Why Growth Matters (36 page)

6
. According to a newspaper report, road construction recently has accelerated to eleven kilometers per day, but it remains to be seen whether even this pace will be sustained. See “11 km Added Per Day, Highways Back on Track,”
Economic Times
, October 17, 2011.

7
. The floor-space index is usually fixed by the urban authorities. In the central business district of Mumbai, this index has been fixed at 1.3 since the early 1990s. This means that only 1,300 square meters of floor space can be built on a plot of 1,000 square meters. The restriction has resulted in buildings with one or two floors in areas where land is extremely scarce and therefore expensive.

1
. For more extensive analysis of the Browne report, see Panagariya (2010b).

2
. See Panagariya (2010c) for details.

1
. Panagariya (2008a) addresses Track I reforms in yet other areas, such as Indian bankruptcy law, civil service, subsidies, privatization, land titles, and financial sector policies. In fact, the full agenda of reforms that we could usefully implement is so large, because of the counterproductive nature of our policy framework prior to 1991, that the task before our reformers is akin to cleaning up after a tsunami.

2
.
See, in particular, the comprehensive analysis in Kohli and Bhagwati (2012) and a more abbreviated discussion in Bhagwati and Kohli (2011).

1
. These issues and policy proposals to address them were discussed at length twenty-five years ago by Bhagwati (1988), drawing on much economic research, in the Vikram Sarabhai Lecture in 1987 in Ahmedabad on “Poverty and Public Policy.”

2
. The wages paid in such public works has important implications, as discussed below.

3
. Note here that whether the payment is provided in cash or in kind is a separate issue that we consider below. In principle, both the transfer and wage can be provided in cash or in kind.

4
. For example, the food security bill that is under consideration proposes to encourage increased consumption of rice and wheat by offering these grains at highly subsidized prices through the public distribution system.

5
. The only way the government can eliminate the possibility of turning in-kind transfer into cash is by offering subsidy on unlimited quantity. In this case, the market price will drop down to the subsidized price, making it impossible to turn in-kind subsidy into cash. In this case, the lower effective price of rice will also lead to increased consumption.

1
. NREGA has recently been renamed as the Mahatma Gandhi National Rural Employment Guarantee Act scheme. But we shall continue to refer to it by its original acronym in this volume.

2
. Consequently, the specified wage rose from 17 percent in Meghalaya to 79 percent in Haryana beginning January 1, 2011.

3
. The dollar conversion is done using the average dollar–rupee exchange rate for the fiscal year reported in the RBI
Handbook of Statistics on Indian Economy
, 2011.

4
.
See Government of India (2009b).

5
. One might argue that setting wages at piece rates, as provided by the law, would solve this problem. But this is unlikely since the piece rate must be sufficiently high to give the worker the minimum daily wage that the legislation sets. Moreover, enforcement of work as per the piece rate is likely to be lax in public works programs, especially since the primary purpose of such programs is to create employment.

6
. Panagariya has found this to be the case in his informal conversations with businessmen from Bhilwara district in Rajasthan, who told him that workers refuse to work at wages similar to NREGA wages, arguing that the latter are available to them for limited effort while employment in the private sector requires a lot more effort.

1
. See National Sample Survey Organization (1996).

2
. See National Sample Survey Organization (2001a and 2007a).

3
. Data on the first three surveys are from the National Sample Survey Organization (2001b) and for the last one from National Sample Survey Organization (2007b)

4
. To quote the authors (Deaton and Drèze 2009), “As has been suggested by several authors, including Palmer-Jones and Sen (2001) and Ray and Lancaster (2005), we could take the calorie intakes associated with the original lines as fixed poverty norms and compute the fraction of the population living in households whose per capita calorie consumption falls beneath 2,400 calories in the rural sector and beneath 2,100 calories in the urban sector. Such calculations are shown in Table 5. Because the distribution of per capita calories is moving to the left over time, these numbers show
rising
poverty rates, from two-thirds of the rural population in 1983 to four-fifths in 2004–05, and from 65% to more than 75% in India as a whole” (p. 45).

5
. In principle, there is one qualification. Earlier work by Bhagwati and Balbir Sihag (1980) showed that the lower the offtake of the rations at lower prices in the public distribution system, the lower the differential between these prices and the higher free-market prices. The reason,
they argued, was that an opportunity cost is attached to lining up to get the ration. But the difference between the current market prices and the subsidized prices in the proposed bill is too large to be offset by such opportunity costs for most poor households.

6
. See Panagariya (2011f) for additional details.

7
. For example, a recent article even by the leading agricultural economist Ashok Gulati in a
Wall Street Journal
blog (
http://blogs.wsj.com/indiarealtime/2011/03/17/india-journal-how-to-achieve-food-security
), which discussed at length possible measures to engineer a second Green Revolution to improve food security, made no mention whatsoever of the role imports can play in enhancing food supply.

8
. See blog
http://blogs.wsj.com/indiarealtime/2011/03/17/india-journal-how-to-achieve-food-security
(accessed December 5, 2011).

1
. Economists distinguish between private and public goods. Public goods have two properties, non-rivalry in consumption and non-exclusion. Non-rivalry means that consumption of the good by one individual does not reduce its availability to others. Non-exclusion means that once a good is made available, individuals cannot be excluded from its consumption even if they did not pay for its provision. Defense is the commonest example of a public good. Its availability to one citizen does not reduce the availability to others, and once it is provided, no citizen can be excluded from benefiting from it. Private goods exhibit rivalry and exclusion. If an individual drinks a bottle of Coca-Cola, it is no longer available to another individual (rivalry in consumption). Moreover, once the individual buys the bottle, she can exclude others from drinking it (exclusion). Usually, the market would adequately supply private goods but not public goods. In the latter case, government intervention is required.

