Why is India a ‘Flailing State’?

The Indian state is a paradox.

While it has the capability of organizing the ‘Kumbh’ every 12 years at Allahabad, where a whole new city is being set-up to cater to nearly 24 crore pilgrims for 50 days, on the other hand it fails to provide quality care to the infants in its government hospitals.

The Indian state can efficiently perform complex tasks that require massive coordination and planning, while it fails to provide basic services to its poor on a day-to-day basis. It can organize one of the biggest elections in the world in terms of scale and complexity but it would fail to provide a hearse van to its dead.

Why is it so? From where is this contradiction coming?

In 2009, Oxford professor Lant Pritchett tried to unpack this paradox. He famously coined the term ‘Flailing State’ to describe India and its institutions. Perplexed by the fact that a booming economy and democracy like India can have the best elite institutions (election Commission of India, Indian Administrative Services, the Supreme Court etc.) and the worst public provisioning of basic services like health, education and sanitation, Pritchett argued that there is a massive disconnect between its elite institutions and the frontline institutions. This has resulted in what is often called as ‘last mile delivery problem’.

He wrote,

“India is today a flailing state- a nation state in which the head, that is the elite institutions at the national (and in some states) level remain sound and functional but that head is no longer reliably connected via nerves and sinews to its limbs”.

He further added that India is not a ‘failing state’ since its macroeconomic indicators are stable and the state is able to maintain law and order and protect private property. However, it is a ‘flailing state’ because the administrative apparatus has not been able to provide basic services to a large section of its population.

In a recent essay, published in American Economic Association’s Journal of Economic Perspectives, Devesh Kapur has explained why the Indian state both fail and succeed.

Kapur starts the piece by analyzing the performance of the Indian state. He argues that the Indian state has performed better in certain situations while at the same time it has fallen short of even claiming itself to be a credible state.  He calls this performance a ‘heterogeneous performance.’

He writes,

The Indian state has delivered better in certain situations and settings specifically on macroeconomic rather than microeconomic outcomes; where delivery is episodic with inbuilt exit, rather than where delivery and accountability are quotidian and more reliant on state capacity at local levels; and on those goods and services where societal norms and values concerning hierarchy and status matter less, rather than in settings where these norms (caste and patriarchy) are resilient.

Kapur gives several examples that outline the heterogeneous performance of the Indian state.

  1. Democratic India taxes less: A state has monopoly over legitimate expropriation. This essentially means that a state can tax its people in order to raise revenues to provide services to the citizens. A state’s capacity for public provisioning depends upon its fiscal performance on raising direct taxes.

India’s tax-to-GDP ratio has always been historically low. The tax-to-GDP ratio was around 6% in 1950-51. It has gone up to around 18% in 2016-17. A comparative analysis of the tax-to-GDP ratio between India and the OECD countries reveals that the average tax-to-GDP ratio of 17% for India is lower than the average of 24% of the OECD countries. This essentially means that India has not been able to generate revenues through direct taxation as efficiently as other countries.

Source: Mint

A democratic country like India, that has granted universal franchise at the stroke of the mid-night hour, to a poor and illiterate population, faces a lot of redistributive pressures. Democracies ought to tax more and spend more. But India has never followed that path.

Source: Kapur 2020

India is an outlier when it comes to tax-to-GDP ratios in democracies. It has the lowest tax-to-GDP ratio amongst the democracies. Kapur claims that India does not under collect taxes because it is relatively low income; rather it under collects taxes despite being a democracy.

2) The state performs well in activities that are episodic: The Indian state has performed very well in activities where the delivery mechanisms are episodic and there is a provision of exit once the task is complete.

Kapur gives examples of statutory bodies like the Election Commission of India, the Delimitation Commission, Census and the Finance Commission. These bodies have performed better than other institutions that provide basic services. He also gives example of the Kumbh at Allahabad in 2019 which is not a statutory body but can be considered as an activity by the state which is episodic (once in 12 years) and where the exit is automatic.

The footnotes of the paper compare the Kumbh with the Hajj. In 2019 Kumbh of Allahabad, also regarded as the largest human gathering, a temporary city was built across an area of 2,500 hectares to cater to around 22 crore pilgrims for 50 days without a single major stampede.  The Saudi state organizes Hajj for around 3 million people for 5 to 6 days.

In 2013 researchers from the Harvard University came down to the Allahabad Kumbh (the 2019 was the Ardh Kumbh that happens every 6 years) to study how it is better organized than the FIFA world cup.

These elite institutions and the episodic activities (once in 12 years) are in complete contrast with the state’s neglect for basic services like health, education, water, affordable housing and sanitation. Kapur calls them ‘quotidian’. The efficient provisioning of these services depend upon the state capacity of the local institutions.

The only exception in public health where the state has done a reasonably good job is the eradication of polio and reduction of HIV/AIDS. But this ‘mission mode’ service delivery also has its own set of disadvantages. In public health literature there is a huge body of literature that shows that an integrated approach is better than a standalone vertical health programme approach (polio, HIV) since it takes away a large proportion of resources from other programmes. The vertical programmes are desirable as a temporary measure if the health system is weak but if continued for a long time, it may impair the health system.

In the second part of the essay, the author has discussed 3 possible reasons that explain why the Indian state has failed at providing basic services to its people:

  1. Inadequate local government resources:  The structure of public employment in India, especially at lower levels, is completely different from that in the US or China.

