Looking East: India and the East Asian Policy Experience

Regional Cooperation: Perspectives from China and India

Second in NCAER’s Looking East Video Conversation Series with key policymakers in East Asia

This dialogue brought together Chinese and Indian policymakers and analysts for a discussion on how the Asian landscape will evolve as regional linkages and partnerships in Asia take more concrete shape over this decade. Jointly organised with the Asian Development Bank (ADB) through the ADB-PRC Regional Knowledge Sharing Initiative, this conversation is a part of NCAER’s Looking East Video Series of live conversations with key East Asian policymakers, scholars, and analysts.

As 2016 unfolds, the list of worries about the world economy continues to remain longer than that of reasons for hope–many emerging markets are grappling with excessive debts, slow growth, plunging currencies, and rising inflation. In these troubled times, it is easy to forget the future and how different approaches to initiatives such as regional cooperation will shape that future. The broad ranging discussions held in this dialogue hope to bridge the gap between the optimists on regional cooperation and those seeped in realpolitik. The three broad areas discussed in this conversation were Policy, Execution and Way forward . On Policy, there is China’s One Belt One Road Initiative and India’s Look and Act East Policy. On execution, besides issues of financing, including by multilaterals, there are concerns about the asymmetry of the incidence of costs and benefits between the host and the foreign partner. Looking a decade ahead, will China’s and India’s regional initiatives converge, complement, or diverge?

Dr Min Tang, Counsellor at China’s State Council and Executive Vice Chairman of the YouChange Foundation, Professor Yunling Zhang, Director of International Studies at the Chinese Academy of Social Sciences, and Mr Hamid Sharif, ADB’s Country Director for China, connected from Beijing. They were joined in New Delhi by Dr Sanjaya Baru, Director for Geo-Economics and Strategy at the International Institute of Strategic Studies in London, Mr Dinesh Sharma, Additional Secretary in the Ministry of Finance and India’s Director on the Board of the AIIB, the Asian Infrastructure Investment Bank in Beijing, and Professor Prabir De, Coordinator of the ASEAN-India Center at the Research and Information Systems for Developing Countries. The conversation was co-moderated by NCAER Director-General Dr Shekhar Shah and Distinguished Fellow Mr Rajat Nag.

NCAER’s Looking East Dialogues are policy conversations designed to provide an opportunity for live, focussed dialogue among public policy practitioners in India and East Asia. These two-hour, tightly organized video conversations at NCAER are driven by mutual interest and intellectual curiosity, with the invited East Asian policymakers selected for their intimate knowledge and involvement in their country’s public policy experience and their own interest in learning about how Indian policymakers are meeting similar challenges.

The ADB-PRC Regional Knowledge Sharing Initiative (RKSI) facilitates the exchange of development knowledge among the Asian Development Bank’s member countries drawing on China’s vast experience with rapid economic growth and social transformation over the past 30 years. RKSI supports networking among knowledge institutions in Asia and the Pacific Region to promote greater effectiveness in development and enhance cooperation and integration.

Launch of the NCAER Labour Economics Research Observatory (N-LERO): India’s 3E Challenge- Education, Employability, and Employment

NCAER today launched its first research on India’s 3E Challenge- Education, Employability, and Employment under the New Skills at Work India (NSAWI) program. Housed in NCAER’s Labour Economics Research Observatory (LERO), NSAWI is an inaugural research initiative that will look at the skills gap currently affecting the Indian work environment. The two-year research program, supported by J.P Morgan, will focus on education, employability, and employment within India’s job market, looking closely at the employability of potential and current employees, youth aspirations, employer requirements, educational policies as well as how India’s education system looks to equip students with the necessary skills for the work place..

India became a middle-income country in 2007. In PPP terms, it became the third largest economy globally in 2013 after the United States and China. By 2028, it will be the world’s most populous country. The labour force in the industrialized world will decline by about 4 percent in the next 20 years, but will increase by 32 percent in India. This challenge of jobs facing India is daunting. With the world’s youngest population of 730 million people in the working age group of 15-59 years, India will have one million young job-seekers join its labour force every month for the next 20 years. Other countries, in the recent years China, have reaped rich dividends from this demographic transition by employing its young productively. To reap this demographic dividend which is expected to last the next 25 years, India needs to equip its workforce with employable skills and knowledge.

