AKF (India): note to file Somnath Bandyopadhyay 20th January 2010

Excerpts from a panel discussion on Bihar as part of the Bihar Development Conference, Patna
15th January 2010 (1 hour)

Participants: Abhijit Banerjee, Professor of Economics, MIT (moderator)
Sushil Kr Modi, Deputy Chief Minister (Bihar) N. K. Singh, Member of Parliament, Rajya Sabha (Bihar) Navin Kumar IAS, Development Commissioner (Bihar) Bhanu Pratap Sharma IAS, Principal Secretary, Finance (Bihar) Michael Anderson, Head of India Programme, DFID (UK) Roberto Zagha, Country Director for India (The World Bank) Robin Burgess, Professor of Economics, LSE (UK) Anup Mukherji IAS, Chief Secretary (observer) Purpose: The panel discussion was a part of the first Bihar Development Conference organised by the Abdul Latif Jameel Poverty Action Lab (J-PAL), convened to share selected evaluations and their relevance for evidence-based policy formulation in Bihar. Background: The Central Statistical Organization (CSO) has placed Bihar just second to Gujarat in terms of growth in the Gross Domestic Product (GDP) between the years 2004 and 2009. Despite three years of floods followed by a year of drought, Bihar reports a miraculous 11.03% GDP growth, as against the national average of 8.49%. The growth rate assumes all the more significance as it comes after a negative 5.15 % growth of 2003-04. Chief Minister, Nitish Kumar, attributed this to cumulative development expenses of Rs 35,364 crore in the last four years in basic health, education and infrastructural sectors, apart from vastly improved law and order situation. At a joint meeting with the Chief Minister in Patna on an earlier day (13 January 2010), the head of the World Bank (WB), Asian Development Bank (ADB), UK-based Department of International Development (DFID) and Japan Bank of International Cooperation (JBIC) – who are coordinating their development finance support to the State – have expressed keenness to invest in construction, power, health, tourism and rural development in Bihar. Key Points: From the inaugural speech of the Honourable Deputy Chief Minister: Shri Sushil Modi stated that the goal for Bihar was to end poverty within our lifetime (i.e. in the next 20-25 years). Thereafter, he enumerated several major initiatives that he felt contributed to the development and

empowerment of the poor. First, affirmative action for women in Panchayat Raj Institutions (PRIs) and urban local bodies – over and above the national mandate (50% as compared to 33%), along with elections on these basis in 2006. Second, provision of bicycles to girl students at a scale that makes a difference (500,000 for girls and 100,000 for boys this year). He felt both these were small steps with major impacts (that need to be measured). He mentioned that the Bihar government was using ‘conditional cash transfers’ as the key mode for benefitting the poor – whether it was for bicycles, school-uniforms or other health and education initiatives. He spoke of a record Rs 10,000 crore outlay on education this year (including both plan and non-plan), but was concerned about the poor delivery systems, particularly the mid-day meal scheme. While hot cooked meal was very desirable, even Tamil Nadu has around 20% leakage in the system after implementing it for nearly two decades. He mentioned how incentives have improved performance in the health sector. The Janani Suraksha Yojana providing cash incentives for institutional deliveries have raised the figures from 45,000 in 2005-06 to 312,000 in a single quarter of 2009-10. Pension and other welfare schemes for widows and handicapped were also mentioned. Among the constraints, he pointed out four major ones: (1) proper targetting of welfare programmes needed proper enumeration and surveys of the poor. This was a methodological nightmare in the state, compounded by the several definitions that have been floated by various committee reports, including Suresh Tendulkar and N C Saxena. (2) floods are a major contributor of poverty, wiping out gains in single episodes. The issue is also linked to low industrialisation, urbanisation, migration and rural population densities. (3) Patna boasts of the first veterinary college of India established in 1927 and the sixth medical college to be established in the country. However, there has been no substantial investment in any major academic institution in the recent years. (4) despite having some of the most talented officers of the country, the delivery system remains weak. It is not the money, but the spending mechanism that will hold the key to inclusive growth in Bihar. Moderator: What do you make of the recent growth story, and what are the road-blocks ahead? N. K. Singh: First, the growth is fairly widespread: agriculture grew at about 7%, nearly double the national average, industry and manufacturing at about 22% (largely construction), and services at about 10%. The growth seems to be explained by three factors – a vastly improved law and order, a dramatically high government expenditure (annual expenditure to the tune of Rs 16,000 crores, up from Rs 1,200 crores five years ago) and a low base. The causes of worry are several – failure to attract any large private investment (inspite of a degree of commitments), endemic energy deficiency, agricultural productivity that is well below potential (the RAINBOW programme, promoting small-scale agro-allied enterprises is yet to take off) and need for political continuity (the state will elect its new government later this year). Finally, if Bihar has to gain from the demographic dividends, massive investments are required in health and education in addition to fast turning it into a “training laboratory” with thousands of vocational training centres. Moderator: Any specific intiatives in a priority sector that you would like to highlight? Navin Kumar: Yes, information technology. Bihar is a leader of the National e-governance programme – what started out as a treasury application is now a comprehensive financial management application providing real-time information on every bit of state expenditure. Second, e-kiosks (common services centres) are being created in each Panchayat under a GoI programme that will open up opportunities for market information, communication, health and education services and even more sophisticated financial services (acting as Business Correspondents for scheduled banks).

