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Understanding India’s demographic transition November 27, 2013

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Raghbendra Jha

Rising incomes, increasing levels of education — particularly in women — and a variety of social factors contribute to determining the demographic profile of India’s youth and their role in India’s demographic transition.

India’s 2011 census revealed two key trends regarding India’s demographic transition. The first is that the total fertility rate has dropped from 2.9 in 2001 to 2.62 in 2011. And the second is that the gender balance has deteriorated in recent times, particularly among India’s youths. The number of girls per 1000 boys, for age groups 0–4, 5–9 and 0–6, fell from 939 to 891, 920 to 889, and 927 to 914 respectively.

The first trend is usually taken as an indicator of the demographic transition associated with rising per capita income. The second trend, however, may point to the growing widespread gender imbalance that is taking place in India. There is evidence to suggest that sex selection tests exist in India and follow-up abortions are more likely to be carried out if the fetus is found to be female. One study uses household-level data from India’s National Sample Survey (NSS) for 1993–94 and 2004–05 to identify characteristics that increase the chance of feticide, something that the Census data alone cannot identify. The study found, ironically enough, that women with higher levels of education, as well as women from wealthier households, are more likely to contribute to India’s gender imbalance. Only when the level of education and wealth combined reach a relatively high level does the gender imbalance start receding. This implies that over time there will be fewer women than men among India’s youth.

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The scourge of relentless inflation September 7, 2010

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Raghbendra Jha and Raghav Gaiha

Inflation has been in the news for some time.  Recent media reports have come to the view that the RBI deems current inflation to be a scourge. This inflation has also been relentless. There seems to be broad consensus among analysts that the current spate of inflation had its roots in food price inflation.  Last year’s drought led to steep rises in retail food prices followed by hikes in procurement prices for farmers.  With a strengthening of the effects of the drought foodgrains had to be imported on a large scale, at prices higher than were being paid to Indian farmers.  This then led to a further round of increase in the prices paid to farmers and an inflationary spiral set in.  More recently, however, clear signs have emerged that inflation in the non-food sector has picked up even as food sector inflation has moderated somewhat (although still in the double digits), capacity constraints have been hit and inflationary expectations have become entrenched.

It is against this background that anti-inflation policy must operate.  In this article we want to make a couple of points about the current policy debate about inflation.

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India: income transfers through social safety nets June 9, 2010

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Raghbendra Jha, Raghav Gaiha and Manoj Pandey

One of the paradoxes of modern India is the coexistence of high rates of economic growth and widespread under nutrition. Thus, between 2000 and 2005 real GDP per head and real per capita consumption grew at impressive rates of 5.4 per cent and 3.9 per cent per annum respectively. Yet more than 75 per cent of the population has daily per capita calorie consumption below the minimum requirements for Indians.  Concurrently, the food subsidy bill has been rising rapidly and was a staggering Rs. 370 billion for Below Poverty Line (BPL) households in 2009-10.

Now, the government is seeking to enact a National Food Security Bill (NFSB) which purports to provide 25 kg of rice or wheat per month to each BPL family at Rs 3 per kg, failing which a poor person can seek redressal.  Undoubtedly, the logistical and administrative implications of such a sweeping legislation and the subsidy involved would be staggering.  The NFSB therefore needs to be implemented keeping in mind some hard ground realities. (more…)

India: inducing a slowdown through restrictive policy January 15, 2010

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Raghbendra Jha

Indian policymakers pride themselves on the fact that the Indian economy was able to pull out of the Global Financial Crisis (GFC) relatively unscathed with real GDP growth rate falling to 6.7% in 2008-09 as compared to the 9 per cent in 2007-08 and expected to rise above 7 per cent in 2009-10.   At the onset of the GFC many commentators had expected a collapse of growth with some even predicting a return to the sluggish growth of the mid to late 1990s.

Thankfully, the Indian economy proved the predictors of doom wrong.   A number of factors have been ascribed to explain this performance: high consumption in India, as compared to China, and lower exposure to the global economy, again as compared to China.   High home consumption is desirable as it gives support to the domestic economy in the face of a collapse of international trade, as happened during the GFC.  Additionally, lower exposure to international trade reduces the impact of external shocks.  The existence of substantial controls on the banking sector is said to explain the fact that no Indian bank had to be ‘rescued’.  In addition, however, credit is sometimes also given to ‘good policy design’ by the government. (more…)

Targeting by social background vs. economic status in anti-poverty programs in rural India September 28, 2009

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Raghbendra Jha

Many agencies including national governments and the World Bank have cited public works programs as a crucial tool for poverty alleviation, particularly in the rural sector. When properly designed and implemented, rural public works (RPW) have the dual advantage of providing employment to the unemployed (hence reducing poverty) and building much needed rural infrastructure. Besides, as RPW are designed to peak in seasonally slack periods, they help stabilise incomes. By stabilising and stimulating rural incomes and, therefore demand, RPW have the potential of stimulating the rural economy and, therefore, act as a counterfoil to contracting demand during recessions. RPW have been used in many countries, including India.

