have been much lower in TN. Clearly, governance-continuity of Chief Ministers is important but so is their capability. In recent years UP had longer tenures of CM’s but growth has been poor. Good governance leads to better physical and social infrastructure and more effective government expenditures. Agriculture must be studied since its growth could transform lives of many millions. Every part of the country has seen poor and declining productivity in almost all crops. Central government expenditures on agriculture to GDP have been declining. Administrative reform to improve quality of government expenditures is essential. A study of this nature needs to be done for all states. We must look at the differentials within a state. We need to find data for many years on many other factors as well. It is a useful effort and must be expanded. (1256)