The Political Economy of Public Sector Performance Management Reform

Reflections from Prajapati Trivedi, founding Secretary of the Performance Management Division in the Government of India Cabinet Secretariat, in Governance. 

"The new government of Prime Minister Modi never formally declared that it is closing the RFD system. It simply stopped asking the departments to prepare RFDs (performance agreements). Indeed, the government went on to appoint three more Secretaries for Performance Management as my successors. The system was, however, allowed to atrophy and no formal answer about the status of the RFD system was either given in the Parliament in response to questions on the topic or was forthcoming under India's Right to Information (RTI) act. Thus, we can only speculate why the RFD system came to an abrupt end.

First, it is possible that the review of the working of the RFD system in the past 4 years by the incoming Modi government revealed a story that did not match their election rhetoric. Modi had portrayed the outgoing government of Singh as weak on governance and could not, therefore, acknowledge the existence of a rigorous system of performance monitoring and evaluation of government departments. After all, it had promised to do in its election manifesto what was already being done.

Second, the review of actual results for the performance of individual government departments perhaps revealed that “reality” of performance was better than the “perception.” It is fair to say that Manmohan Singh lost elections because he could not “talk the walk.” The performance data revealed that on average government departments were achieving 80% of the targets assigned to them via performance agreement (RFDs). By contrast, the opinion polls at the time revealed that the electorate rated the government performance at around only forty percent 40%. Thus, continuing the RFD system would have revealed facts that went against the main narrative on which the government of Modi came to power.

Third, it is possible that the new government found that the performance results for the past 4 years based on the departments' ability to meet agreed commitments did not meet their preconceived biases.

Fourth, a system based on ex ante agreements and objective evaluation of performance at the end of the year reduces discretion and was perhaps seen as inimical to the personalized style of management preferred by the incoming Prime Minister.

And fifth, I have yet to come across any workplace where performance evaluation is welcomed by staff. Senior career civil servants did feel the pressure to perform and were waiting to sow seeds of doubt in the minds of incoming administration. Performance management is a leadership issue and not a popular issue.

There are several key lessons of my experience that may be relevant for policy makers working on a similar system in their own countries.

We succeeded beyond our wildest expectations in terms of the scope and coverage of the performance management policy because we emphasized simplicity over complexity. We defined performance management as simply the ability of the department to deliver what it had promised.

It is my strong conviction that unless you can reduce the performance measurement to a score, it will remain difficult to grasp and hence difficult to sustain over time. For the performance score to be meaningful, however, performance management must be based on ex ante commitments and must cover all aspects of departmental operations.

Performance management is best implemented as a big-bang effort. Pilots in performance management do not survive because those departments chosen as pilots feel they are being singled out for political reasons.

Finally, the single biggest mistake of the outgoing government was to not enshrine the RFD policy in a law. A similar policy for accountability of state-owned enterprises in India was embedded in a law in 1991 and it has survived changes in government." 

Migration fact of the day

"Today, approximately 7 million Indians work in six GCC countries, which is more than 50% of estimated 13 million foreign workers present in the GCC. The Indian workers in GCC remit about US$40 billion i.e. around 57% of the total remittances, i.e. US$70 billion India receives annually. Besides contributing significantly to the national forex reserves, the remittances received directly by the workers’ families help in poverty alleviation, support local business, promote entrepreneurship and generate employment."

That’s Zakir Hussain on the World Bank blog. Worth remembering this context next time you read a scandal about the poor treatment of Indian workers in the Gulf.

Never Mind Development, here's Nirvana

The biggest cash transfer programme in the world continues apace, as subsidies for fuel in India which used to be paid to fuel companies are being redirected into consumer's bank accounts.

Continuing the push to extending coverage under the Aadhaar program, targeting enrollment for 1 billion Indians; as of early February, 757 million Indians had been bio-identified and 139 [million] Aadhaar linked bank accounts created;

...

