How open defecation solves a puzzle, why Indian states are feeling let down, a promising new series on India's energy sector, and why the pandemic isn't the great leveler. There's also a short story about how I said yes.
Sorry – No Can Do: Government of India is unable to give States their share of the GST. Coming at a time when States are struggling with rising expenses, this has understandably raised concerns. India’s GST laws make it mandatory for the Centre to compensate States for any revenue losses that arise due to the move from the VAT (which states collected directly) to the GST (collected centrally and then distributed).
Punjab has said that 4 months of pending dues are equivalent to 2 months of its salary bills. Kerala has described it as a “brazen betrayal of federal trust”.
This is not just a matter of reneging on commitments (or breaking the law?), but also underlines a key governance issue. State governments are closer to people - with larger responsibility and greater ability to not just fight the pandemic, but also enable recovery. What they don’t have are the means. With the switch to the GST, their ability to raise their own revenue had already shrunk and now they are running out of options. See this on how India’s states are nearly broke. And this for options available to meet this gap in compensation.
What we need is effective and enabling decentralisation.
See this excellent piece by M. Govinda Rao for the nuts and bolts of this issue. If you don’t believe me, here is someone more credible: Raghuram Rajan speaks on the need to decentralise power and empower local administration in the battle against Covid-19.
A real head scratcher: Data shows that on average, Indians are consuming fewer calories even as the average wealth in the country is increasing. This seems counter intuitive. Shouldn’t people be moving to eating more as they get wealthier? Watch a (very) short video here explaining this calorie paradox. If you want more detail, the original paper by Josephine Duh and Dean Spears is here. If you want my 1-line summary it is this:
Reducing open defecation and infectious diseases matters.
As people face a lower burden of infectious diseases, their systems get better at absorbing what they eat. They now need to consume fewer calories to get the same amount of energy.
Stop calling it The Great Leveler: Evidence continues to come in about how the pandemic and the lockdown have disproportionately impacted those who were vulnerable to begin with. Ashwini Deshpande and Rajesh Ramachandran find that while all caste groups lost jobs in the first month of the lockdown, job losses for lowest-ranked castes are 3 times greater.
Their paper also finds that caste did not matter when people were educated – there were no caste gaps in job losses between upper and lower ranked gaps for those who had more than 12 years of education, and those with regular salaried jobs.
Clearly, addressing caste gaps in education is crucial to addressing caste-based social inequities.
Their results don’t point to any new discriminatory behaviour per se, but they do reflect the underlying composition of India’s job market. Lower-ranked caste groups are over represented in vulnerable jobs.
See this on how people in India continue to avoid jobs solely due to their sense of caste identity. Using data from an experiment in rural Odisha, a study finds workers are willing to forego substantial earnings, sometimes as much as 10 times their daily wages, to avoid work that conflicts with their caste identity. I won't pretend I know or understand the many complexities that underpin these choices but if you believe there is no caste in India, here is something else you can believe in.
Energy 101: Folks at the International Institute for Sustainable Development (IISD) and Council on Energy, Environment and Water (CEEW) have launched a 3-part series on how India’s energy sector can recover sustainably from the pandemic. The first commentary in the series is out and covers the issue of financial sustainability and the need to bail out DISCOMS. Two more notes – Environmental Sustainability (fossil fuels and renewables) and Social sustainability (energy affordability and pricing reform) – are in the pipeline. If you’re not an energy expert and need a solid 101 introduction, this series looks very promising.
One more reason to spend on the poor: There’s new research to show that using tax payer’s money to pay for social assistance programmes (health, education, insurance, food subsidies) is a good thing. Not good only because giving money to the poor is necessary, a moral imperative, essential for social order, and is the first job of any government. But guess what:
Even when viewed from the narrowest lens of financial returns, spending on the poor makes money for the taxpayers.
Harvard economists Nathaniel Hendren and Ben Sprung-Keyser looked at US data on welfare spending and found that many programs “made money for taxpayers, when all costs and benefits were factored in”. This happened as investments in the poor gradually increased their incomes, the poor paid more taxes and became less reliant on government support over time. The full paper is here and an excellent summary article by Seema Jayachandran is here.
Two things to note:
Some government programmes will not do this and that’s fine (e.g. disability insurance that makes people stop working and therefore paying taxes). Please use this only to add one more reason to back state-funded welfare programmes.
And for India - and other poor countries - this argument may not work as neatly. It will take more than one generation of welfare support before the poorest here can become tax paying citizens. Though welfare programmes will enable the poor to spend more, so returns through indirect taxes are likely. Also note the much smaller tax base in India and the nature of India’s economy which remains largely informal. That is the one they are more likely to join first.
Sign up!: Folks at IndiaSpend suggested I turn bits of this blog into a newsletter for them, and I am happy to report that I said yes.
I've been following their work for some time now, really like the platform and the focus on evidence-led journalism. This seemed like a great opportunity to join the good fight. It also allows me to reach more people - because let's face it, you're probably the only person reading this blog. Oh well.
So I am curating a fortnightly newsletter called Research Wire. It will cover the most interesting and new research that's relevant for India's development - especially on jobs, education, health, energy, environment, gender and the economy. You can read the first one here and subscribe here. Not everything that's on this blog will make its way to the newsletter, but you should sign up if you'd like to receive a smaller, more focused selection once every two weeks.
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