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2022 | Book

Persistent and Emerging Challenges to Development

Insights for Policy-Making in India

Editors: Dr. Supravat Bagli, Dr. Gagari Chakrabarti, Dr. Prithviraj Guha

Publisher: Springer Nature Singapore

Book Series : India Studies in Business and Economics

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About this book

This book covers a wide range of the issues in development studies. Recognizing the existence of manifold challenges in achieving and sustaining economic development, it is divided into four sections—(i) The Macroeconomy: Foreign Trade, Structural Transition and the Environment, (ii) Health and Standard of Living, (iii) Education, Human Capital and Evolution of the Employment Quality in India, and (iv) Banking and Credit: Access, Efficiency and Stability. The book brings together a right mix of senior and young economists who use cutting edge econometric techniques and/ or revisit a perennial question with much sharper focus and tools to unravel insights that are important and will inform tomorrow’s theorisation and policy making. The volume looks at important questions like spatial concentration of low infant and child health outcomes, trade liberalisation and export quality, intergenerational occupational mobility, multidimensional poverty incidence in rural India, robustness of the banking sector, to name a few. To do so, the contributions use novel and esoteric methods like machine learning, spatial econometrics, system GMM, quintile regression and counterfactual decomposition (QRCD), and so on. The rich collection holds importance for researchers and policy makers alike, and also for practitioners working in different developmental sectors..

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
This chapter provides the strong points behind the further analysis of some selected persistent and emerging challenges to the development for policy-making in India, main corpus of this book. Initially, we illustrate the current situation of Indian economy and the policy paralysis in the context of macroeconomic perspectives, MDGs and SDGs. In the next step, the issues along with its root problems and corresponding way forward covered in this book have been summarised. Finally, we conclude the chapter mentioning the utility of the analysis and discussion on the selected persistent and emerging issues for policy-making in India.
Supravat Bagli, Gagari Chakrabarti, Prithviraj Guha

