Assessing Infrastructure Performance of Indian States 20th Thinkers and Writers Forum of Skoch Summit June 22, 2014 Assessing Infrastructure Performance of Indian States Ramakrishna Nallathiga Associate Professor NICMAR - Pune

Structure Introduction The Study Quadrant Analysis of Performance Framework Methodology Quadrant Analysis of Performance Performance Ranking of States Correlation Analysis Conclusions References

Introduction Infrastructure provides the necessary services that support economic growth by increasing the productivity of labours and capital, thereby reducing the costs of production and raising profitability, production, income and employment. Cross-country empirical studies of infrastructure development impact clearly indicate that the level and quality of infrastructure contributes to economic growth and promotes more equitable development through access to the poor (Claderon and Serven 2004). This is further asserted by recent studies e.g., Estache and Garsous (2012). Infrastructure development has been one of the key driver of economic development in Asian economies like Japan and Korea (Kim 2006).

Introduction Some cross-country studies also point to the importance of good/effective governance in overall infrastructure development (De 2012). Extensive and efficient infrastructure is critical for ensuring the effective functioning of any economy – national, sub-national as well as regional. However, the development of infrastructure and its growth depend upon the peculiar priorities as well as the performance of the State governments in a federal structure of government such as that of India Therefore, as assessment of infrastructure performance of Indian States holds importance

Study Framework The study made an attempt to assess the performance of Indian States on infrastructure through a study using the framework of inter-State analysis Here, only ‘Developable /Constructible Infrastructure’ is examined covering the categories of: Power, Roads, Railways, Posts, Telecom and Banking. The inter-State analysis of development performance was first brought out under the State of States survey carried out by Bibek Debroy and Laveesh Bhandari during the years 2010-2013 Another study by Mundle et al (2012) brings out an inter-State comparison of how the Indian States performed on governance front

Study Methodology  The study has drawn a sample of 15 Indian States and compiled secondary data on the six infrastructure categories viz., roads, railways, power, postal services, telecom and banking, over a time period of 15 years covering two observations (1995/96 and 2005/06). The study sample includes: Andhra Pradesh, Karnataka, Punjab, Assam, Kerala, Rajasthan, Bihar, Madhya Pradesh, Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, Haryana, Orissa, West Bengal The infrastructure performance of the States has been analysed first using levels and growth data i.e., showcasing better/poor performers by comparing with group average. ‘Quadrant analysis’ has been done to imply the comparative status of the States. The assessment of Infrastructure performance of the States was done later with reference to each infrastructure categories through the ranking of States in terms of levels and growth performance.

Quadrant Analysis of Infrastructure Performance of the States Performance Summary Power Sector The States of Maharashtra, Tamil Nadu, Andhra Pradesh and West Bengal are out-performers (top right quadrant of figure). A good number of States are poor performers (bottom left quadrant of figure).  Karnataka and Gujarat have above average power generation but growth rate is below average (bottom right quadrant). Rajasthan, Orissa and Uttar Pradesh achieve well above average growth rates but below average generation levels (top left quadrant).

Quadrant Analysis of Infrastructure Performance of the States Performance Summary Roads Sector Maharashtra, Andhra Pradesh Orissa and Uttar Pradesh are out-performers (top right quadrant). Bihar, Haryana, Rajasthan and Punjab - are poor performers (bottom left quadrant). Karnataka, Kerala and Madhya Pradesh achieve above average road formation but their growth rate is below average (top left quadrant). Tamil Nadu, Assam, Gujarat and West Bengal achieve below average growth rates but above average levels of road length (bottom right quadrant).

Quadrant Analysis of Infrastructure Performance of the States Railways Sector Performance Summary Maharashtra, Karnataka, Andhra Pradesh, Gujarat, Rajasthan, Uttar Pradesh and Tamil Nadu are out-performers (top right quadrant). Assam and Bihar are the poor performers (bottom left quadrant). Haryana, Orissa, Kerala, Punjab and West Bengal - achieve above average growth rate but below average railway line formation (top left quadrant). Only Madhya Pradesh achieved well below average growth rate but above average level of railway line (bottom right quadrant).

Quadrant Analysis of Infrastructure Performance of the States Performance Summary Postal Services Orissa, Tamil Nadu and Madhya Pradesh are out-performers (top right quadrant). Assam, Haryana, Maharashtra, Punjab, Uttar Pradesh and West Bengal are poor performers (bottom left quadrant).  AndhraPradesh, Gujarat, Karnataka, Rajasthan achieve above average level of postal services level but well below average growth rate (bottom right quadrant). Only Bihar and Orissa achieve above average growth but below average service levels (top left quadrant).

