IGC-ISI India Development Policy Conference 2015

A programme and conference report for this event is available below.

The 6th IGC-ISI India Development Policy Conference was held on 21-22 July in New Delhi. The conference brought together researchers and policymakers to present and discuss the implications of research produced by the India Central Programme in Phase II of its operation, on various issues central to India’s growth, and to identify future research questions.

The conference included research presentation sessions on firms and industry, human development, energy and state capabilities.

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Sessions

Welcome remarks

Prof. Dilip Mookherjee (IGC India Central; Boston University) gave the opening remarks for the 6th IGC ISI India Development Policy Conference and welcomed the participants. He emphasised the objective of IGC India Central to fund policy relevant high-quality research and outlined the priority areas of the programme.

Session 1: Firms and Industry

Chair: B.N. Goldar (Institute of Economic Growth)

Presenters

  • Does firm ownership structure matter? Evidence from sugar mills in India – Sandip Sukhtankar (Dartmouth College)

  • Productivity and competition in India’s brick industry – Daniel Keniston (Yale University)

Discussant: Mohan Chutani (Department of Industrial Policy and Promotion)

Sandip Sukhtankar (Dartmouth College) presented his IGC project on “Does ownership structure matter? Evidence from sugarcane mills in India”. This paper examines the effect of firm ownership structure on firm behaviour and the economic outcomes of upstream suppliers by comparing privately owned sugar mills to cooperatives and public mills in India. The “command area” zoning system, whereby mills are given monopoly power to operate within an assigned area helps tackle the identification challenge. The borders of command areas allow for a geographic regression discontinuity design, where underlying soil, weather, and institutional characteristics are exactly the same but ownership structure changes across boundaries. Using satellite images overlaid on digital maps to measure sugarcane grown along the borders, and a survey to determine the effects of crop choices on farmer welfare, he finds that private mills encourage sugarcane production. Greater cane cultivation is tied to better credit provided by private mills, and results in higher income and consumption for land-poor farmers. The discussant, Mohan Chutani (Ministry of Commerce and Industry) noted that cooperatives were brought in to keep sugar prices lower, as it is an essential commodity; therefore it was risky if left only to the private sector. He suggested that the author should consider doing a comparative assessment of other countries’ sugar industry to make the analysis more robust.

Daniel Keniston (Yale University) presented his ongoing IGC project on “Productivity and competition in India’s brick industry”. He explores two main questions from his research in the brick industry, firstly, does this observed productivity dispersion really reflect unequal returns to capital across firms, and secondly, why does competition not drive this productivity dispersion to zero. The brick industry is huge in scale and this project includes data from 5% of the industry. He looks at decomposing physical productivity differences, within and across technology. The study is being conducted in some districts in Karnataka and eastern Uttar Pradesh. He also investigates if productivity differences in technology correlate with difference in output, quality and productivity, specially relating to fuel productivity. Mohan Chutani noted that the Indian brick industry in India has recently come up with greener alternatives. However, as this is a labour intensive sector in India, with better technology there will be employment-displacing effects. B.N. Goldar concluded by remarking there is a trade off here between preserving the environment and protecting employment, a difficult policy decision for any government.

Summary written by Noopur Abhishek – Country Economist, IGC India Central

Session 2: Human Development: Education and Health (Part 1)

Presentations:

  • Improving maternal health with incentives to mothers vs. health workers: Evidence From India – Sisir Debnath (Indian School of Business)

  • How do better-ranked colleges help meet India’s skill shortages? – Subha Mani (Fordham University), Utteeyo Dasgupta (Wagner College)

Discussant: Pawan Kumar Agarwal (Ministry of Skill Development and Entrepreneurship) Abhiroop Mukhopadhyay (Indian Statistical Institute, Delhi Centre)

The session was chaired by Sudhanshu Bhushan (National Institute of Educational Planning and Administration).

Sisir Debnath (Indian School of Business) presented his work on “Improving maternal health with incentives to mothers vs. health workers: Evidence from India”. Using District Level Household Survey (DLHS) data, the project analyses the impact of Janani Suraksha Yojana (JSY) – a conditional cash transfer scheme that aims to incentivise mothers to deliver births at health facilities. It is found that JSY eligibility increases births at health facilities by 4 percentage points; the effect is greater (7 percentage points) during later years of the programme. JSY also increases the likelihood of prenatal care utilisation and immunisation. The marginal effect of giving incentives to health workers is greater than that of giving incentives to mothers. The discussant, Abhiroop Mukhopadhyay (Indian Statistical Institute, Delhi Centre) said that the results are difficult to untangle, particularly with respect to whether the effect is derived from the information given to the mothers or the money provided. He contended that this work ties into the broader question of whether all government officials should be incentivised, or if alternate policies may serve the purpose better.