The heady prospect for the Indian economy is that, with strong investments in state capacity, that Nirvana today seems within reach. It will be a Nirvana for two reasons: the poor will be protected and provided for; and many prices in India will be liberated to perform their role of efficiently allocating resources in the economy and boosting long run growth.

From India's recently published 2014-2015 Economic Survey led by Arvind Subramanian, the government's Chief Economic Advisor (and on leave from CGD) HT: Vinayak Uppal

How not to improve education in India

Some great analysis from MINT who highlight a new Government of India report, which ranks state education "outcomes".

What is odd is that the government rank has a negative correlation with the rankings of the Pratham report which directly measures learning outcomes.

So what goes into the government "outcomes" index?

- Number of teaching days
- Teacher working hours
- Enrolment rates
- Drop-out rates
- Primary-to-secondary transition rates

These are all basically inputs, with the exception of drop-outs and transition rates, which maybe say something about quality. But none of them are actually directly measuring learning at all. Yet more evidence for the Lant Pritchett case that focusing on inputs or "EMIS-visible" metrics won't get us quality learning outcomes, and measuring learning directly is critical to focusing policy attention on how to improve learning.

HT: Abhijeet Singh

Is it wrong to shop from places that use child labour?

I got told off recently for shopping at H&M because of some sweatshop / child labour scandal (a burden I share with Beyonce who has also been criticised for her H&M links). But is a boycott really the right individual action?

Two new(ish) papers look at the impact of government bans on child labour in India:

One economics paper by Bharadwaj, Lakdawala, and Li (via Berk Ozler) looks at the impact of India’s Child Labour (Prohibition and Regulation) Act of 1986. They find that the ban led to a decrease in child wages and an increase in child labour. This is consistent with the theory that families use child labour to reach subsistence levels - so a ban which leads to a reduction in child wages, will make families make their children work more to earn the same amount and reach that subsistence level.  

Second is a note by my colleagues (Ian MacAuslan, Valentina Barca, Yashodhan Ghorpade and Gitanjali Pande) based on qualitative fieldwork in India (150 interviews and focus groups with both children and adults). Their findings support the results of Bharadwaj et al - parents make rational trade-offs, child labour is driven by household poverty, and outright bans might be counter-productive - better to invest in social protection and improving the quality of schooling.

What does all of this imply for me and my new H&M jumper? I'm not really sure. I asked the question a few years ago in Juba, and further quick googling hasn't got me any closer to an answer. I suppose the theory of change is that individual boycotts could force H&M to improve their procurement and make sure no child labour is involved. But this could either lead to those children leaving the factory and going to school, or perhaps more likely and in line with these two papers, a reduction in the going wage rate for children, and an actual increase in child labour.

Any ideas? References? Once again, I'm left wishing that there existed some rigorous impartial GiveWell-style analysis for consumption decisions so I could outsource some more everyday moral dilemmas and not have to do the thinking myself.

What can be done about India’s failing primary schools?

This is a guest post by Abhijeet Singh, Research Officer at the University of Oxford

It’s that time of the year again. As India’s Annual Survey of Education Report (ASER) was released last week (15th Jan), we are reminded of how abysmal learning levels in the country are. Most children are in school, but very few are learning. Less than half the children in Grade 5 can read a Grade 3 text, and only about a quarter can divide a three-digit number by a one-digit number. And the learning levels seem to be going down every year.

Remedies that won’t work

The real question is what can be done to improve learning outcomes. And the first lesson is that most of what is being proposed is not promising:

Inputs alone won’t improve learning: School reform in India seems to consist mostly of getting kids in school and then improving the inputs they get. But this ‘business-as-usual’ approach doesn’t work. The decline in achievement levels in government schools has coincided with major improvements in inputs. Across developing countries, the link between increasing school resources and student achievement is surprisingly weak: building libraries, providing more money to schools, teaching aids like flipcharts or providing a laptop to every child all don’t seem to improve learning by much, if at all. Upgrading school inputs won’t solve this mess.

