As India?s monumental and influential election gets under way, surveys of the electorate suggest that they care about their material well-being, and will be looking for candidates who can deliver on this front. Many of the politicians who may play a role at the national level in the next government have economic track records in their states, and voters ought to understand these records.
Recently, Maitreesh Ghatak and Sanchari Roy have published an analysis of the economic performance of 16 major states over the last three decades (ideasforindia.in). Their results provide a detailed sense of how different states have done. Only three states ? Gujarat, Maharashtra and Tamil Nadu ? have had growth of per capita income above the national average in each of the three decades. But, none of the three saw a substantial growth acceleration in the 2000s, versus the previous decades. By contrast, Bihar improved its growth rate dramatically in that decade, versus the 1990s. Whether this performance reflects natural catch up, catalysed by minimal policy improvements, or a Herculean effort in overcoming substantial barriers of backwardness, remains to be determined.
The Human Development Index (HDI) provides a broader measure of material well-being, incorporating factors such as health and education along with income into a single index. The national level improvement in the HDI slowed down in the 2000s versus the previous decade, but fast growing states like Maharashtra and Tamil Nadu had stayed ahead of the national average in the 1980s and 1990s, whereas Gujarat fell to average in this period, staying in that relative position over the most recent decade.
On the inequality front, Maharashtra, Tamil Nadu and ? surprisingly ? Kerala have tended to be more unequal than average, but Gujarat saw a worsening of its relative ranking in the last decade. On the other hand, poverty reduction in Gujarat has been about average in the 2000s, although Tamil Nadu has done really well, along with several of the poorer states, in which poverty rates would in any case be more sensitive to growth.
Ghatak and Roy?s message is that Gujarat?s record has been good but not spectacular, and that the leadership of the last decade did not lead to appreciably improved economic performance compared to previous periods. Rana Hasan, Sneha Lamba and Abhijit Sen Gupta of the Asian Development Bank have provided some additional insight into the performance of Gujarat and other states. They focus on structural change as a mechanism for poverty reduction. Structural change involves pulling workers from lower productivity sectors and occupations into higher productivity sectors, and is more likely to benefit the poor, in that case. States like Kerala, Tamil Nadu, Karnataka and Andhra Pradesh, which did well in poverty reduction over the period 1987-2009, also had higher structural change. Gujarat did well in overall productivity growth, but less well in structural change or poverty reduction. Punjab saw the least structural change of 15 major states, and among the worst overall growth performance.
Hasan, Lamba and Sen Gupta suggest that policy matters for structural change. They find that better functioning credit markets, competitive business regulations, and relatively flexible labour regulations are associated with a larger reallocation of labour from lower to higher productivity sectors. But this is an average result, and the Gujarat case does not seem to fit this story too well.
Ashok Kotwal and Arka Roy Chaudhuri, in the Indian Express last year, offered a critical assessment of Gujarat?s performance in various development measures, as opposed to its stellar growth record, and speculate that the state has seen centralised governance that works well for big investment projects but not for grassroots development. That is a plausible way of explaining why Gujarat does not fit the Hasan et al story. But the Kotwal and Roy Chaudhuri position has an unintended implication. Perhaps Gujarat?s leadership style is better suited for the national stage than for a smallish state.
The lesson of these studies is that measuring the impact of leadership and policy on economic performance can be a complex exercise, if done with academic rigour. But voters may make their decisions based on how they feel, what their local choices are, and their hopes for the future. These things may matter more than cut and dried numbers. Voters also seem to want governance that is non-predatory and non-patronising. How all these factors feed into their choices remains to be seen. What does seem to be true is that the current national government has disappointed citizens across the board by its poor governance, and done even worse in articulating the achievements it could rightfully claim. The Congress party will probably do worse than in any previous national election. But the complex story of state-level economic performance, as experienced by individual voters, means that who voters will choose instead is uncertain. They will vote for change, but this change can involve a specific ideology of nationalism or a more diverse set of promises of state-level performance.
The author is professor of economics, University of California, Santa Cruz