IGC Bihar Growth Conference 2014

The 4th Annual Bihar Growth Conference was held on the 19th and 20th of July this year in Patna. The conference has brought together political leaders, senior bureaucrats, and leading academics together to generate ideas for growth.

A programme and summaries are available below.

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Sessions

Inaguration

The inaugural session of the IGC Bihar Growth Conference was chaired by Jonathan Leape, Executive Director of the IGC. The Chief Minister of the state delivered the keynote address while the Finance Minister and the Water Resource Minister were present as guest speakers.

The conference started with welcome remarks from Shaibal Gupta, Co-Director of IGC Bihar Programme and Anjan Mukherji, Director of IGC Bihar programme. Both of them welcomed researchers, guests and participants to the conference. They further mentioned that for last four years IGC programme has supported studies related to economic growth of Bihar and completed 25 projects on wide range of subject including health, education, sustainable development, departure management, energy and infrastructure development. The project included 6 rapid responses and all these projects were demand driven.

Jonathan Leape, the Executive Director of the IGC noted that the Bihar Programme is one of the showcase programmes of the IGC. He then stated that the motivation of the IGC is to bringing research and policy together to co-create knowledge. He said that the good policy requires good ideas and good ideas require frontier research. He further noted that good policies can only be generated if the researchers and policymaker work together towards better policy making. He concluded his remarks inviting the Chief Minister and other ministers for the Growth Conference in London.

Guest Remarks from the Finance Minister-

Finance Minister Bijendra Prasad Yadav, in his address noted that the first decade of the 21st century was marked by market dominated economy and we saw modern market and market products reaching rural areas in past decade – however such a market dominated economy has not been able to bring any meaningful change in people’s standard of living.

Water Resources Minister Vijay Kumar Choudhary started his remarks with a welcome note to all researchers participating in the Bihar Growth Conference. He said that it’s important for the state that research related to economic growth is being presented and discussed in this Patna conference.

He then noted that the story of Bihar’s inclusive growth is unparalleled in history and it has to be presented to the world and we cannot find such a quick economic and social turnaround anywhere in the world. He said that the IGC conferences can be useful in telling the Bihar story to the world.

The Chief Minister appreciated the healthy growth rate of the state in the past decade but noted that the social, economic and geographical inequalities in the state remain big challenges in front of his government. He said that there is no meaningful change in the lives of the poor and fruits of higher GDP growth have not reached the lowest strata of the society. He further noted that the importance of agriculture as a profession has declined over the years and it is necessary to restore the importance of agriculture and related services.

The Chief Minister concluded his remarks with note of thank to the International Growth Centre for conducting policy relevant research for past years and helping the state in designing its growth oriented policies.

By Vikas Dimble, Country Economist, IGC India-Central

Session 1: Energy

Mr. Pratyaya Amrit, Secretary of the Bihar Department of Energy opened the first session of the Bihar Growth Conference introducing Nicholas Ryan (Harvard University) and his presentation “Lighting up Bihar”. Behind this IGC funded project there is the idea that most of the pillars of economic growth (e.g. health, education, productivity increases) require or strongly benefit from access to electricity. Bihar’s per capita electricity consumption hovers at around 15% of the national average, equivalent to 1% of the same figure for the US, suggesting the need for a large investment in power supply expansion. To tackle this issue, the research team and the Bihar Department of Energy designed an incentive scheme that connects power supply (in terms of hours per day) to local payment rates. In doing so, this intervention managed to double the payment rate in the treatment locations by allocating more power where payment rates are higher, but also by encouraging consumers to pay. Scaling up this program will generate higher revenues per unit of electricity provided and, in turn, encourage improved service quality, increase power supply and boost Bihar’s economic and social development.

David Szakonyi (Columbia University) spoke next, sharing updates and preliminary finding from his latest project: “The benefits of solar technology adoption for street vendors in Bihar”. Employing around 10 million people across India, this sector of the economy represents a sizeable share of the informal economy and provides livelihood for a large number of urban poor. In order to boost the economic activity of these microenterprises, the team led by David Szakonyi partnered with two local institutions to ease what 80% of Bihar street vendors identified as a top priority: access to electricity. By randomly allocating solar charged lamps for a subsidised rental fee, this constraint is being eased while allowing for a number of interesting research questions to be answered. For example, the experimental design of this intervention will result in a detailed evaluation of the program’s impact not only on basic economic measures of business activity, but also on investment, hours worked and type of customers reached. For example, better lighting might lead to longer working hours in the night and safer marketplaces, allowing vendors to attract workers at the end of the day and a higher proportion of women. Moreover, this experiment will shed more light on the dynamics of technology adoption, which is crucial to the productivity increase of these micro-businesses and to the life of urban poor.