Private schooling won’t do too much either: ASER documents, as do a number of studies, that students in private schools do better on average than students in government schools. But these students come from better-off households, with more educated parents - so it is hard to tell whether the schools caused this difference in test scores. 

Two recent studies - one study tracking the same children for 7 years that I recently authored, and another based on a randomized evaluation of school vouchers, both find that private school students do better in a number of dimensions, (English, Science and Hindi) even after background factors are accounted for. But even here the ‘private school effect’ is only a small part of the gap between students’ actual achievement and any objective standards of quality we expect a functioning school system to deliver. And in some key areas, such as Maths, we don’t see any private school effect at all. 

The key constraint is service delivery (but reform is hard!): A quarter of government school teachers seem to not come to school on a given day. And when in school nearly half of the teachers are not teaching. Researchers have looked for solutions: for example, giving teachers performance bonuses, monitoring attendance with cameras, and even giving them detailed information about their students’ learning needs. But even when these interventions seem to have an impact, it is hard to see how these can be scaled up. 

So what might work?

Better pre-school preparation: One new pattern highlighted in ASER this year is that children in government schools seem to start earlier than children in private schools and are less ‘school ready’. A recent paper of mine, published this month in the Oxford Review of Education, finds the same pattern but goes further: gaps between children in the private and government sectors arise before school entry and aren’t just a reflection of household incomes and parental education: at least part of the failure probably comes from the failure of government pre-schools. Investing in early childhood education could be the best investment to make, including in developing countries, but most of India’s anganwadis (pre-school centres) aren’t geared towards education at all.

Supplementary teaching: Karthik Muralidharan, one of the most prominent researchers into primary schooling in India, had a different proposal for India’s Five-Year plan. He suggested supplementing class teachers with more teaching assistants who can provide individual learning support (which has been shown to improve test scores in India). And then to facilitate a system that allows the best of these teaching assistants to become regular teachers and receive preference in hiring. This will not be a cure-all, but it could improve matters significantly. And it could be sustainable not just economically but also politically.

Rethink what is taught and how: A more far-reaching reform, proposed both by the ASER team and by Lant Pritchett, is to rethink what we expect students to learn in primary school. The system focuses on a grade-specific curriculum that requires teachers to complete a list of topics per year, regardless of what students need. The curriculum is targeted at the top 10% of children, the other 90% gain nothing because they are already too far behind. And in a setting where children from many grades sit in the same class, a grade-specific syllabus might not be something to aspire to anyway. Much better to focus on the skills we expect children to acquire, rather than the textbook chapters a teacher can tick off whether or not the children have really understood.

Reforming a situation so dire will not be easy. But the first step, in all of this, is to acknowledge the problem. Perhaps the saddest thing of all about the latest ASER report is the government’s refusal to accept that a problem exists and that it is getting worse. This is not the first time such denials have occurred. India cannot progress without assessing whether children are learning at school and without evaluating what works in the school system and what doesn’t. As reactions to the ASER report demonstrate, India’s researchers and civil society have made that leap. It is time the government does so too.

India fact of the day

In India, remittances are larger than the country’s earnings from IT exports.

From Dilip Ratha 

India wonkwar: Sen vs Bhagwati

This is a guest post by Vinayak Uppal (previously an economist in South Sudan, more recently at DFID India, soon to be OPM), summing up the recent debates between heavyweight economists Amartya Sen and Jagdish Bhagwati. He would opt for reading Bhagwati if you had to pick only one. 

“Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's...If so, what, exactly? ...The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.”

Thinking about India is precisely what some of India’s best-known economists have been doing. An Uncertain Glory, written by Amartya Sen and long time collaborator, Jean Dreze, and India’s Tryst With Destiny by Jagdish Bhagwati and Arvind Panagriya[1] are two recent books that put the spotlight on Indian development.

Economists, even global leaders such as these, rarely make mainstream headlines. The last few weeks however have seen regular updates to an increasingly acrimonious, personal and bitter spat, being played out in op-eds, letters, interviews and talks all over the world, increasingly with strong political overtones.