The Macroeconomy: Foreign Trade, Structural Transition and the Environment

Frontmatter
Chapter 2. Asymmetric Quality Effect of Input Trade Liberalization
Abstract
Restrictive trade policies pursued by the developing countries are often regarded as a major reason for the low quality of goods produced by them that adversely affect their merchandise export growth to the developed countries. The IMF data however suggests that variations in quality indices have not only been non-monotonic but also asymmetric across different products. This paper offers a plausible theoretical explanation for such asymmetric quality variations by examining the impact of input tariff liberalization when quality upgrading requires more of domestic factors as well as imported inputs. We show that a reduction of tariff on the input that is directly used to produce the quality-differentiated export good will induce quality upgrading only when higher qualities are relatively more intensive in imported input than skilled labour. If tariff on the input that is used in production of homogenous traded goods is lowered, on the other hand, export quality would be upgraded for those exports whose higher qualities are more intensive in skilled labour than capital. Improvement in quality of the export good, if at all, may also raise the value of such exports, despite a fall in volume of exports, under reasonable conditions.
Shrimoyee Ganguly, Rajat Acharyya
Chapter 3. Informal Sector in India: A Critique of Inclusive Transition
Abstract
The objective of the study is to explain the puzzle of the non-transition of the vast informal sector in India. To this end, we argue that such a non-transition of the informality and, hence, a lack of structural transformation of the overall economy itself develop the symptoms like the dual phenomena of high rates of growth in the formal sectors along with a persistence of the informality. In explaining these intriguingly dichotomous phenomena, we have hypothesised that there are dualities within the informality across its rural/traditional and urban/modern segments. While the urban segment bears a complementary relation with the formal sector, the rural counterpart is engaged in a bitter resource conflict with the former. Agriculture is considered as the proxy for the overall resource base (water–forest–land–mines–space) outside the circuits of formal–informal sectors. Since growth of traditional agriculture-linked modern informal segment needs to be sustained for maintaining the growth of the formality, the formality cannot go on grabbing these resources and grow beyond an optimum rate. Consequently, the formal sector itself does not want to transform the formal–informal composite towards comprehensive capitalism. Our empirical exercise supports this argument showing the inherent conflicts and complementarities between formal–informal segments through the lens of expropriation of agricultural resources.
Anirban Kundu, Saumya Chakrabarti
Chapter 4. An Analysis of the Medical Devices Sector in India—Domestic Manufacturing and International Trade
Abstract
In the Indian context, while a lot has been spoken and written about the success of the biotechnology and pharmaceuticals sectors, the medical devices sector has remained completely in the shadows, both in the academic literature as well as in the policy domain. With an increasing burden of non-communicable diseases, the management of which depends more on diagnosis and monitoring than on cure, and medical devices have become even more indispensable in the modern-day treatment process. Increased diffusion of technology followed by the access to the same remains contingent on domestic production capabilities as well as participation of the country in international exchange. Dependence on imports from MNCs can potentially inflate the healthcare costs—this can have catastrophic impacts in India where health care is mainly financed through out-of-pocket expenditure. Thus, increased access to technology should come from domestic manufacture. This paper, in this context, tries to study the multi-product medical devices sector in India. The focus is on local manufacture and international trade. We find that manufacture of medical devices remains mostly an activity that lacks coherent definition. The local sector remains primarily occupied with producing low-value, low-technology and high-value products, while imports supply most of the market for high value, high technology and low volume. The attempt of the domestic sector to move up the technology value chain in the last two decades, even though significant, remains incomplete. Such import dependence in a sector like health care is not desirable and can stifle technology diffusion among the masses. In such a scenario, it becomes imperative for the government to promote self-sufficiency in this sector through targeted policies in a manner similar to what was done for the pharma sector in the period 1970 onwards.
Saumaly Ghosh
Chapter 5. Impact of Climate Change on Agriculture: Empirical Evidence from South Asian Countries
Abstract
Human-induced climate change is occurring at a fast rate, and agriculture, for its greater dependence on nature, is the most vulnerable sector to climate change. The rate of global warming has increased, and among the greenhouse gases, carbon dioxide is mainly responsible for this. It is projected that climate change may adversely affect global food security in this century. South Asia accommodated nearly half (48%) of the World's multidimensional poverty in 2017, and any adverse impact on agriculture will hurt South Asian countries very badly. Among eight South Asian countries, Bangladesh, India, Nepal, Pakistan, and Sri Lanka together have nearly 99% share of total GDP and 97.8% of the total population of South Asia in 2018. This study attempts to find out the evidence of the impact of climate change on agriculture in South Asia and five selected countries mentioned above based on data collected from the central database of the World Bank for the period of 1960 to 2016. We begin by assuming that CO2 can affect the agricultural value-added and examine whether there is any equilibrium long-run relationship among value added by agriculture, CO2 emissions, land under cultivation of cereal crops, and rainfall using the ARDL bounds test and error correction model. We do not find any evidence of the adverse impact of climate change on agriculture in South Asia and five selected countries.
Bipradas Rit