Source: Kapur 2020

In India the share of public employment at the local levels is almost one-third of what the US and China has. While India’s public employment structure follows the U-curve, in the US and China it follows a bell curve. This essentially means that the elite institutions at center and state levels in India have more manpower and capacity than the lower institutions. This has manifested in teachers absenteeism, vacant posts of doctors in rural health centers, tardy implementation of schemes etc.

This inadequate capacity at the lower institutions, that act as frontline delivery entities for basic services, has resulted in poor implementation of development programmes.

Kapur elaborates,

Bureaucratic resource constraints affect performance by forcing local officials to multitask excessively and this inability to specialize has an adverse impact on the performance of development programmes.”

2) India’s precocious democracy: This is a theme that has been dealt in great detail by Arvind Subramanian earlier.

India is an outlier because of its democratic credentials and the social fault lines. Seventy years ago nearly everyone in the world wrote obituaries of the Indian republic. They thought that India will be divided into several smaller regions since it’s a multi-religious, multi-ethnic and multi-linguistic country without a common strand that holds together everything. The Indian constitution guaranteed universal franchise to everyone ‘at the stroke of the mid-night hour’ when the literacy level was 18% and the life expectancy was only 32 years. The western democracies took years to give franchise to the women and people from other ethnicity and race. The expansion of franchise, in those democracies, happened after a reasonable level of industrialization and after the state has laid the foundation of public goods such as health and education. After building this foundation, welfare states were built and redistribution started.

India took a very different course. The redistribution happened at a very early stage of economic development when the per capita GDP was very low as compared to other countries.

Source: Economic Survey of India 2016-17

The fact that the Indian state started redistribution at an early stage of economic development when the state capacity was not high, explains why it fails to provide basic services to its citizens.

Kapur further suggests 4 distinct ways in which the precociousness of the Indian democracy has led to the heterogeneous performance of the Indian state:

  1. When a country, like India, transitions to democracy prior to economic development, then the pressures of redistribution is very high on the state. India started redistribution before setting up mechanisms for public good provisioning. This redistribution started when the state capacity was weak. The western democracies first started with industrialization, that was followed by public good provisioning (like health and education) and later it started redistribution through a welfare state that was built on the foundations of strong public good provisioning. The Indian state is precocious in the sense that it redistributes in the absence of a strong public good provisioning infrastructure and while taxing less.

Kapur further elaborates,

By not providing public goods before shifting to redistribution, the Indian state weakened the legitimacy and trust to create a virtuous circle that could strengthen the social contract between citizens and the state. This has led to ‘exit’ (in the sense of Hirschman 1970) of India’s middle class. Feeling that it has not received enough from the state by way of public goods, the Indian middle class exits in favor of private provisions and is also reluctant to pay taxes.”

2) A democracy with multiple social cleavages tend to provide narrow club goods to a target population rather than providing broad based social services to all. Club goods are the public goods that have excludability characteristics (people can be excluded from accessing some public goods). In Indian electoral politics which is highly competitive, the politicians tend to provide certain public goods only to a small group of people or they target public provisioning only to a certain set of individuals (example Ujjawala scheme).  Since this targeted approach excludes other sections of the society, this also leads to exit of middle and upper class who favor private services provided by market rather than depending on the slow and tardy government services that often lack quality.

3) The political class in India tends to favor signaling syndrome. The politicians will tend to emphasize the provision of goods that are visible and can be provided quickly, infrastructure, over long term investments like human capital.”

This politics of visibility and signaling harms the broad based public provisioning of basic services. A prime example of this is the sanitation policies of India that has led to toilet construction but usage is a tricky part to solve.

4) In India the societal failures are reflected in the state failures and its inability to provide welfare to its citizens. Over the past 70 years the Indian state has been able to provide hard goods such as roads, electrification and basic infrastructure. But it has failed to provide sanitation, women protection and address child malnutrition since these are difficult to provide without out maneuvering regressive societal norms of notions of purity, patriarchy and status of women in households respectively. The policies in India are being framed by the elites who are far removed from the actual realities of India’s social cleavages. Also there are no incentives for these policy makers to break these societal norms that are holding back social progress. Not addressing these sticky and behavioral issues has resulted in negative outcomes such as manual scavenging, violence against women and child malnutrition which is worse than some of the sub-Sahara African countries.

Kapur, very emphatically writes about the Indian state,

It is better at building schools and giving bicycles to improve girls’ enrollment than at improving educational outcomes because what happens within the classrooms is affected by caste and gender norms. India’s state is even less effective in improving worrisome sex ratios, declining female labor force participation or generalized societal violence against women all of which are rooted to varying degrees in social norms.”

The essay ends with a set of recommendations that are familiar to those who have engaged with Devesh Kapur’s early writing on public institutions.

The capacity of the frontline implementation institutions needs to be enhanced in order to bridge the last mile delivery gap in provisioning of basic services. The Indian state has done a reasonably good job in converting inputs into outputs. It has to invest in building capacity of its institutions to covert those outputs into outcomes (building toilets should lead to usage of toilets, hence improving sanitation and health outcomes).

Kapur concludes,

While technology has sharply reduced the transaction costs of obtaining services, it does not by itself get water into a house or sewerage out of it or treat it before discharge. For all of these India will need a more effective state, one that is better resourced especially at the local level and whose accountability is more ‘downward’ directed towards citizens, rather than ‘upward’ directed towards the state level bureaucracy and politicians.”  

This was first published here.

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