So what are they saying, and what is the disagreement over?

Sen argues that India under-performs significantly in a variety of social indicators. It therefore needs to focus on building human capital like health and education first, with such services (largely) provided by the State rather than viewing growth as an end in itself.

Bhagwati's book reads like a capitalist manifesto, making a strong case for the gains that reforms have brought the average Indian through economic growth, and argues that far more reforms are needed to sustain progress.

Like all good debates, there is plenty of disagreement. Sen has stated previously that in an under-nourished country such as India, it is stupid to focus obsessively on growth. He points out how India is now like “islands of California in a sea of Sub Saharan Africa”. Bhagwati takes a far more positive view of growth, highlighting the hundreds of millions of people pulled out of poverty in the decades since growth accelerated, and the rapid improvements in almost all social indicators. 

Sen clearly believes that basic services can, and should, be delivered through State systems, rightly highlighting many of the gains made in states like Himachal Pradesh and Kerala. Bhagwati comes out firmly on the side of cash transfers in many of the social services like health and education. His view of the public sector can be simplistic, seeing almost any money spent through government as a waste.

There remain a number of untouched issues. Both are relatively quiet on the environment. Sen skirts around economic reforms and growth, giving only passing references to crucial issues like infrastructure, labour reforms and increasing job creation. Bhagwati’s views on improving governance are limited, as are his views on how to combat corruption and social exclusion. His book also doesn’t answer the basic conundrum of why India has been unable to provide its citizens with a basic standard of living, despite being the world’s biggest democracy and many of its poorer neighbours performing far better.

It is important in the middle of this heated debate, to remember that they agree on the fundamentals. (Bhagwati clearly disagrees with this, calling Kaushik Basu and Montek Ahluwalia simplistic bureaucrats for suggesting such a thing!) Neither of them is debating the importance of growth or questioning the need to spend resources on delivering health and education.

These are both big books attempting to grapple with the pressing issues facing India today. They are also both rather staid books; no Poor Economics or More Than Good Intentions style human-interest stories pepper the chapters. Instead they are filled with academic references, charts and statistics to better illustrate their points. Yet, both are worth a read. They present different views on development, with areas of agreement, but also fundamental differences in approach and priorities.

If I had to pick one recommendation, it would be Bhagwati’s which seems more comprehensive, better argued and more grounded in India’s reality where the problem is often not poor policy, but poor implementation of policy. It also thankfully presents his views on policy, unlike some of his downright nasty editorials, which may be one reason the only Nobel he has won has been in Springfield.

---

[1] For ease of reading, the views are presented as Sen’s and Bhagwati’s individually, though the books are jointly written by Sen and Dreze, and Bhagwati and Panagriya respectively.

The one thing that does get delivered in India's government schools

Excellent writing by Abhijeet in the Guardian providing some perspective on the recent deaths in Bihar from school meals.

the midday meals, which reach about 120 million children on every school day, are probably the most successful of all interventions in education that the Indian state has delivered in the past decade. On any school day, a quarter of teachers are absent from government schools (pdf), only 45% of those in school are teaching, but in 87% of schools, a hot meal is served (pdf).

Are private school fees in India "inflated"?

Adventures in fact-checking exfam lefties

Swati Narayan on Duncan Green’s blog celebrates a new law passed in India reserving 25% of private school places for underprivileged kids. As part of the deal, the government reimburses private schools, but only at the level of government per pupil funding rather than necessarily the fees charged by private schools. Swati writes:

The Act is categorical that the state will reimburse private schools only based on what it spends per pupil in government schools, which is typically much less. For-profit private schools are therefore keen to pass on the burden and increase their already inflated fees for the remainder of the class.

Are those fees really inflated? It is possible that high-end elite schools are getting a raw deal here, but most private schools are not high-end elite schools. Here are some numbers from Karthik Muralidharan, who is possibly the global expert on the economics of education in India. In his survey of rural primary schools in Andra Pradesh, spending per pupil at government schools is typically five times more than at private schools.