Subha Mani (Fordham University) presented her research titled The impact of peers on cognitive, non-cognitive, and behavioural outcomes: Evidence from India. Using data from Delhi University, the study examines the effect of exposure to better-quality colleges/ high-achieving peers on cognitive, non-cognitive and behavioural aspects of human capital accumulation, which are rewarded in the labour market. It is found that there is a positive effect on test scores of women but not so much for men, which may be because women attend college more regularly. There is a reduction in risk-averse behaviour in women, but little effect on personality traits is found for both men and women. The discussant Pawan Kumar Agarwal (Ministry of Skill Development and Entrepreneurship) said that the spread of cognitive abilities of students in co-educational, morning colleges in Delhi University, admissions to which are very competitive, is narrow; hence, it may not be right to draw implications for national policy. The study did not take into account students that are admitted to the colleges through quotas, and in his view, there is not a lot of difference in the abilities of students in the general (non-quota) category. It may be interesting to look at the impact on cognitive and non-cognitive abilities of the quota students.

Summary written by Nalini Gulati Country Economist – IGC India Central

Session 3: Human Development: Education and Health (Part 2)

Chair: Ravi Srivastava (Jawaharlal Nehru University)

Presentations:

  • Christianity and child health in India – Nidhiya Menon (Brandies University)

  • Double for nothing? Experimental evidence on the impact of an unconditional teacher salary increase on student performance – Karthik Muralidharan (University of California, San Diego)

Discussants:

  • Amarjeet Sinha (Ministry of Rural Development)

  • Rathin Roy (National Institute for Public Finance and Policy)

Nidhiya Menon (Brandeis University) presented Christianity and Child Health in India, a paper that explores the relationship between religious identity and child health outcomes.  Despite rapid economic progress, India shows higher levels of child stunting and wasting relative to the African economies with lower income levels.  Menon and colleagues trace an impressive historical record of religion and foreign missions in India to systematically better health outcomes among Indian Christian children, controlling for a broad set of characteristics. The study supports existing consensus on investments in maternal education and health having broad positive consequences for human capital development.  Specifically, the project finds that improvements in health and welfare of mothers during pregnancy is linked to improvements in female child height, an outcome more sensitive to in-utero inputs. Much of the discussion of the paper focused on the importance of education in supporting many of these welfare outcomes, including in-utero health of the mother. As noted by Menon, many of these early stage environmental factors may have long-reaching, inter-generational impacts on individual welfare.  

Menon’s presentation was followed by a lively discussion on teacher performance and government policies around incentive pay, sparked by Karthik Muralidharan’s (University of California San Diego) research, Double for nothing? Experimental evidence on the impact of an unconditional teacher salary increase on student performanceThe randomised control trial, implemented in Indonesia, evaluated the impact of the government’s policy to effectively double teacher salaries, following the satisfaction of a relatively undemanding certification process.  When implemented, this scheme worked exactly as it was designed and was associated with declines in teachers’ self-reported levels of financial distress and hours worked at second-jobs, or moonlighting.  However, the researchers, despite numerous checks for robustness, find exactly zero effect of the programme on student on test scores. Given that when nationally scaled up this policy added $5 billion to Indonesia’s annual wage bill, the results offer a cautionary tale for other large economies, such as India, that may be exploring large-scale policy redesigns.  Furthermore, the findings evoked a spirited debated about the design and motivations of India’s public service and public wage policy in general.  Muralidharan’s final remarks suggested that his future research will pursue effects of changes to pay structure, which he believes is a driver of employee performance. The discussion of the paper focused the applications of the Indonesian experience to the Indian civil service, particularly with respect to public sector teachers. In concluding, the discussants noted that it was not the level of pay that was important at improving performance, but the structure and potential for merit-based career progression.

Summary written by Anne Laski, Country Economist – IGC Tanzania

Session 4: Finance

Chair: R Gopalan (Public Enterprises Selection Board)

Presentations:

  • Demat trading and market liquidity: Evidence from the NSE in India – Madhav Aney (Singapore Management University), Sanjay Banerjee (Nottingham University)

  • Informal Insurance under group lending with individual liability: Evidence from India – Abhirup Sarkar (ISI Kolkata), Souvik Datta (IIM Bangalore)

Discussant: Ila Patnaik (Ministry of Finance)

The first presentation was by Madhav Aney, Singapore Management University on “Dmat trading and market liquidity: Evidence from the NSE in India”.