By Andrea Smurra, Country Economist, IGC Myanmar

Special Lecture 1

Lakshmi Iyer (Harvard University) presented findings from a working paper titled ‘Politician Identity and Religious Violence’. The paper investigates whether increasing minority political representation lowers religious conflict; more specifically, whether Muslim political representation lowers the incidence of Hindu-Muslim violence in India.

The analysis connects two streams of the literature, one concerned with the effects of politician identity and the other with the causes of civil conflict. The paper is based on datasets on religious identity of state legislators and extending the Hindu-Muslim riots database (Varshney-Wilkinson) database to 2010. The empirical analysis uses an identification strategy based on close elections between Muslim and non-Muslims to control for unobservable differences in voter preferences and other area characteristics.

The results show that presence of Muslim legislators does not make a statistically significant difference to the occurrence of Hindu-Muslim riots, except in very specific samples. This has policy implication in terms of affirmative action intervention like quota benefit enjoyed by Muslims in India. The paper concludes that perhaps party identity/ideology is more important than personal identity. This is supported by some previous (correlation) studies have linked BJP presence to incidence of riots. The authors conclude that further research is needed to understand if Muslim politicians are effective in preventing riots only when they have an executive role (e.g. ruling party affiliation, minister in state cabinet), if the religious identity of non-elected officials (bureaucrats, police etc.) matter etc.

A comment was received on the terminology used in the paper- replacing the terms ‘communal violence’ and ‘riots’ with ‘religious violence’ will add clarity.

By Farria Naeem, Country Economist, IGC Bangladesh

Session 2: Innovations in Government: Experiences of Other States

Chair: Sandip Poundrik, Secretary, Urban Development Department, Government of Bihar

This session included two presentations: the first addressed solid waste management, the second addressed Indian states’ management of debt. Though covering very different challenges, the two issues drew out a conversation about India’s federal system and the practical work of governing within it.

Presenting ‘Challenges in Solid Waste Management,’ Dr. G.P. Mohapatra (Municipal Commissioner, Ahmedabad) discussed the city of Ahmedabad’s strategies for improving its treatment of solid waste.

He identified four major hurdles ‘typical of all Indian cities’:

– Non-segregation of waste at the source

– A low recycling percentage

– Current composting/RDF plants produce rejects >20% for landfill site

– Shortage of land for landfills/not-in-my-backyard problems

Mohapatra stressed the need for funding and better technologies for addressing solid waste problems, while discussion also highlighted the need to create the right incentives for improvement and the right ‘civic culture’. Though there are nationally-issued rules for solid waste disposal, ‘not a single city in India follows even 25% of these rules,’ Mohapatra said, given the small fees collected and the higher costs involved. However, he viewed the relative independence allowed to municipalities as an opportunity for government innovation to address an issue of the highest priority.

The second presentation, from Abhirup Sarkar (Indian Statistical Institute, Kolkata) addressed the ‘Relative state of public finance in Bihar and West Bengal.’ In the 1995-6 and 1999-2000 period, Bihar was among the most indebted states, and West Bengal held an average level of debt, Sarkar said. By the end of March 2013, however, their positions were reversed: Bihar had about an average level of debt, while West Bengal’s indebtedness had increased.

Sarkar emphasized the importance of understanding the performance of these two states, the role of the Federal Responsibility and Budget Management Act, and the degrees of deconcentration which could be appropriate in the Indian federal system. Transfer payments from the Central government are much higher in Bihar than in West Bengal, due to Bihar’s low development indicators. Sarkar identified this as a new and ‘different phenomenon’ in which ‘development became much more centralized’ and spending was administered through centrally-run programmes.

Discussant Rathin Roy (Director, NIPFP– National Institute for Public Finance and Policy) argued more simply that Bihar’s high level of debt in the 1990s meant that the state could not borrow at reasonable rates. It then stopped borrowing, but also ‘stopped functioning,’ said Roy. Increasing transfers to states might affect fiscal federalism, said Roy, but would not necessarily do so.