Health and Standard of Living

Frontmatter
Chapter 6. Hurdles in Fuel Choice and Consumption in Rural India
Abstract
This chapter investigates hurdles in fuel choice and identifies stage-based socio-economic determinants at household level in rural India. Using NSSO data, this chapter estimates double hurdle model. Firewood consumption decision is based on two stage decision: (i) whether households participate on firewood consumption; and (ii) amount of firewood consumption, if participate. Empirical findings indicate that income significantly determines quantity consumption, not firewood choice decision. Firewood consumption declines with increasing education level of household head, while women-headed households consume relatively less firewood compared to that of men.
Sanchita Daripa, Soumyananda Dinda
Chapter 7. Explaining Cross-Region Disparities in Childhood Stunting in India
Abstract
In the present study, we have tried to explore the drivers of the large disparities in childhood stunting (height-for-age Z scores distributions) among different regions of India. We compared the regions with relatively poor height-for-age Z scores (HAZ) by keeping the best performer southern region as benchmark and employed unconditional quantile regression (recentred influence function regression per se) and counterfactual decomposition (QR-CD in short) methods using unit level fourth round data of National Family Health Survey (NFHS). Results indicated that covariate effects (endowments) and coefficient effects (returns to endowments) vary across regions and quantiles when compared to the benchmark region. It has been observed that HAZ disparities are primarily attributable to the differences in returns to endowments, while endowments try to reduce such disparities when southern region is compared with the northern region. However, magnitude of the differences varies across quantiles. On the contrary, both covariate and coefficient effects have significantly increased the disparities in HAZ outcomes when southern region was compared with the central region. It was also noted that covariate effects dominate over coefficient effect with different magnitudes in various quantiles.
Saswata Ghosh, Santosh Kumar Sharma, Dripta Roy Choudhury
Chapter 8. How Long We Will Wait to Celebrate the First Birthday of Infants in India?
Abstract
The objective of the study is to examine inter-state variations in infant mortality rate (IMR) in India and identify possible state-level factors that are responsible for the observed inter-state differences in IMR. Although there has been a decrease in IMR in India, it is still above the Millennium Development Goal of 27 per thousand live births. India at present has an IMR of 33 per 1000 live births. In particular, the slow pace of decline in a few states and a striking difference in rural and urban IMR are some of the concerns of policymakers. A state-wise analysis of IMR for the period 2005–2018 reveals that although there has been reduction in rural–urban gap, states like Assam, Madhya Pradesh, and Rajasthan are lagging the all India average. Panel data analysis, for 21 major states, reveals that per capita income, urbanization, female literacy, per capita availability of milk, and immunization are the significant macro-determinants of IMR of Indian states. Although states have introduced several policies like Kanyashree Prakalpa (West Bengal), Karunya Health Scheme (Kerala) to address issues like female education, health security, an integrated and holistic approach is required for all lagging states to ensure an improvement in infant mortality indicators.
Dishari Dasgupta, Krittika Dirghangi, Sankha Mitra, Subangi Saha, Mousumi Dutta
Chapter 9. Incidence of Wasted Pregnancy and Health Facilities: An Empirical Study of the Indian Women
Abstract
