Subir Roy: Growth leader, development laggard

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A massive contrast stalks India. It is not just emerging as a clear global leader in growth but has begun to challenge the job prospects of many skilled people in the developed world. On the other hand, India's human development standing often remains poor not just in comparison with the developed world but also with some other South Asian countries. Sri Lanka's superior status in this regard has been established for long but what is disturbing is that in terms of some key indicators, Bangladesh, long taken to be an international basket case, is successfully challenging India.

India's ascendancy in services exports is by now well-established. Significantly the country is also emerging as a competitive geography for manufacturing. Most recently, the automobile industry and the railways are putting their heads together to conceive several dedicated freight corridors to enable quick transportation of cars to ports for export to the rest of Asia. India, simply put, has become an attractive place to make cheap cars for Asia.

If that is the big picture, here is a micro example. Bangalore-based QuEST is a successful engineering services firm doing non-core development work for global auto, oil and gas, and aeronautical firms. This week, timed with the annual promo BangaloreIT.in, QuEST has announced an investment of $25 million (not insignificant for it as its turnover last year was $28 million) over the next five years to set up a plant to manufacture precision-machined components for aeronautical OEMs.

I recall meeting its founder Ajit Prabhu a couple of years ago and noting how careful he was in not overstating what his firm was doing. We design the face lift for existing car models and non-core concept design for developing components, he said. From designing QuEST is going into manufacturing. Given the robustness and unbounded confidence of Indian entrepreneurs, it will not be surprising in a few years to find a distinct Indian presence in the global aerospace value chain.

Now the other side of the picture. Thirty-five years ago India and Bangladesh were at about the same level in terms of infant mortality""India stood at 138 deaths per thousand live births in 1971 and Bangladesh at 145 in 1970. By 2003, Bangladesh had brought down the figure to 46, and India had distinctly fallen behind at 74 in 2000. Even if a child manages to live, what are her chances of growing up healthily? In 2004, 53 per cent of Indian children were malnourished, compared to 48 in Bangladesh and 33 in Sri Lanka.

The Oxfam International publication Serve the Essentials, an exhortation to governments and donors to improve South Asia's essential services, has compiled these statistics and more, mostly sourced from UN agencies. Twenty-five per cent of hospitalised Indians fell back into the poverty trap in 1995-96 by having to meet medical costs. This is unsurprising as out-of-pocket expenses accounted for a massive 82 per cent of total health expenditure in India in 2002. The comparable figure for Bangladesh was 52 and Sri Lanka 50.

What is to be done? Surely, it is not beyond the national competence to make up these appalling deficits in human development. As private initiative is seen to be at the forefront of the current Indian economic resurgence, the goal of public advocacy can be to convince as many Indian businessmen as possible of the business opportunities that lie at the bottom of the pyramid, as outlined by C K Prahalad.

But the problem is the market failures in the areas of health and education. The poor have difficulty in paying for even very cheap healthcare although, as cited above, overall, Indians privately pay for four-fifths of their medical expenses. Hence the state has a "responsibility to provide universally accessible and robust public delivery systems for essential services," says Jean Dreze in his forward to the Oxfam report.

Few will quarrel with the contention that the government should spend more on healthcare and primary education for the poor. But the key issue is the mostly appalling nature of the Indian public delivery system. The middle-class attitude is that money which mostly goes down the drain is best not spent. The fact that the eighties saw significant improvements in human development through increasing public expenditure despite leakages does not convince those whose opinions matter.

Hence public debate today ought to be on how the money can be better spent, the service better delivered. There are really three ways of doing this. At the grassroots, panchayati raj institutions have to take ownership of the local primary health centre and primary school and demand better delivery. Above that, wherever there is a choice, a state-funded voucher system can be tried whereby people who are slightly informed about the choices available, be it in healthcare or education, can go and shop for better delivery. The third leg is the role of NGOs, which have to inform, help and monitor right down the line to help delivery. There is strong opposition to a voucher system from left ideologues and politicians, and the leaders and members of trade unions.

The most remarkable improvement in human development in India in the last 25 years has occurred in Tamil Nadu. Left control over the government machinery need have nothing to do with better service delivery to the poor. Politics in the name of the poor delivers indifferently in West Bengal, but it does very effectively in Tamil Nadu through the politicisation of dalits. Caste- driven politics has not, however, delivered in UP and Bihar. So there need be no one answer to the same problem in different parts of the country. The need is to keep arguing and experimenting.

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