Background

It is well understood that technological progress affects total surplus through its effect on the production function.  In addition to this, technological progress also affects market efficiency in matching buyers with sellers. In this work, authors look at a particular technological innovation, dematerialised (demat) trading, at the National Stock Exchange (NSE), and its effect on financial market performance.

About Demat

In December 96, the NSE introduced demat trading, an innovation eliminating the need to transfer paper share certificates from sellers to buyers. Instead, buyers and sellers held accounts in a centralised depository, like a bank account, containing records of their portfolio. The introduction of demat led to a reduction in the potential loss or theft of share certificates and cancellation of the stamp duty for transfer (previously charging 0.5%).

The authors find:

  1. Post-demat, the volume of trade at the NSE relative to the BSE, increased by around 10-15 %.
  2. Similarly the number of transactions at the NSE relative to the BSE, increased by around 15 %.

The authors conclude that the introduction of demat trading had a big effect on the level of liquidity in the NSE. However, increased liquidity was more pronounced for firms that were less-liquid at the start.

The second presenter- Souvik Datta Indian Institute of Management, Bangalore, presented his work “Informal Insurance under Group Lending with Individual Liability: Evidence from India”.

Background

There has been a recent shift from joint liability to group loans with individual liability by the Grameen Bank and some other prominent micro-lending institutions across the world. Under the joint liability lending mechanism, a group of individuals were given a loan and individuals in a group were jointly liable for the loan given. Under the new lending mechanism although borrowers have to be in a group in order to access the loans, individuals are not liable for the default of other group members. Their study conducted a detailed analysis on individual liability lending in groups.

Their survey was carried out in November and December 2014 in the two districts of West Bengal – Purulia and East Midnapore. Bandhan operates 7 branches in Purulia and 28 branches in East Midnapore. Authors randomly chose a branch in each district – Raghunathpur in Purulia and Kanthi in East Midnapore. In each branch, two groups from Raghunathpur and three groups from Kanthiare were randomly selected. A total of 113 interviews were conducted, 57 in Purulia and the remaining 56 in East Midnapore.

Findings from their pilot survey are as following:

  1. They find evidence of informal insurance in the sample. On average, there is approximately 30% informal insurance in most of the groups except Jyotsna. This may be far less than the full potential of informal insurance as noted, but it shows evidence of informal insurance. The idea of informal insurance is naturally built up in the mechanism of joint liability lending, but it is not clearly evident in case of individual liability lending and this study is a first step in showing that informal insurance may still exist under individual liability lending and hence needs to be studied in greater detail.
  2. They also show that microfinance loans affect the lives of many poor households by increasing access to credit improving earnings, living standards and fostering social integration. Mirco-loans also helped empower the women by increasing their voice in decision-making on important household matters and more importantly by boosting self-esteem and morale (with respect to stress, anxiety, confidence etc).
  3. The study also finds evidence that significant fractions of group members deposited money into ponzi schemes. It is likely that misinformation about these schemes was spread through group networks. This again requires further probing in the main survey.

Summary was written by Vikas Dimble, Country Economist, IGC India Central

Session 5: Energy and Environment

Chair: Nitin Desai (The Energy and Resources Institute)

Presentations:

  • Rural electrification with off-grid community micro-grids: An impact evaluation in Uttar Pradesh – Johannes Urpelainen (Columbia University) 

  • Should resource saving technologies be subsidised? Evidence from the diffusion of drip irrigation in Gujarat – Ram Fishman (George Washington University)

Discussant: Anandajit Goswami (The Energy and Resources Institute)

The Energy and Environment session was chaired by Nitin Desai of the Energy and Resources Institute. The first presentation was by Johannes Urpelainen of Columbia University who presented on an impact evaluation study of the Rural Electrification with Off-Grid Community using solar power in Uttar Pradesh. Using a Randomised Control Trial approach evaluating Intention To Treat (ITT), the study, implemented in rural Uttar Pradesh with Mera Gao Power shows that adoption of solar power as a mode of rural electrification has substantial benefits over the widespread use of Kerosene. In particular that it is easy to scale up and does not require any subsidies to encourage adoption. The monthly payments for solar power service, though relatively higher than urban electricity access, are affordable and enable small business to flourish through the provision of reliable power supply. Kerosene spending is significantly reduced following the adoption of solar power. Increased lighting use at relatively lower cost of adoption is significantly evident, and this is without the presence of subsidies on either the consumption or service provision side. The study however notes the limitations that off-grip solar rural electrification is not suitable for irrigation and that productive loads of electricity are unavailable, and that, on average, compared to grid electricity, poor villagers in rural areas pay more than wealthy urban electricity users.