This chapter assesses the effects of antenatal care along with choice of the place of delivery, reported physical health condition and the incidence of anemia of mother on incidence of wasted pregnancy for Indian women. We also examine the socioeconomic–demographic factors affecting the access to health care and the health condition of the expecting mothers. Using the dataset from IHDS-II (2011–12), a logit regression has been estimated for assessing the effects of access to healthcare facilities along with the reported physical health condition of mothers on incidence of wasted pregnancy. The study has applied binary logit model for estimating the incidence of anemia and antenatal care and multinomial logit model for estimating choice of the place of delivery and reported health condition of the women as a function of selected socioeconomic–demographic factors. We find that access to antenatal care and access to hospital for delivery place significantly reduce the probability of wasted pregnancy. Incidence of anemia and reported poor physical health increases the risk of wasted pregnancy in India. Backward classes and Dalits have a major disadvantage in respect of both physical health and healthcare utilization. Place of residence, age at marriage, per capita income, education and media exposure of women are important for getting access to healthcare facilities which are instrumental for reducing wasted pregnancy.
Supravat Bagli, Debanjali Ghosh
Chapter 10. Analysis of Quality of Living Data of Households of Indian Districts Using Machine Learning Approach of Fuzzy C-Means Clustering
Abstract
Machine learning is used to analyse the 2011 census data of physical amenities and educational levels of Indian households in order to cluster and categorize Indian districts based on living standards and educational attainment. Household-level data on amenities such as electric lighting, television, mobile, car/scooter ownership; kitchen, toilet, bathing facilities and home ownership of families; as well as educational levels are used for 640 Indian districts, each consisting of 26 parameters (i.e. attributes). This makes the data set fairly large and complex for a clustering problem, and in order to preserve data granularity, fuzzy C-means (FCM) clustering algorithm has been chosen for analysis. The features of the algorithm are briefly presented. The analysis considers 4–10 clusters for the data set. The quality of clustering with larger clusters is discussed with appropriate indices. The results of computation yield the correlation between the variables which allow us to look at the relationships between them. The results also yield the classification of districts in a scale ‘well-off’ to ‘disadvantaged’ for various levels of clustering and show how the number of districts for each variable changes with the number of clusters. It is argued that these results can be used to orient investment plans for various sectors such as education and housing and establish ease-of-living ranking indices for districts which, in turn, can establish a rational basis for coordinated development of Indian regional economies.
Supratik Sekhar Bhattacharya
Chapter 11. Multidimensional Poverty in Rural India: An Exploratory Study of Purulia District
Abstract
This paper explores the incidence and intensity of multidimensional poverty in rural India based on a self-designed survey of 700 households during 2018–2019 in Purulia district, a backward-most rural district in West Bengal. Applying the methodology recognized by UNDP for measuring multidimensional poverty index (MPI), this study has reported that thirty nine per cent of the sample households are income poor while thirty seven per cent of the sample households are multidimensionally poor. However, one-fourth of non-income poor are multidimensionally poor, and 60% of the multidimensionally poor are income poor. MPI for Purulia district is 0.161 which is nearly 1.4 times of the MPI for India as a whole in 2018. In Purulia district, the incidence, depth, severity and intensity of income poverty are the highest among the households belonging to tribal community, followed by SCs, OBCs and then general castes. The ranks of the social castes in respect of multidimensional poverty are exactly equivalent as their ranks in income poverty. Among the selected indicators, deprivation of access to improved cooking fuel and deprivation of access to improved sanitation are two leading contributors to the district MPI followed by the indicators, regarding material of residence, suffering from hunger. Therefore, further expansion of infrastructure regarding food security, sanitation facility, affordable housing, access to improved cooking fuel and awareness of the households regarding the importance of these infrastructures are urgent policy recommendation for curbing the incidence and the intensity of multidimensional poverty in Purulia district.
Supravat Bagli, Goutam Tewari