Quadrant Analysis of Infrastructure Performance of the States Performance Summary Telecom Services Gujarat, Tamil Nadu and Orissa are out-performers (top right quadrant). Maharashtra, West Bengal and Uttar Pradesh are poor performers (bottom left quadrant). Assam, Bihar, Haryana, Kerala and Punjab achieve above average growth rate but below average services (top left quadrant). AndhraPradesh, Karnataka, Madhya Pradesh and Rajasthan achieved below average growth rate but above average level of telecom services (bottom right quadrant).

Quadrant Analysis of Infrastructure Performance of the States Banking Services Performance Summary AndhraPradesh, Haryana, Karnataka, Kerala, Punjab and Tamil Nadu outperformed (top right quadrant). Assam, Bihar, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Uttar Pradesh and West Bengal are poor performers (bottom left quadrant). There is no State with above average growth rate but below average level of banking services (top left quadrant). Only Gujarat achieved below average growth rate but is above average level of banking services (bottom right quadrant).

Performance Ranking of the States and Correlation Analysis Summary Power Sector Gujarat has more or less maintained its top ranking, Maharashtra, Andhra Pradesh, Tamil Nadu, Rajasthan and West Bengal have improved their ranking during the period. Assam, Bihar, Madhya Pradesh, Haryana and Kerala went down in terms of ranking. Andhra Pradesh, West Bengal, Rajasthan and Maharashtra have achieved top ranking in terms of growth performance Madhya Pradesh, Haryana, Assam and Bihar have failed in terms of growth performance. Rank correlation analysis of power generation levels and growth indicates a strong correlation (Cr = 0.75), implying that larger capacity addition leads to higher growth. The correlation analysis between levels indicates that both of them are not related positively and significantly (Cr=-0.06) implying the importance of capacity addition. State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 15 3 1 Assam 9 14 Bihar 10 Gujarat 2 8 Haryana 6 12 Karnataka Kerala 13 Madhya Pradesh 4 11 Maharashtra 7 5 Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal

Performance Ranking of the States and Correlation Analysis Summary Roads sector Maharashtra and Uttar Pradesh maintained top rankings, AndhraPradesh, Orissa, Gujarat, Karnataka and West Bengal have improved their ranking. Bihar, Haryana and Punjab went down in terms of ranking (with Assam remaining at same rank) as they appear to have not focused on this sector Gujarat, Andhra Pradesh, West Bengal, Assam and Uttar Pradesh have achieved top rankings in terms of growth performance in roads sector. Kerala, Rajasthan, Haryana, Bihar and Tamil Nadu have failed in terms of growth performance. Rank correlation analysis of road length levels and growth indicate a strong correlation between them (Cr = 0.73), implying that larger network creation leads to higher growth. The correlation analysis of levels indicates that both of them are related positively but not significantly (Cr=0.27), implying again the importance of new projects State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 7 4 3 Assam 12 Bihar 10 13 14 Gujarat 11 9 1 Haryana 15 Karnataka 8 Kerala 6 Madhya Pradesh 5 Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh 2 West Bengal

Performance Ranking of the States and Correlation Analysis Summary Railways Sector Uttar Pradesh, Rajasthan, Maharashtra and Gujarat maintained their top rankings, West Bengal and Andhra Pradesh improved ranking. Punjab, Orissa, Kerala and Haryana remained at bottom in terms of ranking and appear to have lost opportunity to create better connectivity. Gujarat, West Bengal, Andhra Pradesh, Assam and Uttar Pradesh have achieved top rankings in terms of growth performance in railways sector. Kerala, Rajasthan, Haryana, Bihar and Tamil Nadu have failed in terms of growth performance. Rank correlation analysis of railway length levels and growth indicate negative and weak relation between them (Cr=-0.33), implying that larger network is a barrier to higher growth (via a lower bargain/lobbying power to States). The correlation analysis between levels indicates that both of them are related positively and strongly correlated (Cr = 0.92), implying ‘legacy’ rather than new projects holds key to performance State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 7 4 3 Assam 12 Bihar 10 13 14 Gujarat 11 9 1 Haryana 15 Karnataka 8 Kerala 6 Madhya Pradesh 5 Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh 2 West Bengal

