ELEPHANT CHASING DRAGON

Can Elephant chase Dragon?
It is the most perplexed question of every economist and every common man in India. expectations running high on the new government,partly because of Modi wave and partly because of India's commending economic fundamentals,the world is closely watching this two great civilizations.
India with 1.28 billion population having 328 million sqkm, is a 1.85 trillion dollar economy.It spends $40 billion as defense spending(2.4% of its GDP)while its counter part, China with 1.35 billion population having 960 million sqkm,is a 8.2 trillion dollar economy. it spends $130 billion as defense spending( 2% of its GDP)

this stats can reveal the picture that while the Elephant is limping the Dragon is flying.
India- china Trade imbalance issue:
How Modi Government can tackle trade imbalance with china?how big is the problem?. India currently runs a$ 35 billion annual trade deficit with china. It is half of the remittances India receive annually,it is 11 billions more than the Foreign Direct Investment ( FDI) India receives annually.
1. If Modi government  can negotiate with china, to halve the import duty on cotton fabrics from current 10%  India could raise its exports from $700 million to $ 6 billion in five years.
2. If New Delhi could able to negotiate to relax phytosanitary norms, buffalo meat could fetch India another $1 billion annually.relaxation in similar standards in ares such as marine products could add more value to exports from india.
3. Getting access to Chinese markets for Indian pharmaceuticals and IT related services India could bring down the trade deficit to $17 billion in coming three to four years.
If Modi government has to tackle china effectively it should keep in mind Mahatma Gandhi's words "strength does not come from physical capacity but with indomitable will". The foreign policy should be guided with give and take relationship and engage in dialogue and peace.the conundrum of elephant chasing a dragon, should no more be an impossible task.

New Portifolios

MIDDLECLASS BETTEROFF

The Indian middle class now owns more gadgets and is a little better educated, but is still not as prosperous as has been believed to be, says data from the 2011-12 round of the India Human Development Survey (IHDS) conducted by the National Council for Applied Economic Research (NCAER).

The data, collected from 42,000 families, shows that with rising incomes — the real median income grew from Rs. 28,200 per year in 2004-05 to Rs. 37,500 in 2011-12 — asset ownership of the middle class has also increased.

Purchase of air-conditioners, colour TVs, refrigerators, cars, laptops and credit cards has doubled over the last seven years, and cellphone ownership has exploded from 7 per cent of the population in 2004-05 to 82 per cent.

The Hindu is reporting exclusively from the findings of India IHDS 2011-12, the largest independent nationally representative sample survey . The annual income of the middle class remains relatively low. If the Indian population is divided into five classes of equal sizes of 20 per cent each, the poorest quintile (20 per cent) will earn between Rs. 1,000 and Rs. 33,000 annually as a household, the next 20 per cent will earn between Rs. 33,001 and Rs. 55,640. Families that earn between Rs. 55,000 and Rs. 88,800 annually would be in the third quintile and fall in the middle of India’s income distribution. The fourth quintile will include families earning between Rs. 88,801 and Rs. 1.5 lakh annually and those with income above Rs. 1.5 lakh per year will comprise the richest 20 per cent population. According to the Planning Commission, a family earning Rs. 55,000 annually would be at or just above the urban poverty line for 2011-12.

Not all of the Indian middle class has access to all amenities yet. According to latest data from National Council for Applied Economic Research (NCAER), only 40 per cent of those in the middle class, comprising households with annual income above Rs. 88,800 annually (an estimate suggested by NCAER researchers), have piped water connections, and only 15 per cent get three hours of water supply every day. Just over half of such families have flush toilets and a similar percentage get 18 hours of electricity in a day.

Non-agricultural labour is still the most common job for men in families earning between Rs. 88,801 to 1.5 lakh per year. For the richest 20 per cent population (above Rs. 1.5 lakh per year), however, salaried work becomes the most common occupation.

By standard international definitions, like a consumption expenditure of more than $10 per day, India would have no middle class because everyone spending that much is in the top 5 per cent population of the country. Economist Nancy Birdsall, founding president of Washington-based Centre for Global Development, proposed a $4-$10 range for a class she described as the “catalysing class,” which in India is made up of 150 million people or 12 per cent of the population.