A NCAER survey conducted in 2010–11 asked Chief Wage Earners (CWE) in households about their educational and occupational aspirations. Of the respondents, 53% were satisfied with their level of education but of the 47% who were not, still preferred to gain professional degrees over vocational qualifications. This indicates the possible misperceptions around vocational training as well as the need to ensure it is relevant and meets the requirements in the Indian job market.

Emphasising the skilling challenge that faces India today, Jayant Krishna, CEO, the National Skills Development Corporation (NSDC) remarked, “Only 30 percent of the professional elite, which largely includes engineers, MBAs and so on are employable and if you look at the overall universe of undergraduate and post graduate students then barely 10 percent, of the country as a whole, are employable. Skilling is a challenge whose time has come.”

The NSAWI research will be implemented in three phases. The first phase will create a clearer understanding of the challenges faced in providing and developing the necessary skills for the work place; the second phase will consist of a primary survey assessing workforce readiness in the National Capital Region; and finally a National Urban Survey will be conducted focusing on the foundations that need to be laid in order to help create the correct educational environment that supports the provision of relevant work skills; how institutions can adapt their education programmes to provide the right training; and the kind of policies that need to be introduced in order to support and encourage training within the broader population.

The research will be guided by an advisory panel consisting of S. Ramadorai (the Prime Minister’s Adviser on Skills), Manish Sabharwal (CEO, TeamLease), Rohit Nandan (Secretary, Ministry of Skill Development & Entrepreneurship); Rukmini Banerji (CEO, Pratham Education Foundation), and Pramod Bhasin (Founder, The Skills Academy and Genpact).

Third Annual India Human Development Survey Data User Conference

NCAER formally launched the public-use India Human Development Survey-II (IHDS-II) data, India’s first national, multi-topic, longitudinal household panel survey, at the start of the Third IHDS Users’ Conference at the Neemrana Fort Palace, Rajasthan. A training session was also held on March 16th in conjunction with the conference for students and scholars working with IHDS data. The conference, based on data from IHDS-I of 2004-05 as well as some of the early access files of 2011-12, featured papers on a wide range of economic, sociological and political transformations in India over the past decade and provided an insight into the changes that India has experienced in the twenty-first century.

IHDS is the first large-scale national panel survey of over 40,000 Indian rural and urban households undertaken by researchers from NCAER and the University of Maryland, College Park, USA, in a long-standing partnership.  It covers the full spectrum of health, education, economic, family and gender modules based on both urban and rural samples, and provides data to re-conceptualise development and to spur research on India’s social and economic transformation. Longitudinal panel data—tracking the same household over long periods of time—is particularly valuable because researchers and analysts can make inferences with far greater confidence and trace the long-term impact of economic and social policies.

The IHDS contains data on a wide range of topics such as income, expenditure, employment, morbidity, health expenditure, marriage, fertility and education. It is also the only source of data on marriage patterns in India, and has proven to be extremely useful in studies of family formation and intra-household dynamics. The project has wide support from a number of funders, including five grants from the US National Institutes of Health, and from the World Bank, the Ford Foundation, and DFID, UK.

The IHDS surveys have been conducted with broad support from the former Planning Commission and are guided by an advisory panel consisting of eminent academics and ministry representatives and chaired by Dr Pronab Sen, India’s first Chief Statistician. NITI Aayog has enthusiastically continued this support to IHDS. Dr Ramesh Chand, Member, NITI Aayog, in his keynote address at the launch at Neemrana, commented, “The India Human Development Survey data contain valuable information on all aspects of human development available at one place. The panel data will reveal the direction and magnitude of the socio-economic changes taking place in India. I feel IHDS will provide very rich material to researchers, and contribute to strong evidence-based policy making.”

The core strength of IHDS lies in its ability to generate panel data surveying the same households over time.  The foundations of IHDS lie in work NCAER had done in 1993-94 as part of its Human Development Profile of India (HDPI). The IHDS-I rural sample used about a third of the HDPI households. IHDS-I data were collected in 2004-05 from 41,554 households with 215,751 individuals and located in 1,503 villages and 971 urban blocks all across India. This was repeated in 2011-12 for IHDS-II, when the same households were revisited, with a high re-contact rate of 83 per cent after seven years.