Moderator: What’s exciting? Bhanu Pratap Sharma: When Bihar split in Nov 2000, it was deemed a basket case since it retained the bulk of the population but lost the major urban and industrial hubs. Today’s leadership seems to be regaining a lot of lost pride. Moderator: What is your take on Bihar? Roberto Zagha: We’ve come a long distance from the Washington Consensus, thanks to sustained growth in East Asia, India and China, as per the Commission on Growth and Development. Truly, there is NO recipe. However, sustained 7% growth still means that incomes double every 10 years. Only 13 countries have made it so far (India is still not there). However, there is cause for much hope and optimism. Moderator: As a researcher, what would be your focus in Bihar? Robin Burgess: The recent changes in Bihar was largely a result of openness – it became a sort of marketplace for ideas that have competed on the ground. However, the institutional changes are more evident only at the top, and a lot needs to be done. The following areas should be studied: (1) Governance and accountability – there is need for a sea-change in the local governance systems and the way institutions of governance aggregate would be quite interesting; (2) Rural development – drawing parallels with Bangladesh, it can be stated that basic manufacturing and small industries is the way ahead; (3) Big private investments are faltering, and it is not just clearance but a whole set of facilitation that is required; and (4) Better cities and how these are governed will be absolutely central to the future of Bihar. These might begin with the IT clusters or the small industrial clusters. In the short run, it is not about revenue generation, but about efficient spending. Large federal programmes are stalling due to lack of “local capacity” and this needs to be addressed immediately. Moderator: So, what is the revenue and expenditure scenario? And, how are you dealing with local governance? Navin Kumar and Bhanu Pratap Sharma: As stated earlier, government expenses have multiplied nearly 10 fold in the past nine years. However, according to the report of the Finance Commission, the per capita development expenses continue to be the lowest in the country. Internal revenue generation is better than many states. More than Rs 1000 crores is now being generated only from registration of property sales, which has been made possible by reducing rates and standardising methods. The state is also adhering to the FRBM act and has maintained a revenue surplus on a consistent basis. We’ve already noted that the state expenditure is increasing rapidly. Of the Rs 16,000 crore allocation this year, nearly 85% is central outlay. While state revenues are picking up, national outlay for Bihar also needs to go up, both from devolution as well as borrowing. Bihar has spent Rs 1000 crore through externally aided projects. One of the reasons for better budget utilisation is decentralisation – upto Rs 20 crore does not need cabinet clearance now. The 12th Finance Commission has recommended specific allocations for local bodies. Panchayat elections have also been held. But there is indeed an issue of capacity, particularly in management of accounts.

Moderator: Off the hand, what will be your five priorities for Bihar? Michael Anderson: In the short-term, these would be (1) focus on nutrition for under-two year olds. It is difficult, but there is a need to crack this puzzle through the anganwadis and health systems; (2) focus on leadership at the local level. A critical enabling policy would be to ensure specific tenures to hold officials in their positions; and (3) roll out big ticket programmes in a phased manner. Elaborating, he mentioned distributed energy options, particularly solar and biomass. If flooding is key to addressing poverty, we need to understand climate change. The longer term agenda should include (1) creating conditions for urbanisation, including investments in infrastructure and governance; and (2) leveraging the global economy, including regional trade (particularly with Nepal and Bangladesh) and the diaspora. DFID is interested in long-term partnerships, particularly in interventions that are measured rigorously, fed into detailed database and inform policy on what does not work. Moderator: Any final thoughts? N. K. Singh: In order to gain the demographic dividends in Bihar, there is an urgent need to address the “missing middle”. There is scope for 10-20,000 vocational training institutions urgently to do this. In the largest petrochemical hub, Jamnagar (Gujarat), nearly 45% of the 90,000 odd employees are from Bihar. Mukesh Ambani has mentioned that it makes sense to invest in training in Bihar. A massive CSR partnership is possible to have a broad-based agenda that will address this issue. Navin Kumar: There is a woeful shortage of doctors and nurses in the state at the moment. From the closing words of the Chief Secretary: Poverty is our central concern and all of us are seeking solutions. In this quest, there is a need to learn from practical experiences – to do the right things, and then to do things right. Changes in governance need to be strengthened. Government programmes are often perceived to be for the government, rather than for the people. This must change. The Honourable Chief Minister himself has expanded accountability by attending people’s court every Monday. Technology must be harnessed to benefit people. Biometric cards under the e-shakti programme will lead to financial inclusion, while plugging into the national unique identity (UID) project that will impinge on all aspect of social welfare. Large programmes need to be undertaken to address issues of nutrition, decentralised energy options, governance (particularly, policing), health, education and skill development. However, before programmes are rolled out at scale, there is need for pilots and randomised evaluations. In particular, impact on women need to be studied. Implementation remains a concern and there is a serious suggestion – devise report cards for implementing officers at all levels and put these on public domains. Finally, Bihar needs to respond to heightened expectations and there is a call to end poverty in our lifetime. So, can we rise to the challenge? Implications for AKDN in Bihar The Bihar government has set clear goals for poverty alleviation and has focused on women’s empowerment and delivery of public services. Not only are our goals and focus synergised with this view, but we also seek

to contribute by choosing to work in areas with a concentration of Muslim minorities and Scheduled Caste communities. Our operational approach puts a high premium on pilots and evaluations that inform planning, through a processes of continued learning. A major objective is to improve public services by partnering government and using lessons from grassroots implementation. These include primary education, meal schemes, early childhood programmes, primary health and environmental sanitation. Preliminary engagement on these issues have already commenced. There is a huge scope in harnessing diverse opportunities through mobile and other information technology options where, presently, we are limited to technology training opportunities only. There is potential for much larger use of technology in improving remittances, education (upper primary and above), vocational training, market information and access etc. Specific steps that we could take include: (a) follow-up with DFID, IFC and ADB on possible partnerships; (b) step-up engagement with the State government; (c) raise the quality of evidence generated through improved learning systems; and (d) focus on scalable and sustainable interventions through market-led approaches in economic development, especially skill-building through vocational training systems.

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