By Mari Oye, Country Economist, IGC Myanmar

Special Lecture 2

The special lecture II was chaired by Navin Verma (Principal Secretary, Dept. of Industries, Govt. of Bihar). The speaker, Mritunjoy Mohanty (Indian Institute of Management Kolkata) presented his work on ‘Growth and Institutional Evolution in India: a Political Economy view’. The aim of the paper was to explore how industrial evolution in India has been both intentional (as the result of policy reform) and unintentional and unanticipated (as the result contestation, structural features and the conjuncture) and how this may shape future growth trajectories. He emphasized that the reforms of the 1990s were urban biased and that even though they were successful in integrating India into the global economy, there is hardly any R & D in the manufacturing sector. According to him, the unintended reforms included improper implementation of the Land Reforms Act and Forest Rights Act) by the state and bureaucracy. He concluded by saying that India needs to address the growing current account deficit; therefore ability to produce capital goods, the agrarian crisis for the sustainability of small farmers and class mobility before embarking on a new growth trajectory.

Navin Verma noted three key observations. Firstly, he agreed that when the land reforms were introduced in Bihar, they were only on paper and not implemented successfully. Secondly, he concurred that although that there is less focus on R & D in the manufacturing sector, India benefits from globalisation by getting access to cheap services as a result. He quoted the example of telecommunication services in India and how calling rates and data services are amongst the cheapest in the world. Finally, he clarified that in his experience, the Indian bureaucracy is not against any Act and he doesn’t believe that they have purposely hindered the implementation of the Forest Rights Act.

The Q & A session included important remarks, firstly, that to increase indigenous capacity, there should be a smaller public sector focused on doing things that the private sector cannot do. Another participant remarked that although public sector enterprises may be successful, they are a huge burden on the fiscal deficit of the country and the revenues they generate may not balance out in the long run, hence private sector participation should be encouraged in India vis-à-vis the public sector.

By Noopur Abhishek, Country Economist, IGC India-Central

Session 3: Rural Development

The first session on the second day focussed on rural development and migration. Clement Imbert (Oxford University) presented his work on short term migration and NREGA, a rural employment guarantee scheme, in India. One of the primary motivations behind this study is the phenomenon of the persistent urban-rural wage gap that exists. Figures from 2007-08 show that 8.14 million of the Indian population are short term migrants from rural areas who move to urban areas to work for short periods before returning back to their homes. Such short term migrants comprise a third of the urban population.

Clement Imbert uses data of short term migration flows in India from the national sample survey (NSS), and focuses on the states of Rajasthan, Gujarat and Madhya Pradesh, to evaluate the impact of a national public works program on migration as well as to estimate the costs of migration. Descriptive statistics indicate that higher levels of short term migration occur during the summer and winter, 35% and 29% respectively, as compared to the monsoon season (10% migration) when there exists a higher level of agricultural work. On average, short term migrants travel 300km away to primarily urban destinations for a period of two months.

NREGA entitles every rural household 100 days of work per year with the majority of the work provided during the agricultural lean season, the peak migration season. The study exploits variation in the extent of public employment provision across the three states, with Rajasthan providing the most and Gujarat providing very little, to compare migration rates. There are high levels of demand for public works in the lean season among migrants with lower levels of migration exhibited in districts that provide more public works programs.

The study finds evidence of a significant impact of NREGA on migration: migration increased in districts that did not have public works provided, whereas those with public works provision saw a dampening in migration levels. The data shows that 30% of migrants would have accepted more work from the NREGA programme. Migrants who with no preference for more NREGA work were those that earned more from migration; a migration cost of is calculated at 60 rupees to explain such findings. Furthermore, the study finds an increase in wages in urban areas most exposed to a drop in migration inflows.

Indrajit Roy (Oxford University) presented a qualitative study on internal circular migration in Bihar with the objective of providing a more ‘realist’ interpretation of the migration process, in the face of the more common ‘optimistic’ (migration represents an efficient reallocation of resources) and ‘pessimistic’ (migration leads to a ‘brain drain’) arguments widely expressed.

Indrajit Roy emphasises the fact that migration experiences are very heterogeneous. His study uses survey questions and ethnography in two panchayats (wards). Survey findings indicate that 44% of respondents had family members who were migrants, over half of which were engaged in casual employment in urban areas.