2
. It is arguable whether India also needs campaigns to emphasize personal hygiene. As the economist Padma Desai has written, middle-class Indians, devoted to personal hygiene and a clean home, will typically collect garbage at home but will then dump it in the street outside.
Nonetheless, many households could use advice on other health-related matters, such as the health effects of traditional cooking stoves and the dangers from wearing rayon and nylon saris close to fire when cooking.

3
. In its surveys, the National Sample Survey Organization distinguishes between non-hospitalized and hospitalized treatments. These can be approximately identified with what we call routine health care and major illnesses, respectively, in this chapter but the correspondence is not exact. In particular, the surveys most likely include treatment at home of prolonged illnesses and outpatient surgeries in “non-hospitalized” treatment, whereas we include them in the major-illnesses category.

4
. Most, though not all, major illnesses require hospitalization. Therefore, we can get at least some rough idea of the incidence of major illnesses at the aggregate level from the data gathered by the National Sample Survey Organization (2006) mentioned earlier. According to it, during January–June 2004, the average rate of hospitalization was 2.3 per 100 individuals in rural and 3.1 per 100 individuals in urban areas. The associated average expenditure per hospitalization was 5,695 rupees in rural and 8,851 rupees in urban areas in current rupees. In comparison, the average expenditure on non-hospitalized care per ailing person in a fifteen-day period was 257 rupees in rural and 306 rupees in urban areas.

5
. See
http://sahakara.kar.gov.in/Yashasivini.html
(accessed December 10, 2011) for details.

6
. See
www.rsby.gov.in/overview.aspx
and
www.rsby.gov.in/about_rsby.aspx
(both accessed December 10, 2011) for further details.

7
. K. Srinath Reddy, president of the Public Health Foundation of India, chaired the group.

1
. Whereas courts are empowered to enforce the fundamental rights in the Constitution, similar enforceability does not exist with respect to the directive principles of the state policy.

2
. According to
Aser 2010
, enrollment of children age six to fourteen years in private schools rose from 16.3 percent of the total enrollment
in 2005 to 24.3 percent in 2010. In the four southern states, where growth has been more robust and which also happen to be relatively rich, the ratio rose from 29.7 percent to 36.1 percent in just one year, between 2009 and 2010.

3
. The findings by Muralidharan and Kremer (2006) and Tooley and Dixon (undated) mirror those documented earlier in the comprehensive report by the PROBE Team (1999) and Kingdon (2005).

4
. The provisions of the RTE Act legally bind the local government to seek out and enroll every single child within its jurisdiction in an elementary school. The model rules accompanying the act require the local government to conduct household surveys to identify all children within its jurisdiction and to maintain records on them from birth to fourteen years of age. The record, which is to be in the public domain, must include information on name, sex, date and place of birth, parents' names and occupation, preschool of the child, disability if any, and whether the child belongs to a weaker section or disadvantaged group.

5
. Indeed, it is quite unlikely that many public schools will be able to satisfy these norms and standards either.

1
. Thus, as we have argued in this volume (Myth 3.1), the thesis advanced by Dani Rodrik and Arvind Subramanian—that the dramatic turnaround in Indian performance was a result of “attitudinal” changes prior to 1991 rather than the reforms begun in 1991 like a blitzkrieg and steadily intensified thereafter—flies in the face of these massive changes, none of which was expected to be reversed. Novelty sometimes has virtue, but in this case, it is an unmitigated vice.

2
. See James Lamont (2010), Amartya Sen (2011), and critiques by Panagariya (2011a, 2011b).

3
. We do not address here the India–China comparison on social indicators, as against growth rates, that Drèze and Sen have written on. We have already demonstrated its errors (Myth 5.1).

4
.
Samizdat
refers to clandestine copying and distribution of literature banned by the state, especially in the Union of Soviet Socialist Republics.

1
. Nehru (1946, pp. 438–439) records this objective in clear terms when describing the deliberations of the 1938 Planning Committee in
Discovery of India
. He states, “The objective for the country as a whole was the attainment, as far as possible, of national self-sufficiency. International trade was certainly not excluded, but we were anxious to avoid being drawn into the whirlpool of economic imperialism. We wanted neither to be victims of an imperialist power nor to develop such tendencies ourselves.”

2
. Export pessimism reinforced the self-sufficiency argument from the side of economics. If you could not export more jute to buy machinery, which you needed to raise investment, then you had to produce the machinery yourself. This pessimism came from the early views that exports of traditional primary and agricultural products were under strain because of continued economizing on the use of such products in manufactures and because of substitution by synthetics for them. It also came from the view that Western governments, faced with growing exports from the developing countries, would enact trade barriers.

3
. The First Five-Year Plan (p. 422) stated the policy in these terms: “The scope and need for development are so great that it is best for the public sector to develop those industries in which private enterprise is unable or unwilling to put up the resources required and run the risk involved, leaving the rest of the field free for private enterprise.”

4
. Later, starting with the Third Five-Year Plan, the targets were derived with more economic sophistication, in optimization models. But the optimization was academic; the targeting approach remained an albatross around the neck of Indian planners until the post-1991 reforms.

5
. According to the Third Five-Year Plan, 32 percent of the total imports in the First Five-Year Plan (1951–1952 to 1955–1956) and 23 percent in the Second Plan (1956–1957 to 1960–1961) were accounted for by consumer goods. “Established importers” who were licensed to import goods for sale to other buyers were allowed to operate relatively freely.