“I think it’s more useful to go beyond the income data, and look at what we really mean when we talk about a global middle class,” said Dr. Sonalde Desai, senior fellow at the NCAER and professor of sociology at the University of Maryland. “This would means things like a college degree, fluency in English, white-collar jobs among others,” she said.

The NCAER data shows that just 12 per cent of adult men in 2011-12 had a degree or diploma, only 8 per cent could speak fluent English and 14 per cent had some computer skills. Women had fewer skills than men in each of these categories.

 

The impressive gain by rural households in spite of the favouritism towards non-primary activities appears real

The Indian economy has moved on a high growth path since the mid-1980s. After a blip in growth between 1990-92, liberalisation, initiated for aligning the Indian economy with the world in 1991, not only put the economy back on a higher growth path but also sustained this growth till the 2000s. During the last few years, India has been the second fastest growing economy in the world.

Despite the high growth over the past two decades, concerns have been raised over the growth not being equally distributed. Policy makers responded to these concerns arguing for inclusiveness in the 11th Five Year Plan in 2007. How has the rapid growth during the 11th Five Year Plan period helped in improving the income levels of the most vulnerable Indian households?

Sharing of growth

The aggregate estimates routinely brought out by the Central Statistical Organisation (CSO) show a “feel good factor” — that real per capita income has been growing rapidly. But there is little evidence on (a) how this growth has been shared among households in rural India versus urban India and (b) whether households belonging to different socio-religious groups have grown together. Three rounds of the National Sample Survey Consumer Expenditure (NSS CE) surveys carried out between 2004-05 and 2011-12 suggest an unprecedented rise in household expenditure and a consequent decline in poverty. These estimates imply that some benefits of growth have been shared by vulnerable households. But these data do not clarify whether poverty has declined because of new social safety net programmes or because vulnerable households have participated in the general economic growth.

The recently-concluded India Human Development Survey (IHDS) — a nationally representative survey of about 42,000 households conducted by researchers from the National Council of Applied Economic Research (NCAER) and the University of Maryland examines changes in the incomes of the households during the period of rapid economic growth, 2004-05 and 2011-12. It is the only nationally representative panel survey covering the same households. During the two rounds of IHDS, besides a range of outcome indicators, data on household income and its sources have also been collected.

Though validation of the data is still underway, we present some pointers based on preliminary analysis. The median real income of the households from all sources had been about Rs. 28,200 in 2004-05; this increased to about Rs. 37,500 in 2011-12, which is an average of 4.7 per cent annually. Unlike aggregate growth figures released by the CSO, IHDS data allows calculation of household income by the place of residence of households. Those IHDS calculations show for the first time that the real average household income in rural India has increased 5.0 per cent annually — almost twice the 2.6 per cent annual growth in urban India. This has resulted in a significant narrowing of the gap in household income — from 2.26 times in 2004-05 to 1.97 in 2011-12. These figures are consistent with the growth of per capita expenditure calculated from the respective NSS CE (61st and 68th rounds) monthly per capita expenditure growth in the rural and urban sectors.

When we normalise the household median income by the number of members in the household, the growth of income in rural India is even more impressive — an average annual median per capita income increase of 7.2 per cent, which is more than twice the rate experienced by urban households (3.2 per cent annually). This story of growth at the aggregate level is fascinating in itself because most of the changes during the liberalisation phase have favoured the growth of non-primary activities. But the impressive gain by rural households in spite of the favouritism towards non-primary activities appears real and requires further investigation.

Further proof of growth

We note similar differences in median income growth across different socio-religious groups that provide further confirmation of the inclusiveness of the recent economic growth. In IHDS surveys, we have defined six social and religious groups — high caste Hindus, Other Backward Classes, Dalits, Adivasis, Muslims and Other Religious Minorities. The highest growth in the median per capita incomes is reported for Dalits (7.8 per cent annually) and OBCs (7.3 per cent), while the real median income of high caste Hindus grew only at 4.6 per cent annually. The average income growth of other vulnerable groups was also higher than that of high caste Hindus. The income of Adivasis grew at 5.7 per cent annually while the income of Muslims grew by 5.4 per cent.