Education, Human Capital and Evolution of the Employment Quality in India

Frontmatter
Chapter 12. Input-Oriented Technical Efficiency and Its Determinants of Primary Education in West Bengal: A District-Level Analysis
Abstract
Considering secondary data of West Bengal’s district-level primary education for 2005–06 to 2013–14, this study measures (i) input-oriented technical efficiency (INPTE) for each sample year, (ii) the extent of inefficiency in different input utilization and (iii) the determinants of INPTE. After first-stage estimation of INPTE, second-stage panel regression for determinant analysis follows, with district-school specific favourable and poor infrastructure, policy variables and district-level macro-indicators representing economic environment, as determinants. Two-output, four-input variable-returns-to-scale framework is used; the net-enrolment ratio and students passed with 60% in examination (in percentage, representing output-quality) as outputs; (i) number of primary schools per lakh population, (ii) teacher–pupil ratio, (iii) classroom–student ratio, (iv) teachers with qualification graduate and above (in percentage, indicating teacher quality) as inputs. Absence of full efficiency, with inter-district variation of INPTE, is evident. High literacy rate and or educational development index may not result in high INPTE. Teacher–pupil ratio and teachers with qualification graduate and above (in percentage) have the highest and the lowest level inefficiency in input utilization. INPTE is influenced significantly and (i) negatively by percentage of single-teacher schools, (ii) positively by percentage of schools having girl’s toilet, percentage of girls getting free textbook to boys and per capita net district domestic product. Policy measures are suggested for improving INPTE.
Amrita Bhanja, Arpita Ghose
Chapter 13. Public Expenditure on Pre-tertiary and Tertiary Education: Effects on Skilled–Unskilled Wage Inequality
Abstract
Due to increased governmental recognition of importance of human capital formation coupled with their egalitarian goal to reduce inequalities, differential public allocation to pre-tertiary (primary and secondary) education and tertiary (higher) education is a pertinent issue. The paper analyses the effects of government subsidy on pre-tertiary and tertiary education, on skilled–unskilled wage gap in the economy. A three-sector full-employment model is set up. There is endogenous skill formation, whereby unskilled and skilled labour supply are determined by intertemporal utility maximizing behaviour of the households. Comparative static analysis indicates that both subsidies on pre-tertiary and tertiary education are beneficial for reducing wage inequality irrespective of the level of skill formation if the low-skill sector is more capital intensive vis-à-vis the high-skill sector. However, if the high-skill sector is more capital intensive, subsidy on tertiary education subsidy may reduce the skilled–unskilled wage inequality only when the skilled labour stock is higher, while pre-tertiary education is likely to be favourable during the period of skill formation only if the returns to education are sufficiently high. The government policies pertaining to public expenditure on education should take into account the relative factor intensity conditions and the level of skill formation in the economy.
Ujjaini Mukhopadhyay
Chapter 14. Not in Education, Employment or Training: Incidence, Determinants and Costs in India
Abstract
An individual is termed as NEET, who is neither employed, nor is (s)he attending any educational institution, nor is (s)he attending any sort of skill developing training. Thus, in a sense, NEET not only includes the currently unemployed population, but also includes the individuals who are more likely than not to be unemployed in the future, since they are not engaged in any productive activity whatsoever. NEET is essentially a measure of complete disengagement from the labor market. This study draws on the NSSO Employment and Unemployment Survey for the years 2004–05 and 2011–12 to firstly find the proportion and the absolute number of NEET in India. Secondly, we consider various socio-economic factors to assess whether they are significant determinants of being NEET using logistic regression models. Finally, we provide an estimate of the total loss in earnings of the individual. For this purpose, we calculate the proportions of NEET from the NSS data, and the total population figures were used using Census 2001 and 2011 data. We found that being a female and being married increase the odds of being a NEET significantly. Apart from this, family affluence, age, education level and socio-religious community of the individual were all found to be significant determinants of NEET. Finally, we found that the total income loss to the NEET was about 2% of GDP in 2004–05 and about 7% in 2011–12.
Somtirtha Sinha, Zakir Husain
Chapter 15. An Exploration into Inter-Generational Occupational Mobility in India: Evidences from IHDS-II
Abstract
The paper analyses the extent and pattern of occupational mobility in India by using data on male population aged 16–65 years from IHDS-II. The mobility analysis is done by constructing various indices like the Absolute Mobility Index, Shorrock-Prais Index and Bartholomew Index. The paper provides explanations for the factors which affect mobility and upward mobility and finds that an individual’s upward mobility is positively correlated with his own education and his household’s asset owners’hip. Furthermore, if the father is from a higher occupation category or if the household size of the individual is large, then there is less chance of mobility or upward mobility. In spite of the fact that occupational mobility in India is sticky, there has been significant mobility and upward mobility if we go from an older generation to a relatively younger generation. We also find that there is significant upward mobility in the east and north zones compared to south and west zones. The backward castes have also recorded higher levels of mobility and upward mobility vis-a-vis the forward castes indicating that they are climbing the occupational ladder.
Prithviraj Guha, Nirban Roy