Indrajit Roy focuses on the ethnographic portrait of one family, comprising three generations. He found that one of the primary reasons for migration in earlier generations was the lack of dignity experienced in work in the village: work in the village was available, however, social remuneration was very low where workers were dissatisfied with the lack employer-employee interaction. Wages were also cited as one of the motivations for migration, however, this does not appear to be the single most important cause.

Indrajit Roy also highlighted the changing dynamics between workers and employers in rural areas. In more recent periods, employers face a greater difficulty in obtaining workers, having to exert greater effort in convincing them to accept work in their fields; it is apparent that labourers are more aware of outside opportunities.

In terms of the impact of migration on gender dynamics, qualitative data from this study provides a mixed picture. On the one hand, migration means that women are given a greater role in the household and are able to engage in a broader range of tasks. Furthermore, several women expressed that migration gave them greater autonomy from drudgery where they no longer are required to work on farms, and are no longer exposed to taunting and leering. On the other hand, there are also consequences for female mobility where women are tasked with more household responsibilities.

Indrajit Roy argues that naïve optimism nor undue pessimism is an accurate interpretation of the effects of migration. He highlights the need for the enforcement of existing labour laws as well as the portability of worker rights where migrant workers should be able to carry their rights with them. He refers to a lack of social security schemes or a lack of knowledge of several schemes for migrant workers.

Mritunjoy Mohanty (IIM Kolkata) and Alakh Narayan Sharma (IHD) were invited to provide comments on both studies. Both discussants commended the work of both researchers, and the insights provided on the issue of migration. Mohanty expressed the importance of further capturing agrarian dynamics, highlighting that high levels of migration are not matched by high levels of trade and commercialisation. Sharma mentioned other important factors affecting the migration process, including land transfers to lower sections of society culminating in a lower propensity to migrate.

By Michelle Jacob, Hub Economist, IGC Hub

Session 4: Innovations in Government

Session 4 was chaired by Anjani Kumar Singh (Chief Secretary, Government of Bihar). At the session, senior state government officials from various departments shared examples of innovations implemented by them in their respective areas of work.

Dr. Vijaylakshmi (Division Commission, Patna) discussed innovations undertaken in Bihar in 2011-12 to increase the productivity and production of rice, which in turn, helped enhance food security and farmers’ income. Farmers were encouraged to adopt sustainable farming technologies by providing a timely supply of quality inputs, cash subsidies and skill development. Increase in rice production of 166% was achieved in 2011-12, as compared to the previous year. Bihar received the Best State in Rice Award by the Government of India in 2011-12. The gains were sustained in 2013, even though it was a rain deficit year.

B. Pradhan (Principal Secretary, Food and Consumer Protection) highlighted the use of IT in Bihar for reforming the Public Distribution System (PDS). This includes fully automated stock issue order generation, automatic reconciliation of payments by dealers at banks, computerised inventory management, GPS tracking of food grain movement by dedicated control rooms in each district, weighing food grains at door-step delivery, SMS alerts to vigilance committee members and some beneficiaries, transparency portal, help desks for technical issues, and call centres for grievance redressal.

Sanjay Kumar (Secretary, Labour Resources Department) said that a major challenge Bihar is currently facing is skilling 10 million people in Bihar in the next five years. To address this, the government is setting up a Bihar skill development mission to impart employable skills. It involves the coming together of 14 government departments, public-private management, district programme administration units and a centralised web portal to provide a common platform for those who want to be trained and training providers. Innovative interventions have also been introduced in the health sector. Auxiliary Nurse Midwives (ANMs) and Anganwadi Workers are given mobile kunjis containing an assortment of about 45 simple interventions such as exclusive breast feeding for infants for the first six months, along with a mobile code for each. They can dial the code for a particular intervention and a doctor comes on the line and tells people the importance of the intervention. There is also a ‘mobile academy’ wherein health workers can test their knowledge by responding to questions, and the ones that do well are presented certificates by district authorities in public functions. Interactive, virtual classes for training of health workers have also been started.

By Nalini Gulati, Country Economist, IGC India-Central

Session 5: Political Economy

The Political Economy Session was chaired by Dr. E. L. S. N. Bala Prasad (Commercial Taxes Department, Government of Bihar). Prof. Sisir Debnath (ISB), and Dr. Rathin Roy (Director, NIPFP) also joined the session as discussants.

Prof. Nishit Prakash, University of Connecticut, presented the preliminary design of the ongoing IGC research “Political Change and Crime reduction in Bihar“.

