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A letter to chief minister Mayawati

Arvind Panagariya

Dear chief minister,

Kindly accept my belated congratulations on your spectacular victory in UP, by far the largest state in India and larger than all but six countries in the world. Allow me to also applaud you for publicly announcing your preference for poverty-based rather than caste-based reservations. Just as it took Richard Nixon — a Republican President — to open the door to China, it will probably take a Dalit prime minister to replace caste-based by poverty-based reservation in India.

But in the meantime, you confront the task of leading UP out of poverty. Your speeches, including some delivered in my part of the world, leave little doubt that you fully understand what must be done. Yet, given the historic opportunity you have, I can scarcely resist offering my two bits’ worth:

l Make growth your priority number one. While your ultimate goal is poverty alleviation, do not lose sight of the fact that this cannot be achieved without sustained rapid growth. Social programmes and redistribution may relieve hardship immediately but they will not eliminate poverty. Assertions that growth barely trickles down to the poor are nonsense. Sustained rapid growth does not just trickle down, it forcefully “pulls up” the poor into gainful employment.

Consider momentarily the experience of India as a whole. During 1950-80, our per-capita incomes grew less than 1.5% per annum with the result that we achieved no reduction in poverty. But growth began to accelerate in the 1980s. Per-capita incomes annually grew approximately 4.5% between late 1980s and 2006-07. During the last four years, they increased almost 7% per annum. Correspondingly, the proportion of the poor in the population has been cut into half since the mid-1980s.

Unfortunately, while UP has shared handsomely in the social programmes launched by the government of India (GoI), it has not shared in India’s growth. Per-capita income in UP has continued to grow at pre-1980 rates of India: barely 1.2% between 1994-95 and 2002-03. This has left the incomes in UP progressively behind India wide average. The proportion of per-capita income in UP to that in India fell from two-thirds in 1994-95 to half in 2004-05. UP simply has not had the benefit of the growth-pull-up effect that the rest of India has had. Slow growth has additionally meant fewer tax resources for social programmes.

While the task of promoting growth is uphill, there are reasons to be optimistic. Having stagnated as long as it has and with the rest of the country growing at 7% in per-capita terms, it is inconceivable that UP will not jump up to much higher rates than in the past. Indeed, at 3.1%, growth rate between 2002-03 and 2004-05 has been higher than before.

Nonetheless, you will need to undertake reforms necessary to improve the business environment in UP. Equally, you will need to personally carry the message to investors in India and abroad that UP is a changed place under your leadership. Your message to the US India Business Council at the Marriott Financial Center in New York recently was on target but it needs to be spread with a missionary zeal.

2 Build rural roads. If relieved of bottlenecks in just two areas — electricity and road connectivity — rural folks can convert their enormous entrepreneurial talents into effective incomes. While the process of expanding electricity supply will remain slow, you can speed up the construction of all-weather rural roads. But this will require a change of strategy. Under Bharat Nirman, rural road construction is parcelled out into tiny projects ranging from Rs 1 to 5 crore. These projects attract only small contractors, inexperienced in constructing all-weather roads. Being numerous, they are also difficult to monitor.

You must take a cue from the Golden Quadrilateral project that broke from the past and brought large private firms into play. You must get these same firms to construct all-weather rural roads. Bundle the rural roads in entire districts into single projects and make them attractive to the large firms. This will undoubtedly compromise equity in contracting but think of the huge benefit you will bring to the rural poor.

3 Go for an innovative health-care policy. The national health policy is a disaster. Cumulatively, the government has spent vast sums on health-care in the last 55 years but has utterly failed in delivering the service. Today, private providers cover 80% of outpatient and 55% of in-patient care even in the rural areas nation-wide. Sadly, rural medical providers — the so-called RMPs — who provide the bulk of the rural outpatient care have virtually no qualifications.

You need to begin short “nurse-practitioner” training programmes to begin imparting them basic medical knowledge. You also need to massively expand MBBS level medical education. The maximum current annual intake of MBBS students in the entire UP is 1,662. Of this, 650 seats were added in or after 1996. Therefore, even the most favourable calculations suggest that UP produced at most 36,860 doctors in the last 30 years.

This implies a patient to doctor ratio of 4,500 compared to 400 in the US and 220 in Israel. Finally, you need to provide cash transfers for outpatient care and medical insurance for in-patient care to the bottom 50% of the population. Rather than waste valuable tax resources on expanding PHCs, CHCs and ASHAs, give the purchasing power to the poor and let them decide between public and private providers.

4. Reform the policies in agriculture. While you cannot substantially reduce rural poverty without creating opportunities for farmers outside agriculture, increased productivity in agriculture remains important. Space constraints do not permit me to elaborate on these reforms but UP has the potential to become fruits-and-vegetables mandi of entire India as also the hub of food-processing industry.

PS : May I be so bold as to point out that your website is an embarrassment. Please fire the NIC and outsource the site to a young entrepreneur.

(The author is professor, ColumbiaUniversity in New York City)

June 28, 2007