Performance Ranking of the States and Correlation Analysis Postal Sector Summary Orissa, Andhra Pradesh, Tamil Nadu and Karnataka have maintained their top rankings, the States of Bihar and Madhya Pradesh have improved their ranking. Haryana, Maharashtra, Uttar Pradesh and West Bengal remained at bottom in terms of ranking Madhya Pradesh and Bihar achieved top rankings in terms of growth performance. Uttar Pradesh, Gujarat, Rajasthan and Haryana failed in terms of growth to remain at bottom. Rank correlation analysis of post office levels and growth indicate positive and weak relation between them (Cr=0.29), implying that larger network may or may not lead to higher growth, which is the case of postal services that faces competition from private. The correlation analysis indicates that both of them are related positively and strongly (Cr = 0.9). It implies that ‘stagnation’ or ‘decline’ in postal services that is barrier to performance. State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 1 2 8 Assam 9 7 Bihar 14 11 Gujarat 6 13 Haryana 15 Karnataka 5 4 Kerala 3 Madhya Pradesh Maharashtra 12 10 Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal

Performance Ranking of the States and Correlation Analysis SUMMARY Telecom Sector Karnataka, Rajasthan and Madhya Pradesh maintained top rankings, while Orissa, Kerala, Andhra Pradesh, Gujarat and Tamil Nadu improved Assam, Bihar, Haryana and Punjab remained at bottom Assam, Orissa, Kerala, Bihar and Punjab achieved top rankings in terms of growth performance West Bengal, Karnataka Madhya Pradesh, Uttar Pradesh and Maharashtra failed to grow to be at bottom Rank correlation analysis of telephone exchange levels and growth indicate positive but weak relation between them (Cr=0.17), implying that larger exchange base may or not lead to higher growth, which is the case of telecom services facing competition from mobile telephony The levels correlation analysis indicates that both of them are related positive but weak (Cr = 0.03). It implies that expansion of telecom service is not dependent upon/ constrained by ‘level at begin’. State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 5 2 Assam 15 3 Bihar 11 12 13 Gujarat 8 1 Haryana 14 Karnataka 4 6 Kerala Madhya Pradesh Maharashtra Orissa 7 Punjab 9 10 Rajasthan Tamil Nadu Uttar Pradesh West Bengal

Performance Ranking of the States and Correlation Analysis SUMMARY Banking Sector Punjab, Kerala, Karnataka, Tamil Nadu and Haryana have maintained their top rankings, Andhra Pradesh, Uttar Pradesh and West Bengal have improved their ranking during the period. Assam, Bihar, Uttar Pradesh and West Bengal remained at the bottom in terms of ranking. Kerala, Haryana, Punjab, Tamil Nadu and Andhra Pradesh achieved top rankings in terms of growth performance by registering lower decline Assam, Bihar, Gujarat and Madhya Pradesh have registered a greater decline in bank branches thereby remained at the bottom. Rank correlation analysis of banking levels and growth indicate strong and positive relation between them (Cr=0.82), which implies that larger network leads to higher growth (or, lower decline), which appears to be due to the effect of presence reinforcing more patronage. The levels correlation analysis indicates that both of them are indeed related positively and strongly correlated (Cr = 0.94). It implies that there has been an onset of ‘stagnation’ in banking services due to the restructuring among them State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 7 6 2 Assam 15 14 12 Bihar Gujarat 4 13 Haryana 5 Karnataka 3 Kerala 1 Madhya Pradesh 11 Maharashtra 8 Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh 10 West Bengal

Overall Ranking and Conclusions State Level Rank (1990/91) (2005/06) Growth rank Andhra Pradesh 8 1 Assam 15 9 Bihar 13 14 Gujarat 4 7 Haryana Karnataka 2 5 11 Kerala Madhya Pradesh Maharashtra 3 6 Orissa Punjab 10 Rajasthan Tamil Nadu Uttar Pradesh West Bengal 12

Conclusions Karnataka, Tamil Nadu and Gujarat have maintained their top rankings at two different time periods, while Andhra Pradesh and Orissa have improved their rankings significantly to reach top positions. Andhra Pradesh, in particular, has moved up by 7 ranks to become overall ranked 1 on infrastructure, which is a big achievement. Rajasthan Kerala and Punjab have performed modestly with their rankings remaining more or less constant during the period. Further, the States of Maharashtra and Uttar Pradesh, which were good in rankings at begin, slipped down to become the States of modest performance.

Conclusions The States of Assam, Bihar, Haryana and West Bengal remained at the bottom in terms of ranking.  It can also be seen that Andhra Pradesh and Orissa have top ranked in terms of growth performance, followed by Kerala, Tamil Nadu and West Bengal. Modest growth performance on overall infrastructure has been shown by the States of Punjab, Assam, Maharashtra, Gujarat, Haryana and Rajasthan. The States of Karnataka, Madhya Pradesh, Uttar Pradesh and Bihar have achieved bottom rankings by showing lower growth performance.

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