In this edition of ResearchWire by IndiaSpend, we discuss a visual tool to understand India’s poverty and inequality, an index of Indian states’ quality of governance and what that can (or cannot) tell us, the impact of COVID-19 on inequality, an insightful interview with a brilliant development economist, and a foolproof way to shine if you’re a man.
If you’ve missed the earlier editions, you can read them here.
What does India’s poverty look like?
I’ve shared Dollar Street with you before—a visual tool to understand what poverty looks like in different parts of the world. Here’s another tool like that, but focused closer home. One Hundred Homes is a visual survey of India, which reduces the country to a representative 100 households and uses that to illustrate its poverty and inequality.
Every percentile of India’s income distribution is represented by a home and its pictures.
I especially recommend these short videos: on the limitations of how India measures poverty; and why the poverty line is much more a political tool than a scientific one. The website is a great resource on India’s poverty, inequality and human development—and like Dollar Street, a great parenting hack when your child is being ungrateful.
Kerala leads again
The think-tank Public Affairs Centre recently published its imaginatively-titled Public Affairs Index for 2020, ranking Indian states on the “quality of their governance”. On this index, Kerala, Tamil Nadu and Goa emerge as the best governed states, while UP, Odisha and Bihar find themselves at the bottom. I cannot comment on their methodology—it isn’t very clear. I spent a lot of time on their website but came back none the wiser. Still, if you like quotable statistics, it’s a good one to read.
More interestingly though, how much does good governance matter?
The relationship between growth and governance is widely contested.
While there is greater agreement between economists that a strong relationship exists between economic growth and governance, the direction of causality is often debated. Does good governance lead to economic growth or does economic growth lead to good governance?
The traditionally held view—one that drove much of governance-focused reform by the World Bank and others—is one that understands good governance as ‘market-enhancing governance’; i.e. governance that lets markets function, and by doing so, leads to growth. But perhaps for developing countries, good governance means something else? The ability to enforce minimum wages or labour protection, for example, is as important as any other governance capability, even when it may be ‘market distorting’. Surely, some markets need the distortion. The Bank’s Ease of Doing Business rankings have been criticised on similar lines—famously in the case of India.
What are the types of state capacities that are necessary for the acceleration of development? i.e. do developing countries need the governance that ensures efficient markets (e.g. enforced property rights, a rule of law, low corruption) or something else? The East Asia growth story is an example of states that grew despite performing quite poorly on market-enhancing governance—in fact, doing quite the opposite.
What is the relative importance of governance reforms in accelerating development in countries at low levels of development?
Read the paper or watch Prof Khan speak here on why governance reform is not a pre-requisite for growth.
Inequality is set to rise
The latest World Economic Outlook (IMF) notes that COVID-19 is expected to worsen inequality in emerging economies, including India. It attributes this to the fact that measures to contain the pandemic have had disproportionate effects on vulnerable workers and women.
Using the ability to telework (or work from home) as a proxy for income loss, the IMF estimates that the average Gini coefficient for emerging markets and developing economies will rise to 42.7—comparable to that in 2008—reversing gains since the global financial crisis. The impact will be larger for low-income developing countries despite slower progress since 2008.
Lower-income workers will be less likely to be able to work from home and more likely to lose their jobs as a result of the pandemic.
The poorest are also already the hardest to reach and identify so their access to any relief will also be limited. This can be expected to worsen the income distribution.
Read also about the Gini coefficient—the most widely used measure of inequality but far from perfect. The coefficient ranges from 0 (perfect equality) to 100% (perfect inequality where all income accrues to one person).
Read this on how inequality is not only about income, but life chances and setbacks that will influence these chances for years to come. An episode of hospitalisation can drive poor families into severe debt traps and poverty; and school closures and limited digital access mean millions of children will miss out on both education and mid-day meals, leading to long-term nutrition and learning consequences.
For development enthusiasts, I recommend a very good interview here with Yale economist Ahmed Mushfiq Mobarak who gives lucid, evidence-based answers to some of the most interesting questions around Bangladesh’s growth and development, with several references to India and the rest of South Asia.
The interview covers a wide range of issues including the implications of Bangladesh’s garment factories for its women; the role of NGOs in development; how new seeds and not mechanisation drove agricultural productivity in South Asia (you can’t mechanise small farms); why the role of microfinance is overemphasised; and why we must take a pause before calling Bangladesh’s garment workers ‘underpaid’. It is a thought-provoking and compelling read, with many real-world examples of what works in development.
Finally, on an unrelated note, here is something I want to draw your attention to:
Prof Mobarak recently shared a note from a female economist on Twitter where she recounts how he “gets it right” when talking to women colleagues. I’ve appended a part of the note below. She talks about how he listened attentively when she spoke, made eye-contact, and fundamentally operated with the assumption that she knew what she was talking about.
As much as I’d like to roll my eyes at men getting notes of appreciation for doing the bare minimum, I know how rare this is. Instead, I doff my hat to Prof. Mobarak, ask you to read the note, and—if you’re a man—insist that you use it like a manual the next time you speak to women at work. You’ll be amazed at how little it takes to shine!
Contributing Editor, IndiaSpend
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