A working plan

Our preliminary results point towards the largest gains for the traditionally vulnerable households — rural areas, Dalits, OBCs, Adivasis and Muslims. This narrowing of group differences is all the more remarkable in the face of a slightly diverging overall income distribution. Our preliminary calculations of per capita income inequality suggest a small increase from a Gini ratio of 53 in 2004-5 to 55 in 2011-12.

The relatively greater progress of vulnerable sectors despite this growing inequality seems to suggest that the inclusive growth policy implemented during the 11th Five Year Plan may have been working. While a much more rigorous analysis is required to delineate the factors that have led to this, our conjecture is that some of the social sector schemes like the Mahatma Gandhi National Rural Employment Guarantee Act, Janani Suraksha Yojana, the National Rural Health Mission et al. may have contributed to this inclusive growth.

 

 SOURCE: HINDU

HOUSEHOLD INCOME

Families with an annual income of Rs 1.5 lakh are among the richest 20 per cent in the country, data from the 2011-12 round of India Human Development Survey (IHDS) conducted by the National Council for Applied Economic Research (NCAER) shows.

While incomes have grown considerably in the last seven years, access to adequate public services is still severely lacking, says the data collected from 42,000 households across the country.

The NCAER, whose survey is being reported exclusively by The Hindu , is the only research organisation with a large sample survey to estimate household income. The government’s National Sample Survey Organisation (NSSO) collects data on consumption expenditure, which is often used as a proxy for income.

For the 2011-12 IHDS, the NCAER research team returned to over 80 per cent of the households it had interviewed in 2004-05, to make an estimate of the change over the last seven years. In 2004-05, a family earning Rs. 70,000 annually would have been among the richest 20 per cent in the country, while in 2011-12, the same family would find a place in the middle of the distribution. An annual household income of Rs. 25,000 placed a family in the middle of the order in 2004-05. In 2011-12, Rs. 25,000 is the annual income of the poorest 20 per cent of Indians.

The situation on the public services front is still grim. Piped water available indoors has grown by only 2% and is now available to 27% households. In urban areas, piped water is available to between half and two-thirds of families. Of families which get piped water, less than a third get three hours of supply a day.

Gujarat, Maharashtra, Goa and Delhi have the highest coverage of families for piped water (60%). Delhi gives its residents water for the most number of hours in a day.

Flush toilets are now accessible to one-third of all households and over two-thirds of urban households. Toilet coverage is the highest in Kerala (92%), Delhi (79%) and Punjab (74%).

Access to electricity is inching towards becoming universal with 83 per cent of all households getting supply. Jammu and Kashmir, Himachal Pradesh and Delhi have 100% access to ‘some electricity’. No State had reached this milestone in 2004-05. Just 45% households with access to power get 18 hours or more of electricity in the day. Himachal Pradesh, Punjab, Kerala, Delhi and Gujarat lead the country in terms of supply of 18 hours or more.

SOURCE: HINDU

POORLY PERFORMING PUBLIC SERVICES

Implementation of the Right to Education Act and the National Rural Health Mission should lead to better outcomes but we see the reverse

There is something ironic about politicians making announcements about the Right to Education or the Right to Health when the only thing they can ensure is allocation of funds. Their control over the usage of these funds is somewhat weak; the overall quality of services is even weaker; their control over actual health or educational outcomes is the weakest.

Looking at education and health behaviours and outcomes using data from the India Human Development Survey (IHDS) of 2004-05 and 2011-12 paints a picture of striking dissonance between government programmes and experiences at the ground level. The period between 2004-05 and 2011-12 saw initiation of several new programmes. The Right to Education Act (RTE) was implemented in 2010; the National Rural Health Mission (NRHM) began in 2005; the Janani Suraksha Yojana (JSY) began in 2005, to be implemented alongside the NRHM. Substantial expenditure was incurred in each of these centrally-sponsored programmes. Below we look at changes in education and health to see how these programmes line up with outcomes.

