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Prof Tarun Ramadorai (University of Oxford and NCAER) presented on Cross-country Trends in Household Finance at this NCAER Seminar. Dr Pallavi Choudhuri from NCAER shared her views as the discussant for the seminar.

Household finance studies the ways in which households use financial instruments to attain their objectives. The field has grown rapidly in recent years, with considerable emphasis on anomalies—household financial behavior that deviates from the prescriptions of standard finance theory in ways that are hard to rationalize—and on the characteristics of households and of the financial systems in which they operate that either exacerbate or mitigate such mistakes. Cross-country studies of household finance have added substantially to individual country studies enabling a systematic comparison of household finance practices around the world. Ramadorai reviewed the literature on international comparative household finance and discussed what the aggregate household balance sheets for 13 countries reveal. Based on work done jointly with Cristian Badarinza and John Campbell, Ramadorai highlighted common features and contrasts across countries and discuss key issues surrounding retirement savings, investments in risky assets, unsecured debt, and mortgages. He also focused on research from India in this rapidly growing area of work.

About Professor Tarun Ramadorai

He is Professor of Financial Economics at the Saïd Business School, University of Oxford, and a Non-resident Senior Fellow at NCAER. He is also an Executive Committee member of the Oxford-Man Institute of Quantitative Finance, Senior Academic Fellow of the Asian Bureau of Finance and Economics Research, Research Fellow at the Centre for Economic Policy Research, and Honorary Advisor to the National Institute of Public Finance and Policy. He has served as an Economic Advisor to the European Securities and Markets Authority, and was a Visiting Scholar at the Economic Advisory Council to the Prime Minister of India during 2011 and 2012. His research focuses on asset pricing, international finance, household finance, and the Indian economy. Ramadorai has a PhD in Business Economics from Harvard and an MPhil in Economics from Cambridge.

Gaurav Datt of Monash University presented his work on “Growth, Urbanization, and Poverty Reduction in India”, co-authored with Martin Ravallion at Georgetown University and Rinku Murgai at the World Bank.  This new work delivers the most robust evidence to date that economic growth in India has not only come with a lower incidence of absolute poverty but also with an acceleration in the pace of poverty reduction in the post-1991 period.  Faster poverty declines have come with both higher growth and a more pro-poor pattern of growth. Ms Mousumi Das, Associate Fellow, NCAER, was the discussant.

Past thinking about the impact of economic growth on poverty in developing countries has emphasized the role of urbanization. There was much hope in India that higher growth rates after the 1991 economic reforms would bring faster poverty reduction.  But there were also signs of rising inequality in the post-reform period, raising doubts about how much the poor were sharing in the gains from growth.  Building on earlier work by Datt and Ravallion (1996), the authors now compile a new series on poverty and related data spanning 60 years, substantially extending the reach of their analysis.  With the benefit of nearly 20 years of post-1991 data, Datt and colleagues find a downward trend in poverty measures since 1970 that accelerated after 1991.  Despite rising inequality within the rural and (especially) urban sectors, growth within the sectors delivered sufficient gains to poor people to mitigate higher inequality. Population urbanization played a role, but not in the standard way assumed by the Kuznets process in which distributions are preserved within both the rural and urban sectors. Instead, the authors find that urbanization came with distributional changes within sectors.  Another difference is that the sectoral pattern of growth in India’s Net Domestic Product mattered less to progress against poverty post-1991 than was the case in the pre-1991 period. Stronger inter-sectoral linkages suggested by the post-1991 data meant that urban consumption growth brought gains to the rural as well as the urban poor. The composition of growth between the primary, secondary, and tertiary sectors ceased to matter as all three sectors contributed to poverty reduction.

About Gaurav Datt 
He is Associate Professor and Deputy Director of the Centre for Development Economics and Sustainability at Monash University in Melbourne. He has worked previously in research positions at the World Bank and IFPRI in Washington D.C, most recently with the Bank based out of Sydney and Kathmandu.  Datt’s primary focus on poverty, income distribution and social policy has led to extensive journal publications and several World Bank country poverty assessments.  His work has covered countries including India, China, Egypt, Laos, Mozambique, Nepal, Papua New Guinea, the Philippines, Sri Lanka and Timor-Leste. Datt has a PhD in Economics from ANU in Canberra, and an MA from the Delhi School of Economics.

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).

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.