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.