Banking and Credit: Access, Efficiency and Stability

Frontmatter
Chapter 16. Openness and Potential Fragility of the Global Banking System
Abstract
This study investigates whether risk of bank default intensifies with globalization and what are the driving forces behind such escalation. A balanced panel of sixty-four countries for 1996–2017 is formed, and countries are grouped according to their business freedom, investment freedom and financial freedom rankings. System GMM estimation is employed at different stages of openness to identify whether factors such as efficiency and depth of banking and other financial institutions, market concentration and market power of banks, stock market development, foreign market participation risks, people’s perception of corruption and real GDP per capita could affect such risks. Banks appears less fragile where deregulations come with free investment and business opportunities. Fragility escalates with weaker financial sector interlinkages, ill-managed global market risk and in the absence of factors that could facilitate efficient functioning of banking system. Growth and transparency at governmental level improve bank stability but only in countries that operate at moderate levels of openness, growth and transparency. The study asserts that the efficiency of minimally regulated market may still be maintained if global market risks are managed efficiently. As factors affecting fragility vary with openness, justification for adopting a common system of banking regulations across the globe might be questioned.
Gagari Chakrabarti
Chapter 17. Informal Trade Credit Guarantee Networks
Abstract
Provision of trade credit via networks provides a way for producers in many industries who face uncertain demand to finance production when they are in the need for such thing. The readymade garment manufacturing industry of Metiabruz, Kolkata, is one such industry where the suppliers of input often provide trade credit to producers with whom they have long-term business relationships and belong to their direct trade credit networks. One of the most interesting and unique feature of this industry is that suppliers of input often provide trade credit to producers against guarantees from people they find acceptable in addition to direct provision of trade credit. Guarantors usually belong to input suppliers’ direct networks and produce readymade garments. This paper explores the architecture of trade credit guarantee networks of producers who act as guarantors for each other. This paper considers that the cost of forming a bilateral link is positive and the benefit is frictionless. This paper finds that only cycle-free networks, i.e. star network, tree networks, line networks, etc., are pair-wise stable and efficient.
Jayeeta Deshmukh
Chapter 18. Repeated Lending in Informal Credit Markets with Adverse Selection and Strategic Default
Abstract
The paper shows that in an infinitely repeated lending–borrowing model, where the stage game is characterized by adverse selection, borrowers who do not have access to alternative sources of credit are willing to pay a higher interest rate than those with access to such credit sources. If arbitrage cannot be ruled out, in the pooling equilibrium where some default is an equilibrium outcome, there are two possible equilibria: one with a higher interest rate than the other. It is found that the higher interest rate is paid by borrowers who value their future more identified as forward-looking borrowers, whereas the lower interest rate is paid by myopic borrowers who value their present more than the future. Also the higher interest rate equilibrium will prevail if the proportion of borrowers with greater access to alternative credit sources in the population falls below a critical level, and the lower interest rate equilibrium will prevail if it lies above the critical level. In addition, higher return from any successful venture, lower amounts of loan, higher probability of success of any project, increasing future orientation of the borrowers with greater access to alternative credit sources and lower valuation of future incomes of the lender and borrowers with no alternative credit sources reduce the market interest rate.
Saswatee Mukherjee
Chapter 19. Financial Inclusion in India: An Intertemporal Study
Abstract
The government of India has long focused on financial inclusion as a means of development and the most recent effort is Prime Minister Jan DhanYojana (PMJDY) which has been working since 2014. This chapter analyzes the achievement in financial inclusion of Indian states and union territories during the last decade. Using the data published by RBI in BSR, we compute financial inclusion index (FII) for each sub-national units at three points of times 2011–12, 2014–15, and for 2018–19. FII has been constructed measuring the weighted geometric mean of the indicators covering three dimensions of formal financial system/services—availability, accessibility, and applicability. The weights are derived applying principal component analysis of the indicators of financial inclusion. A cluster analysis has been performed to explore the nature of similarity and dissimilarity of the sub-national units in respect of the indicators of financial inclusion at different time points. The study has found that level of financial inclusion of the sub-national units has low mean but high disparity in 2011–12 which persists even in 2018–19. Most of the southern states have performed relatively better while the north-eastern states lie behind among the states and union territories in India.
Papita Dutta
Metadata
Title
Persistent and Emerging Challenges to Development
Editors
Dr. Supravat Bagli
Dr. Gagari Chakrabarti
Dr. Prithviraj Guha
Copyright Year
2022
Publisher
Springer Nature Singapore
Electronic ISBN
978-981-16-4181-7
Print ISBN
978-981-16-4180-0
DOI
https://doi.org/10.1007/978-981-16-4181-7

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