Average spending per pupil at government schools: 7680 rupees ($140) per year

Average fees at private schools: 1330 rupees ($24) per year

Right then. I don't have a strong opinion about this new law, but let's maybe have less demonisation of private schools in poor countries where the public education system is pretty dysfunctional yeah?

What do Indians think about British aid?

Following an exchange with Ian Birrell last week, I asked an entirely unrepresentative group of six Indian friends what they thought (all economists with degrees from UK or US). In general the British media's take seems to have been pretty devoid of voices of actual Indians who are not also politicians.

My hypothesis: that whilst Indian politicians might not want the stigma of aid, that people living in extreme poverty tend to be grateful when they get some free money, and don't really care where it comes from.

None of my friends knew of any surveys or data on the subject (though someone did remind me of this book from interviews with 6,000 aid recipients, not from India, who were in general grateful for the support but also had  their criticisms). 

Two of them agreed with me

"People would probably not care where aid is coming from. To people in the poorest sections, there is very little that distinguishes Britain from the politicians in Delhi in so far as both are equally removed."

and

"India does need the aid of course (small or big is irrelevant). Any extra help to India's efforts to bring down inequality and deliver services to the poor is highly appreciated, the important thing to worry about is the effectiveness of this aid."

A third argued that it is about modalities

"Overall the debate about aid is clear, it is important, and it is a safety net for the poor. The debate over DFID money is not about aid in general, it is about the modality of delivery, the quantity of aid, and the ability of DFID to hold the Government of India to account for the way this aid is spent. All of this considered, I think it makes sense for DFID to reduce the amount of aid it gives to India directly and maybe, channel it through the World Bank or UNICEF or the like."

The other three mostly disagreed

"whether the extremely poor would be happy to receive any extra amount that might come their way irrespective of source—hell yes! They don’t care whether it’s DfID or Delhi. But is that a reason strong enough to justify Britain’s aid to India? I am someone who feels we (India) don’t need aid (British or otherwise). What we need is fixing the various inefficiencies in how we target and deliver health, education, free ration and the entire gamut of public services to the poor, and this is something India needs to figure out for itself."

and

"Public opinion is not super supportive, and Indians mostly 

1. Don't give a damn about aid
2. Are suspicious of most state actors, but think it does have a role (which can't be filled by DFID)
3. Are paranoid about foreign intervention and control (we did have the east India company!) 

Obviously though the response would be different if you were to ask the direct beneficiaries, but it isn't easy to assess the counterfactual. It's unlikely they would not have received support in the absence of DFID. My guess is if you did a census - 80% would not know or care about aid, 18% would oppose on nationalist grounds and 2% would support!"

and

"It makes a lot of sense for DFID to pull out of India and spend that money in Bangladesh, Cambodia, or Indonesia, where it can do as much good (dense poor populations) but is unlikely to run into that same thicket of issues (at least on the UK domestic front).  

Can DFID money do good in India? Yes. Do I think DFID are better than other donors at figuring out where to spend? Probably yes (for the most part). Does DFID involvement in India endanger UK aid even elsewhere? Almost certainly so! 

It's not worth the tradeoff."

I think at this point I may lean toward the issue of modalities - whilst giving cash to Indian governments might be best ruled out, should we really rule out supporting civil society or even individuals?

What do you think?

When unintended consequences go... well!

After the disappointment of the blank results from the Duflo study on labour market policy in France, a new CSAE study by Imbert and Papp has some more encouraging results - programme side-effects which go in a positive direction.

They find that the "National Rural Employment Guarantee Scheme" (NREGA) in India has a positive impact on private sector wages by bidding up the price of labour. The indirect gains to poor labourers from the higher private sector wages are big - about half of the value of the direct gains to participants from the public works programme. Of course, this increase in wages represents a loss for buyers of labour, but these tend to be people in the top 20%.