However, public policy towards poverty alleviation, of which RPW are one special case, is often subject to the phenomenon of ‘capture’ whereby the benefits of programs, ostensibly meant to target the poor, are garnered by non-poor. An important question in this context is the following. If the non-poor manage to garner the bulk of the benefits from an anti-poverty program, do they get satiated over time, i.e., do the poor become better aware of the potential advantages of RPW and seek to overcome the barriers to participation?

In the ASARC Working Paper (No. 2009/16) “Timing of Capture of Anti-poverty Programs: Rural Public Works and Food for Work Programs in Rural India” Raghbendra Jha, Sambit Bhattacharyya and Raghav Gaiha compute average odds of participation (AOP) given by the ratio of the quintile-specific average participation rate to the overall average for various quintiles of per capita expenditure for Scheduled Castes (SC), Scheduled Tribes (ST), Landowners and the rural population as a whole. They also compute marginal odds of participation (MOP) defined as the increment to participation in that program for various quintiles of per capita household expenditure. The computations are for RPW in 1993-94 and Food for Work (FFW) programs in 2004-05 using large scale National Sample Survey Household Survey for the 50th and 61st rounds respectively. Differences between AOP and MOP reflect differences in the incidence of infra-marginal spending. If the MOP is greater than the AOP for the poorest quintile within a particular social group, then the population in the poorest quintile will benefit more than the others from an increase in overall spending, indicating lower capture from the extra spending.

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India and the Copenhagen summit August 20, 2009

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Raghbendra Jha

As the world moves inexorably towards the Climate Summit in Copenhagen in end 2009, immense pressure has been brought to bear on India to accept legally binding carbon emissions targets.  The latest attempt  to pressure India came from US Secretary of State Hillary Clinton during her recently concluded visit to India.

Such pressures on India and some other countries (particularly China) are occurring against the backdrop of a new wave of environmental activism among western commentators over the climate change debate.  For example, Al Gore has called on all countries to place an immediate moratorium on coal-fired power plants. This would simply be a no go for India. More than half of the 800,000 megawatts of power India plans to produce by 2030 are to come from coal-fired plants because coal is abundant in India and other energy sources are relatively scarce.

Turbines-thar-india

Wind turbines in the Thar desert, India.  Source: Wiki commons. (more…)

The first budget of UPA-II July 13, 2009

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Raghbendra Jha

Finance Minister, Pranab Mukherjee, presented the budget of the central government of India for 2009-10 on 6th July 2009. The backdrop for this budget was unusual, even by the standards of Indian budgets past. Economic growth during 2008-09 fell to 6.7 per cent from the heights of 9 per cent-plus rates enjoyed for the preceding several years. As the global economy took a sharp downward turn exports started to register negative growth, capital inflows started drying up, and borrowing costs, particularly from abroad, increased sharply. Yet, a government with a sound mandate to govern had been formed, indeed on the basis of a promise to return to high and inclusive economic growth,  and its economic management was being guided by some of the best economists in the country. Hence, there were good reasons to be apprehensive about the economic climate for the next financial year as well as to have high expectations from the budget.

It was against this backdrop that Pranab Mukherjee, handed down the budget. The budget tried to do essentially three things:

  1. It has a strong focus on the less prosperous part of the population. Thus total public expenditure has risen to a mammoth Rs 10.21 trillion, much of it going to the UPA-II’s flagship programs. Allocations for rural India oriented projects have been augmented anywhere from 45 to 144 per cent. The targeting of these projects has favoured villages with large Dalit and Muslim populations. In line with the mandate from the Lok Sabha elections and post-Mandal politics, welfare schemes are now broadly oriented towards affirmative action.
  2. There was a significant effect at tax rationalisation. In particular the government committed itself to the introduction of a unified countrywide, harmonised Value Added Tax by April 2010. If this is successfully completed this would be the single most important piece of indirect tax reform in Indian history. There was significant rationalisation of the income tax structure with a view to consolidating the UPA’s hold among the middle class and some tinkering with the indirect tax structure and the educational cess.
  3. Finally, the government realised that the relatively good performance of the Indian economy for 2008-09, as compared to the rest of the world, was due in some significant part to the stimulus packages announced prior to the Lok Sabha elections. Expectations of reaching growth rates of 8 to 9 per cent in 2009-10 were predicated on the global economy improving substantially.  However, the global economy has failed to pick up significantly and there are still some downside risks, especially on the employment front. Hence, the budget went in for yet another stimulus which has lifted budgetary estimates of the fiscal deficit from the previously announced 5.5 per cent of GDP to 6.8 per cent. If the revenue projections turn out to be unduly optimistic or if the food subsidy bill blows out this may yet turn out to be an underestimate of the fiscal deficit. As a consequence, public debt is likely to hover around 90 per cent of GDP.

The budget is staid and not overly reform-oriented. There is only a modest target for the extent of privatisation and, in the interest of providing a stimulus to the economy even in the face of sluggish tax and non-tax revenues, the (more…)