Privatisation

The implementation of the RTE should, in theory, lead to higher enrolment in government schools and better educational outcomes. Ironically we see the reverse. Private school enrolment increased from 28 to 35 per cent between 2005 and 2012 for children of 6-14 years, even before poor students in private schools were reimbursed. At the same time, in keeping with the findings of various Annual Status of Education Report surveys, the IHDS also found a small decline in reading and writing skills among children of 8-11 years. While 54 per cent of children could read a simple paragraph in 2005, there was a modest decline to 52 per cent in 2012. A similar decline was observed for basic arithmetic skills like two digit subtraction, from 48 per cent to 45 per cent. For government schools the decline was higher — nearly 5 percentage points for both outcomes, but a shift from government to slightly better performing private schools limits the overall decline in skill levels.

This growing privatisation of education was matched by continued and slightly increased privatisation of health care. The NRHM is supposed to strengthen preventive and curative care, particularly in rural areas and in States with poor health infrastructure such as Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh. However, a very small proportion of the Indian population relies on public facilities. About 70 per cent of patients visit private providers — either as their first choice or once they are frustrated with public services.

Between 2005 and 2012, years when the NRHM was implemented, instead of increased usage of government services, we see a modest growth in the use of private services for minor illnesses such as cough, cold and fever (from 69 per cent to 73 per cent) as well as for treatment of major illnesses like diabetes, cancer and heart problems (from 67 per cent to 72 per cent). Ironically the greatest increase in the use of private services is in high-focus large States like U.P., Bihar, Rajasthan, M.P. and Orissa. Here the proportion of patients going to private providers increased by nearly 5 percentage points.

The disenchantment of parents and patients with government services is widespread. When asked in 2012 about their confidence in government and private schools and medical facilities, 53 per cent of the respondents expressed confidence in government schools compared to 72 per cent for private schools. Similar differences are observed for confidence in government doctors vis-à-vis private doctors. What explains this? There is no reason to believe that private doctors and teachers are more qualified than government doctors and teachers. Typically government recruitment standards are more stringent about training and qualifications while there is little control over the private sector. It is hard to imagine that anyone would prefer a self-styled private “doctor” in a distant village to an MBBS doctor in a Primary Health Centre (PHC). Yet, this is exactly what we see around us.

The reasons for these preferences are myriad. Parents and patients feel disrespected by government service providers and may find they get better service if they pay. For example, about 6 per cent of the patients see a government doctor or nurse in their private practice rather than in the government dispensary where the same services could be practically free. Government facilities are often irregular in their opening times and teacher and doctor absenteeism adds to the disenchantment. The classroom environment is often not friendly and supportive. The IHDS finds that children are scolded and physically punished in both government and private schools. Indeed, our qualitative interviews suggest that parents consider this to be a sign that the teachers care about students. But this scolding is not balanced by positive reinforcement in government schools. Only about 33 per cent parents of 8-11-year-olds in government schools claim that their children received any praise in the school in the prior month; this proportion is about 55 per cent for private schools.

These observations reflect our pessimism about the potential for improving government health and educational services, regardless of the “rights” that get enshrined in the Constitution. Any service delivery system that insists that a doctor live in a remote village is doomed to failure since doctors must also think of their children’s education. But instead of focussing mainly on village-based sub centres — which patients rarely seem to use — enhancing PHCs which are located in slightly larger and perhaps better connected towns may have a greater potential for improving the quality of services. Thoughtful organisation of services has a far greater potential for enhancing health and educational outcomes than ideologically influenced discussions of rights.

Some good news

The success of the JSY in increasing hospital deliveries is heartening. The years following the initiation of the JSY document a striking increase in hospital deliveries. This increase is greatest in large focus States. Here the hospital delivery rate has jumped from 25 per cent to 56 per cent between 2005 and 2012. Most of this improvement is in government hospitals — from 14 per cent to 40 per cent. This success may be due to the efforts made by medical personnel in response to cash incentives they receive, and the fact that hurdles to hospital delivery like transportation have received consideration in programme design. Although the quality of maternity care remains a concern, increasing utilisation certainly points to the success of the programme. This suggests that focussing on smarter organisation of public services that aligns with provider incentives, and enhances efficiency, offers potential.

SOURCE: SONALDE DESAI, HINDU