A couple of interesting implications that the authors note - first, this is evidence against the Lewis model of surplus labour which can be cheaply tapped for capitalist expansion.

Second - differences in the political power and organisation of landlord farmers may help explain differences in the implementation of the scheme across states.

Finally, a reminder that this is based on nationally representative data in a country of 1.2 billion people, and a programme which spends $9 billion a year and reaches millions of households. Take that, randomistas. 

More on the Indian National Cash Transfer

Easterly announces the latest from the NYT with a "India finds cash grants to the poor are no panacea."

The article quotes Jean Drèze, a real Indian-social-policy expert, who notes

“An impression has been created that the government is about to launch an ambitious scheme of direct cash transfers to poor families,” Jean Drèze, an honorary professor at the Delhi School of Economics, wrote in an e-mail. “This is quite misleading. What the government is actually planning is an experiment to change the modalities of existing transfers — nothing more, nothing less.”

Now obviously far be it from me to disagree with Drèze, but the article also notes

“I think this is one of the biggest things to happen to India’s financial system in a decade,” Ms. Ananth [President of IFMR] said.

and

India spends almost $14 billion annually on this system, or nearly 1 percent of its gross domestic product, but the system is poorly managed and woefully inefficient ... Rajiv Gandhi, who served as prime minister for five years in the late 1980s before being assassinated in 1991 while running for office, once estimated that only 15 percent of the money spent on the poor actually reached them; his son Rahul Gandhi said recently that this level may now be as low as 5 percent.

Erm, if that is even close to correct, then getting an additional 85% of $14 billion into the hands of the poor is HUGE. And what kind of economist gives a damn about panaceas anyway? Aren't we supposed to celebrate marginal gains? Especially when those marginal gains could equate to billions of dollars getting into the hands of the poor.

And finally the criticism that this is just about vote-buying is the weakest of them all. If it is going to be a successful election strategy, it is because people value the transfers more than whatever they were getting before, and therefore it is a good policy idea. And if political parties are competing on who can provide the best social policy rather than caste or religion or whatever else, then that is fantastic. 

The best news story of the year

In January 2013, India will start the world's biggest social innovation programme: giving cash directly to its poorest citizens in a bid to reduce its very large problem of corruption that stops subsidised goods and welfare benefits from reaching those who really need them. This initiative will affect at least 720 million people—a population almost the size of Europe!

The scheme is open to families who live below or just above the government-set poverty line. The Indian government expects to transfer up to 40,000 rupees ($720) a year to each poor household. Cash handouts will replace the money the government currently spends on subsidies on goods such as fuel, food and fertilizer. India plans to launch this ambitious social innovation program from 1 January, covering 18 states by April and the whole country by the end of 2013.

from JustMeans.com via Martin Tisne. 

If this is to be believed, the consequences for human welfare are simply staggering. Nothing else even comes close.

Brazil's Bolsa Familia reaches 50 million people and has lifted 20 million out of poverty. India's programme could reach seven hundred and twenty million people.

Just wow. Sceptical comments to calm me down below please.

Uttar Pradesh Fact of the Day

via Tom:

“...teachers constitute 20 percent of the assembly in the early 2000s, and former teachers another 20 percent.” 

From this: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1895224

 For a bit of perspective on why that matters, consider that

With a population of over 200 million people, [Uttar Pradesh] is India's most populous state, as well as the world's most populous sub-national entity. Were it a nation in its own right, Uttar Pradesh would be the world's fifth most populous country, ahead of Brazil

 and then consider that

“the most striking weakness of the schooling system in rural Uttar Pradesh is not so much the deficiency of physical infrastructure as the poor functioning of the existing facilities. The specific problem of endemic teacher absenteeism and shirking, which emerged again and again in the course of our investigation, plays a central part in that failure. This is by far the most important issue of education policy in Uttar Pradesh today”

(that last part is Dreze & Gazdar, quoted by Kingdon and Muzammil in "A political economy of education in India: The case of Uttar Pradesh", HT:Abhi).