Dr Shekhar Shah, Director-General, NCAER, opened the IHDS Users Conference and emphasised the rich analytical possibilities that this data offers and the impact it has already had. “The IHDS surveys are available free to researchers worldwide. IHDS data are filling a clearly felt need, as evidenced by the fact that more than 7,000 researchers globally are using these data; over 205 scientific papers have been published using just IHDS-I.  With the release of IHDS-II, we anticipate an even greater interest,” 

Dr Shah added, “IHDS-II is currently ranked second in the list of top downloads in the past six months from ICPSR, and IHDS-I is fourth. This is an amazing endorsement of the IHDS, since the ranking includes all US databases on ICPSR.   The next non-US database on this list is at a distant 10th place.  So, you can imagine the level of interest that the IHDS data are generating.   Just the five themes at this Users Conference, which actually only scratch the surface, show the rich possibilities in assessing the success or failure of Indian public policy in promoting development.”

 Dr Sonalde Desai, IHDS Project Leader and Senior Fellow at NCAER and Professor at the University of Maryland, pointed out an inherent problem with use of data collected at a single point in time for informing public policy. She noted, “Our public policies have historically focused on individuals who are poor by virtue of the accident of their birth – dalits, adivasis, and individuals based in poor states and backward districts. But with declining poverty, the accident of birth has become less important than the accident of life. People fall into poverty due to illness, drought, declining opportunities in agriculture, and urban blight.”

Policies that label individuals as poor on the basis of Below the Poverty Line (BPL) surveys often mis-target. In a rapidly changing economy, BPL censuses undertaken only once in ten years tend to miss the mark.  IHDS data shows that only 13 per cent of the population was poor in both 2004-05 and 2011-12, and this is the population most likely to be served by the present policies; 53 per cent of the people were poor in neither of the two periods and 25 per cent moved out of poverty between 2004-05 and 2011-12. The worrying finding, however, is that 9 per cent of the population fell into poverty. This suggests that if we were to provide safety nets in 2011-12 based on a BPL card issued in 2004-05, 65 per cent of the BPL card holders would have already moved out of poverty (reflecting an error of inclusion), but of those poor in 2011-12, 40 per cent would not have a BPL card since they fell into poverty after the BPL survey (reflecting errors of exclusion). The vulnerability of this last group has, unfortunately, received little attention.  “As Latin American countries have found, moving to middle income levels also means fostering a middle-income mindset for drafting social policies, with a greater focus on vulnerability instead of concentrating solely on chronic poverty,” said Dr Desai.

Professor Reeve Vanneman, University of Maryland, pointed out, “Given India’s massive policy innovations, longitudinal research can examine the ‘before’ and ‘after’ outcomes for participants and non-participants alike. National longitudinal data provides the big picture for evidence-based policy design. The decentralisation of programmes such as Integrated Child Development Services and massive experiments such as MGNREGA and Rashtriya Swasthya Bima Yojana or RSBY have promising implications for development policies around the world.  IHDS will help us all to understand their impacts.”

Professor Amaresh Dubey from Jawaharlal Nehru University suggested that access to multi-topic surveys like IHDS reshapes academic discourse by allowing students as well as senior researchers to examine linkages between economic and social transformations.

The formal global launch of the IHDS-II public use data in 2016 is one of the events celebrating NCAER’s 60th Anniversary Year.

In addition to the data launch, a workshop-cum-training session was also held at the commencement of the Conference to facilitate the more effective use of IHDS data by both existing and potential users. The training session was coordinated by the Principal Investigators (PIs) of the project, Dr Sonalde Desai, Professor Amaresh Dubey and Professor Reeve Vanneman. Subsequently, a wide range of papers were presented at the Conference, based on data from IHDS-I of 2004-05 as well as some of the early access files of 2011-12, featuring the economic, sociological and political transformations in India over the past decade and providing an insight into the changes India has experienced in the twenty-first century.

Launch of NCAER’s State Investment Potential Index: The 2016 N-SIPI

The National Council of Applied Economic Research, NCAER, released a new NCAER State Investment Potential Index (N-SIPI) at a full-day launch workshop inaugurated by Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry.  Covering all 29 States and the Delhi Union Territory, NCAER will release N-SIPI in March every year as a credible yardstick of how the investment climate of India’s States is changing. Gujarat and Delhi top the list of states in 2016 on the first N-SIPI index.

