1. 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

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

3. 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).

4. 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

5. 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
Another study by Mundle et al (2012) brings out an inter-State comparison of how the Indian States performed on governance front

6. 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.

7. 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).

8. 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).

9. 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).

10. 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).

11. 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).

12. 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).

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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.

21. 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.

22. References
Bae, Suho., 2012, The Effects of Economic Performance on Infrastructure Spending at the State and Local Levels, World Political Science Review, Volume 8, Issue 1, pp
Bibek Debroy and Laveesh Bhandari (2013), The State of States: The Best Performing States of India, India Today, December 30, 2013 (p 38-62)
Bibek Debroy and Laveesh Bhandari (2012), The State of States: The Best Performing States of India, India Today, December , 2012
Claderon, C and L Serven, 2004, The Effects of Infrastructure Development on Growth and Income Distribution, Working Paper No. 270, Central Bank of Chile, Chile
Dash, L. N., 2007, Economics of Infrastructure: Growth and Development, Regal Publications, New Delhi
De, Prabir, 2012, Does Governance Matter for Infrastructure Development? Empirical Evidence from Asia, Journal of Infrastructure Development, Volume 4, No. 2, pp
Estache, A. and G Garsous, 2012, The impact of infrastructure on economic growth in developing countries, IFC Economic Notes No. 1, International Finance Corporation, Washington DC
Kim, Byongyuki, 2006, Infrastructure Development for Economic Development in Developing Countries: Lessons from Korea and Japan, GSICS Working Paper 11, Kobe University, Japan
Mundle, S., P. Chakrabaorty, S. Chowdhury and S Sikdar, 2012, The Quality of Governance: How have Indian States Performed, Economic and Political Weekly of India, Vol XLVII, No. 49, pp 41-51
Purie, Arun 2012, India Today: State of the States 2012, India Today, New Delhi