Improvements in law and order and crime reduction in the last ten years have been addressed as one of the main driver of Bihar’s economic growth, reinforcing the theory that rigorous enforcement of property rights, therefore a decrease cost in economic transactions foster wellbeing and economic activity.

The design investigates whether law and order restoration in Bihar contributed and the magnitude of the contribution to the State’s latest economic growth and to identify those policies that have been more effective in solving the growth binding constraints.

Indeed, Bihar’s trends in crime, theft and ransom shrunk after 2005, when economic growth took off. Though, the direction of causality and the bias effect due to omitted factors in explaining the crime-growth relation might undermine this explanation. In facts, investments in infrastructure or political changes might have also played a fundamental role on both institutions improvements and economic growth.

The author is currently collecting district and sub-district level data as well as unbiased indicators and will be presenting soon the preliminary findings.

Prabhat Barnwal (Columbia University) presented the study “Leakage in Fuel Subsidies Evidence from Direct Benefit Transfer for LPG (DBTL) policy in India’ on how effective it was in controlling subsidy diversion, effect on recorded household LPG consumption and on black-market prices of LPG.

The identification strategy for estimating the causal effect of DBTL policy rests on phase wise rollout of the DBTL. The paper finds that introduction of DBTL policy is effective in reducing domestic LPG purchase (and thus the subsidy burden) by about 12 to 18% based on household transaction data. Since it includes impact on total domestic LPG refills (subsidized as well as non-subsidized), estimates indicate significant reduction in subsidy diversion. In addition, supporting evidence from survey data show that the impact on leakage is reflected well in LPG black market; DBTL roll back brings down black-market prices by about 15% in the DBTL districts.

The author concludes that introduction of DBTL policy is effective in reducing subsidy burden by controlling leakage. If effectively implemented, DBTL may save more than Rs.6000 Cr ($1 billion). However, frictionless implementation of DBTL must be paid due attention before government considers reintroduction.

By Filippo Sebastio, Country Economist, IGC Bangladesh

Special Lecture 3

In this session, Karthik Muralidharan (UCSE, NBER, and J-PAL) first presented the paper “Building state capacity: evidence for biometric smartcards in India”. This study seeks to address the issue of leakage in anti-poverty programs by using biometric data of beneficiaries across 158 subdistricts. Biometric authentication has gained momentum internationally as a mechanism to reduce leakage. A key challenge in the implementation of anti-poverty programs in India is the limited capacity to securely transfer payments to targeted beneficiaries. The implementation of the smartcards benefited from experience and top-level support, but still faced several challenges. The results indicate better NREGS program performance on many dimensions, including a significant reduction in time to collect payment, payment lags, and payment unpredictability. Moreover, biometrics was key to reducing leakage from 30.7% to 19.9%, with households receiving 24% more NREGS income, with no increase in official outlays. Furthermore, a household at a given percentile of the outcome distribution in the treatment areas was at least as well off as a corresponding household in the control area. This means that apart for the benefits at the aggregate levels, families would not be harmed by this policy.

Mr. Muralidharan also presented his research on policy analysis by revealed preference. Given the issues of the Target Public Distribution System (TPDS), a number of policymakers have suggested a case for switching to cash transfers. Taking into account the fact that governments are risk-averse about big changes, the key innovation in the design was to provide beneficiaries with a choice of cash/kind (to randomly chosen households). This allows looking at beneficiary preferences, study the impact on food consumption and nutrition, and estimate beneficiary valuation of the public money being spent on their name. After 3.5 years working on this project, the option of cash transfers in the TPDS has proved extremely popular among beneficiaries in Gaya District. On average, households exchanged 82% of their rice and wheat coupons for cash, and exchanged 43% of their kerosene coupons for cash. Moreover, price experiments showed that beneficiaries are willing to exchange their TPDS coupons for cash at prices that are considerably lower than market value. The Government of Bihar continues to be highly supportive of the project and has assured full support in continuing the project with tweaks needed to account for the new system.

The discussion stressed the importance of designing research-based policy. Designing and researching the right questions would always be better and compensates for the costs, compared to implementing policies without sufficient analysis risking lack of positive impact. Dr. Anjan Mukherji, Country Director from IGC Bihar, gave the final words, thanking everybody for their presence and the quality of the presentations, and for making this conference possible and successful.

By Michelle Tejada, Hub Economist, IGC Hub