India is currently the fastest growing large economy globally. These global trends and the NDA Government’s focus on creating a more friendly investment climate are expanding opportunities for doing business in India. These opportunities inevitably lie in India’s States, influenced not just by New Delhi’s policies but conditioned very much by what is happening in each State.  N-SIPI measures each State’s investment climate and will track it over time.  The NCAER State Investment Potential Index provides a composite indicator of how India’s States are positioned to encourage and attract investment, bridging the many information gaps surrounding questions of what, how much and where to invest.  It will provide an entry point for domestic and overseas investors in thinking about their investment decisions and will also encourage a more competitive ethos among India’s States.

N-SIPI complements the policy initiatives of the Modi Government on its Make in India, Skill India, and Start-up India campaigns by helping guide potential domestic and overseas investors with relevant, high-quality data and analysis of the policy framework in each State. N-SIPI fully complements the Government of India’s initiative through DIPP to improve India’s ranking on the Ease of Doing Business Index of the World Bank. The Ease of Doing Business index is much more procedure- and transactions-driven, while N-SIPI focuses on the policy and structural backdrop that determines the business environment in any State.  N-SIPI complements the work of DIPP with the States on their September 2015 assessment of how the States had implemented DIPP’s 98-point action plan to improve the ease of doing business and the resulting 340-point Business Reform Action Plan for 2016.

While launching N-SIPI, Mr Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion, observed that while the results and rankings of the NCAER report are different from the DIPP survey conducted last year, both their contents supplement each other and function as vital platforms for assessing investment potential of the states. He noted the significance of this work, highlighting the fact that the “criteria for gauging the investment potential of States used in the NCAER N-SIPI—among them, labour and infrastructure conditions, economic conditions, governance and political stability, and industry perceptions—complement the parameters that DIPP considers important for assessing the business potential of states. The NCAER Report is also significant in that it provides useful feedback from industry and business regarding the pace and implementation of reforms in the states.”

NCAER’s 2016 N-SIPI consists of two indices, N-SIPI 21 and N-SIPI 30.  N-SIPI 21 covers 20 States and the Delhi Union Territory, and in addition to being based on four pillars–labour, infrastructure, economic climate, governance and political stability—fundamentally driving investment decisions, it also includes a fifth pillar comprising an extensive perception-based industry survey to capture State level differences. It comprises 51 sub-indicators, identified after discussions with industry, academics, and central and State government functionaries. N-SIPI 30 on the other hand provides national coverage of all States, covering all 29 States and the Delhi Union Territory, but excludes the perception pillar since the perception survey was not done in nine States.

As with the DIPP September assessment, Gujarat tops the list in N-SIPI 21. Gujarat is followed by Delhi and Tamil Nadu. States like Bihar, Uttar Pradesh and Jharkhand appear much lower in the rankings. If the pillar based on industry perceptions is omitted, the results, as revealed by N-SIPI 30, change significantly. Gujarat slips to second place in the modified index without the perception-based survey, while Delhi is placed at the top. States like Kerala, West Bengal and Punjab move up the rankings, while others like Andhra Pradesh, Chhattisgarh and Madhya Pradesh move down.

Dr Shekhar Shah, Director-General, NCAER, emphasized India’s place as the world’s third largest market, just behind the United States and China, and the need for India’s States to drive their investment climates to convert this market potential into business reality. He said, “With the focus of policy reforms shifting so much to the States, whether in labor reforms, in land acquisition, or in service delivery in health and education, this systematic, credible, evidence-based evaluation of the investment potential of States will be timely.  We hope the work being done at NCAER on the investment climate, of which N-SIPI is the first product, will offer potential investors a reliable tool to guide their investment decisions by ranking States based on their openness to attract investment, business and entrepreneurship, and job creation potential.”  

In terms of the five pillars in N-SIPI 21, Gujarat leads on governance and industry perceptions. Delhi is ahead of the others on infrastructure and economic climate. Odisha consistently occupies the top half of the bracket across all parameters, though faring better in the sphere of labour and perceptions as compared to the others.

While introducing N-SIPI, the lead author of the study and Senior Fellow at NCAER, Dr Indira Iyer, remarked, “A novel aspect of N-SIPI 21 is that the index factors in the business climate across the States as captured by a perception-based industry survey –a signature strength of NCAER for doing which it has a lot of experience. The findings of the survey reinforce the perception that corruption is the most significant impediment to business, followed by difficulties in getting approvals. Contrary to the popular perception, labour laws are not as important as the availability and quality of skilled labour.”

