Refined analysis by top economist says Gujarat underperforms in social sectors

Prajul Bhandari

By Rajiv Shah

A new Planning Commission-sponsored study, “Refining State Level Comparisons in India”, by Pranjul Bhandari, economist at the Office of the Chief Economic Advisor in the Ministry of Finance, Government of India, and a chief brain behind the Economic Survey 2012-13, says that her “refined” analysis has found that Gujarat stands 16th in health index, 12th in education index and 11th in infrastructure index among 21 major Indian states. Bhandari has arrived at these figures on the basis of a new methodology she adopts by “refining” raw data in order to find out how well do states perform in the context of the resources at their disposal.
Bhandari believes that the method so far adopted only provides what “raw” results. They merely “conform with the already well-established findings of several other studies that states such as Kerala are amongst the best performing while the so-called BIMARU states (Bihar, MP, Rajasthan and UP) are laggards.” However, she thinks, “While this is true on an absolute level, it does not reveal the performance conditional on state level factors.”
Hence the need to “refine” the analysis by “controlling” the three indices for per capita consumption” in order to put states on “a level playing field and for gauging how well the states have used available resources.” She underlines, “Our ‘refined’ analysis throws up rankings which are quite different from the ‘raw’ analysis. For instance, we find clear differentiation between the BIMARU states – while Orissa, Bihar and Chhattisgarh are amongst the best performers, Uttarakhand, Rajasthan and Jharkhand are amongst the worst.”
The “refined” analysis suggests that “while the performance of Himachal Pradesh has been most impressive, Gujarat is amongst the worst on health, Maharashtra on infrastructure, and Haryana on both.” Pointing out that on all three sectors – health, education and infrastructure – are “complex”, she says, “Given the sheer size of resources needed for scale up, each of these three needs effort from both the public and private sectors. The public sector for instance not only needs to provide resources, but also create a policy environment conducive for scale-up.”
The methodology Bhandari adopts is as follows: She ranks “the states and gauge if performance across the three sectors are correlated or divergent”, and compares states “for both absolute performance as well as for performance after controlling for consumption levels.” She stresses, “The latter analysis can be associated with governance – how well the resources at the state’s disposal have been used for progress in the critical sectors of health, education and infrastructure.”

Bhandari looks at the ranking performance in the context of per capita consumption. “This puts the states on a level playing field before comparisons are made. For instance, Bihar’s underperformance on many fronts could partly be explained by lower resources at its disposal which makes it difficult for the state to invest more on health and education. Our analysis controls for this factor while evaluating the state’s performance in delivering key services”, she says.
If one uses the established method, the “raw” ranking suggests that –
• The first tier states comprising Kerala, Goa, Himachal, Punjab, Tamil Nadu, Maharashtra and Haryana are the best performers. However, performance of Maharashtra in infrastructure and that of Haryana in health is markedly poor.
• The second tier states comprising West Bengal, Uttarakhand, Karnataka, Andhra, Gujarat, J&K and Orissa are the medium performers. Orissa stands out for worse performance on infrastructure, compared to its performance in health and education.
• The third tier states comprising Rajasthan, Assam, MP, Chattisgarh, UP, Bihar and Jharkhand are the laggards, mostly comprising of the BIMARU states.
However, she states, “While the analysis above is insightful, it only reiterates the well known fact that states like Kerala have done well on health and education, while the BIMARU states have been laggards.” What it overlooks is the fact that “states with lower resources at their disposal are likely to underperform.” Hence the need to “refine our analysis by creating a level playing field before comparing states.”

This is done by adjusting “the three indices for monthly per capita consumption (MPCE).” She explains, while “GDP per capita and consumption per capita broadly measure the same thing and are tightly correlated, consumption has the benefits of reflecting the actual purchasing power and including income generated from outside the state (i.e. inter state remittances).”
The ‘refined’ analysis throws up the following observations –
• Good performers - Himachal Pradesh, Kerala, Orissa, Tamil Nadu and Bihar have been the best performers across all the three sectors. West Bengal and Chhattisgarh have also been amongst the best off states.
• Laggards - Uttarakhand, Rajasthan, J&K and Jharkhand have been laggards across all the three sectors.
• Average performers - The remaining middle ranking states have varied performance. Goa, Punjab and Karnataka have done well in health and infrastructure, but underperformed in education. On the other hand, Haryana, Andhra, Gujarat, Assam, MP, UP and Maharashtra have each underperformed in two of the three sectors.
Bhandari concludes, “The refined analysis of states throws up important results on which states are making best use of the resources in hand to provide health, education and infrastructure services to its people. It is therefore a useful tool in identifying states whose experiments are working, and which can potentially be replicated by others. While convergence in income levels may take its own time, this analysis will help policy experts, interested observers and even voters to evaluate the success of its state and government.”

Refined vs raw rankings