The second presentation was on the effects of subsidies on resource saving technologies presented by Ram Fishman of George Washington University. The study, implemented in Gujarati, studies the effects of subsidising the adoption of drip irrigation on water and electricity use. Compared to flood irrigation, the study shows that subsidies significantly increase the adoption of drip irrigation, but this in turn increases the use of electricity significantly initially, then gradually declines, particularly years 2 to 4 after adoption. Adoption of drip irrigation subsidies is related to costs; subsidies reduce costs of adoption, and as such, enhanced subsidies enhance adoption of drip technology. However, increased adoption leads to increase in use of electricity and electricity bills, which in effect increases the use of energy. However, this also leads to increased land use and efficiently increases productivity.

Summary written by Herryman Moono, Country Economist, IGC Zambia

Session 6: State Capacity

Chair: Dr Pronab Sen (IGC Country Director India Central)

Presentations:

  • Role of ICT technologies in combating malnutrition: Increasing transparency in India’s mid-day meal programme – Sheetal Sekhri (University of Virginia) 

  • Emissions trading as an environmental innovation in India: Measuring the policy impact on emissions and abatement costs – Anant Sudarshan (Energy Policy Institute at Chicago, University of Chicago)

Discussant: Santhosh Mathew (Ministry of Rural Development)

Professor Sheetal Sekhri opened the final session with the paper Dial ‘Mobile’ for Monitoring: Using technology to increase transparency in public service delivery. The study looked at the impact of Information Communication and Technology (ICT) platforms on the delivery of a school midday meals (MDM) programme in Bihar, as part of a massive school-feeding programme. Several reports previously documented high programme leakages. The study aimed to reduce these by identifying a low-cost, scalable system to improve accountability of public service delivery.

The study used a Difference in Difference approach, measuring the roll out of an Interactive Voice Response System (IVRS) across Bihar. IVRS collected beneficiary take-up data and monitored programme delivery. The study compares the impact on MDM in schools receiving IVRS, before and after the study, to the difference before and after the programme among schools not receiving IVRS.

Prior to IVRS, monthly reports prepared by school headmasters would document the number of students requiring meals. This data was sent up through the administrative chain, aggregated at different levels, eventually reaching the top where funds were disbursed. Under IVRS, schools registered additional points of contact allowing for increased school-level monitoring of actual provisions. The study found overall that independent data based assessment of MDM provision improved after IVRS. Central government audit data revealed quality and meal sufficiency also improved. Prof. Sekhri emphasised that the study showed significant promise for the use of ICT in reducing leakages and improving efficacy of public service delivery.

Comments by the discussant, Dr. Santosh Mathew from the Ministry of Rural Development, offered an analysis of other external factors in Bihar at the time of the study that may have contributed to IVRS’ success. Particularly, Nitish Kumar’s wider reform agenda, under which, public programmes experienced significant improvements in administrative capacity. Dr. Mathew suggested that some of IVRS’ impact could be attributable to improved managerial quality and wider changes in political economy and governance in Bihar during the study.

Following this discussion, Dr. Anant Sudarshan presented his paper: Emissions Trading as Environmental Innovation in India.

Pollution has significant implications for health and welfare. Data suggests that concentrations of fine particulate across India, particularly in North India, has a substantial impact on life expectancy, as well as broader economic costs from elevated disease burdens, all of which negatively impact economic productivity. The challenge, outlined by Prof. Sudarshan is developing a responsive and efficient regulatory scheme, providing adequate information and monitoring whilst keeping compliance costs efficient to ensure  good firms are not inhibited from entering the market.

To address this, the study looks at three different coupled approaches for regulating emissions. Particular emphasis was placed on testing a market-driven emissions-trading scheme and assessing its impact on pollution and firm compliance. An emission-trading scheme allows for continuous incentives to firms to reduce pollution. Using market-based monitoring may encourage innovations and greater efficiencies among participating firms. Leveraging the market to regulate firms in contexts where state enforcement capacity is insufficient is also desirable. The challenge, however, remains good data; without data and a functioning monitoring system, market solutions fail.

Comments by the discussant Dr. Mathew pointed out the importance of the study in developing alternatives to the classic approach of increasing regulatory oversight through greater administration and reporting burdens. Instead, markets offers scope for leveraging locally generated, collective action to enforce regulations. Reflecting on both the session presentations, Dr. Mathew called for greater attention to the utility of ICT platforms for motivating greater collective action by local citizens to create an additional accountability check on polluters.

Summary written by Upaasna Kaul, Managing Editor and Hub Economist at the IGC

Closing remarks

Dr. Pronab Sen closed the conference by thanking all conference presenters and discussants for their contribution to the quality of the discourse and policy discussion.