NCAER plans to update the index annually, so that N-SIPI, along with the World Bank’s Ease of Doing Business surveys and DIPP’s assessments of the progress made by states on their action plans, will allow both Indian and foreign investors to take informed investment decisions and, as importantly, aid the central and States governments in policy making, monitoring, and implementation.

In ending, Dr Shekhar Shah said, “N-SIPI 2016 represents a significant initiative at NCAER as part of its 60th Anniversary celebrations.  It is aimed at helping fulfil the vision of India’s founding fathers and their dream of building a Union composed of competitive, inclusive, and opportunity-creating Indian States.”  

Release of NCAER Research Study for Indian Railways, “Factors Impacting Railway Freight Traffic in India”

NCAER  presented its study on Factors Impacting Railway Freight Traffic in India to Mr Suresh Prabhakar Prabhu, Union Minister for Railways, Mr A K Mital, Chairman of the Railway Board, and Mr Mohd. Jamshed, Member Traffic, Railway Board at the Rail Bhavan today. Present were Dr Shekhar Shah, Director-General of NCAER, Dr Saurabh Bandyopadhyay, Associate Fellow and the study’s author, and Dr D B Gupta, Senior Adviser at NCAER.

The bottom line forecast made in NCAER’s study is that Indian Railways  freight volume is likely to grow by 2.1 percent in 2016-17, as compared to its 1 percent growth in 2015-16.  This doubling of the growth rate is likely to be possible without any major policy shifts. The Railway Board requested NCAER for this short-term study to focus on Indian Railway’s freight business and to identify the reasons for the recent plateauing of its growth to around 1 percent per annum for bulk freight commodities, including coal, iron ore, cement, steel, fertilisers and food-grains, and container traffic.
The NCAER study also estimates the likely volume demand in 2016-17 for railway freight.  Freight accounts for nearly two-thirds of IR’s revenue spread over two broad categories, bulk and other goods. Indian Railway’s freight business is estimated to have grown at about 1 percent in 2015-16.  The NCAER study finds that there are several reasons for the nearly flat growth in IR’s freight business in 2015-16. The Indian economy has been passing through a difficult and challenging time since 2014-15. Deficient rainfall and two drought years in a row have lowered rural demand. Industry too remains sluggish due to low investment demand. Services, which have been a key driver for growth, have also not remained immune to the slowdown. Alongside industry, growth in gross value added in 2015–16 for the mining and quarrying sector, IR’s largest client, is estimated to be 6.9 per cent as compared to 10.8 percent in 2014–15. Crucial components of core infrastructure, coal, steel, cement, and electricity, also showed a decline in their growth rate for April–December 2015 as compared to their performance in 2014–15.
The study notes a number of commercial, operational and policy-related issues that could have an impact on IR’s freight traffic.  Said Dr Shekhar Shah, Director-General of NCAER, “The NCAER study shows that there is tremendous untapped potential for improving IR’s freight business if it can begin to meet the growing competition from the road sector. The railways need to compete on price, punctuality, and predictability, the keys to a successful logistics business.”  IR’s freight charges have gone up by 67 percent in the last five years while there has been a decline in fuel prices. Road transport for freight has now become much cheaper than rail.  Among the policy reforms suggested by the NCAER study are correcting the fare/freight ratio; providing for periodic reviews of surcharges like the port congestion surcharge and busy season surcharge; steps to encourage short lead traffic; a review of the dual pricing for iron ore; review of transportation product design to cater to market requirements of smaller parcel sizes; and liberalisation of two-point and three-point loading rules. The short-term study did not go into tariff issues, but a longer study is planned in the future to look at tariff, price sensitivity, and cross-subsidization issues.
Dr Saurabh Bandyopadhyay, the author of the NCAER study, noted “The NCAER study provides substantial insights into how the Railways’ freight revenues are closely tied to international and domestic industry developments and the need to track these developments in order to plan strategically for its brighter future.”

 

In an exclusive interview for a programme titled ‘Ask Rail Mantri’, organised by Ministry of Information & Broadcasting soon after the Rail budget 2016 was presented on 25 February 2016, Mr Suresh Prabhakar Prabhu, Union Minister for Railways quotes this evidence-based NCAER study while discussing the challenges faced by Indian Railways in terms of freight.

 

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