This post is dedicated to @DavidTaylor85 and @OfficeGSBrown

Dreze and Sen on Poverty in India

There is probably no other example in the history of world development of an economy growing so fast for so long with such limited results in terms of broad-based social progress.

Outlook India (HT: @cdsamii)

Can Chindian Urban Planning Save the World?

If per capita carbon emissions in both China and India rise to U.S. per capita levels, then global carbon emissions will increase by 139 percent. If their emissions stop at French levels, global emissions will rise by only 30 percent. Driving and urbanization patterns in these countries may well be the most important environmental issues of the twenty-first century. 

Glaeser, Edward (2011). Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier (Kindle Locations 298-301). The Penguin Press. Kindle Edition.

India is really really big

I just got this email from the Skeptical Bandit (republished with permission). Just to clarify - this is not my alter ego but a real person with poor taste in pseudonyms.

India released its prelim Census estimates today. Lots of blog worthy nuggets -
India's population is about the size of the US, Brazil, Pakistan, Bangladesh, Indonesia and Japan put together. 

Its more than the whole of Africa and just UP (my beloved home state) has a greater population than any developing country but China or Indonesia- so much for all the people who say India is over-studied in development or over-invested in aid!!! 

The cost of doing a Census is about 40 cents per person. This is somewhere between one-thirtieth and one-fiftieth of the cost in South Sudan. Not saying that the differences in cost of service delivery are always the same magnitude, but guess why it REALLY makes sense to be looking at India. 

Lots of changes in demographics - an improving sex ratio, decreasing growth (esp in the most populous states) and a pretty significant jump in literacy with greater gains for women.
I've attached their PDF presentation here. Take a look. very nifty!

A note on this map - non-Indians should read the numbers with care - the commas are in unusual places due to Crores or Lakhs or some weird thing like that.

More reasons to give aid to Indians…

… and other residents of middle-income countries.
So. We’ve had a bit of a paradigm-shift then.

in 1990 … over 90% of the world’s poor lived in the world’s poorest places. But it looks out of date now. Andy Sumner of Britain’s Institute of Development Studies* reckons that almost three-quarters of the 1.3 billion-odd people existing below the $1.25 a day poverty line now live in middle-income countries. [The Economist]

The implication to be drawn; if these countries are middle-income then they can afford to pay for their own poverty-reduction projects right?

Poverty … may be turning from being an international distribution problem into a national one.

Not so fast Mr. Sumner. Mr. Ravallion crunched the numbers a few months ago:

The capacity for redistribution in India is far more limited than in China or (especially) Brazil. Indeed, it would be impossible to raise enough revenue from a tax on Indian incomes above the US poverty line to fill India’s poverty gap relative to the $1.25 a day line; the required MTR would exceed 100%. Even at a 100% MTR, the revenue generated could fill only 20% of India’s aggregate poverty gap.’

National redistribution projects, such as conditional (and unconditional?) cash transfers are going to become an increasingly important part of the solution to global poverty.
But redistribution (either national or international) is always going to play second fiddle to economic growth.

Why DFID should still give aid to "India"

   1. Just because the Indian government doesn’t need UK aid (as demonstrated by the space program, nuclear program, and its own overseas aid programs), doesn’t mean that some of the millions of individual Indian people living in extreme poverty with chronic malnutrition would not benefit from foreign assistance.

   2. India is cheap. This means that in general aid given to Indians can go much further than aid to Africans. The same amount of money will feed more people, build more schools, or pay more nurses in India than anywhere in Africa.

   3. Because India is so big, we don’t have to worry so much about aid distorting the economy, or government accountability to citizens, or government spending decisions. The government (and the economy) don’t even notice. But those poor individuals certainly do.

Not that I’m totally convinced by any this, but it does seem that we too often lazily confuse a country (“India”) with its government and/or its people. Countries are abstractions, they are not actors which take decisions. And we should not confuse governments with people.