No. 22

July, 2016

Human Development in : the role of fiscal policy and governance1

NIPFP team: N R Bhanumurthy, HK Amar Nath, Manish Prasad, Shiney Chakraborty and Richa Jain Email for correspondence: [email protected]

In spite of massive economic growth, Madhya Pradesh has been Health achievements are found to be better in 16 districts in spite of classified as ‘off-track’ in most of the Millennium Development Goals lower per capita expenditures. The districts are Katni, , Seo- (MDGs) along with a wide divergence between the growth and hu- ni, Harda, Sehore, , Mandsour, Khargone, Rajgarh, Morena, Dhar, man development indicators across different districts within the state. Bhind, , Betul, and .

Divergences in Human development Achievements Five districts are lagging behind in health outcomes in spite of higher per capita expenditures. The districts are Shahdol, Sagar, , Rewa and At the district level, Dindori, Sidhi, Singrauli, Panna, Umaria are Raisen. Other 21 districts are lagging behind in health outcomes due to at the bottommost and , Bhopal, , Hoshangabad, lower expenditures and other reasons. Gwalior are the topmost districts in human development achieve- ments. Human development is not only dependent on public ex- These trends could suggest that public expenditure alone may not result penditure, but also on other factors such as governance. For ex- in better human development outcomes. Sectoral public expenditure ample the public expenditure on health and health achievements, could be just a necessary condition and may not be sufficient enough many districts are performing better in spite of lower expenditures to bring improvements in human development outcomes. In addition to and some are lagging behind even though expenditures are higher. public expenditure, other factors such as governance could also influence the human development.

Level of Achievements in Human Development(%) Divergences in Governance Index

Governance is analyzed through five broad dimensions viz. political, legal & judicial, administrative, economic and social (including environment). 100 90 Various indicators influencing these dimensions have been used to con- 80 struct an index for each of these dimensions and by aggregating all these 70 6050.2 dimensions, District Governance Index is constructed. It is found that there 50 88.4 40 are huge variations across the districts in each of these dimensions. There 30 are some districts, lagging behind in all the dimensions of the governance. 20 64.4 10 0 I I I I I L L S R R R R R A A A A D D H H • Five districts (Satna, Alirajpur, Anuppur, Mandla and Rewa) with I R R H H AT AR RA UR UR UA TN IA ON SH A PU DO PU PU TN BA RD GA PU DH AR RP HORE NNA GH AG

RAUL poor human development achievements need to focus on all the KA GUNA REWA SE DATI BETU DHAR AJ AR SI BHIN SA SA UP AH HA GA RAISEN DEWA EO AJAP INDORE IVPURI SE JHAB ANDW TA DAMO BHOPAL VIDI IR PA RATLAM ARGONE DINDOR MANDLA NG NDWA GWALIO SH MORENA BARWAN RAJGAR AN UM JABALPUR SH AN five dimensions of the governance. SH NEEMUC SH AL SI BALA KH HA KAMG KH HI HOKN SH BURHAN TI CH AS CH NARSIMHAPU HO • Some districts (Dindori, Singrauli, Umaria, Katni and Jhabua) are performing poorly in four of the five governance dimensions with administrative, social and economic dimensions being common among the four districts. Source: NIPFP-UNICEF (2016), Madhya Pradesh State MDG Report: 2014-15 • Among the governance dimensions weak administrative index is the main logjam in improving the human development outcomes in less developed districts.

1This One pager is an outcome of the detailed technical analysis, “Divergences in Human Development Outcomes in Madhya Pradesh: The role of Fiscal Policy and Governance”, carried out at NIPFP, New with the financial support from UNICEF, Bhopal. Governance, Public expenditure and Human development Achieve- • The prioritization of specific dimensions of governance should help ment linkages in reducing the divergences in developmental outcomes across the districts. • In spite of lower per capita expenditure, the districts such as Burhan- pur, Ujjain, Hoshangabad and Indore are performing better in hu- • Overall development of infrastructure like expansion of rural roads man development due to better administrative index. and improving telecommunications could increase the usage of health and education facilities. More access leads to better human • The districts with lower human development achievements need to development outcomes. prioritize only in one or two dimensions of governance particularly administrative index. In Madhya Pradesh, at the district level efficiency of human development • The districts such as Neemuch, Dewas and Jabalpur have better expenditure could be improved by improving governance. In understand- human development outcomes due to both better governance in- ing what determines performance in education sector, only per capita dex and higher per capita human development expenditure. district domestic product was found to be significant. However, in case of • On such linkages, an increase in the expansion of rural road under health outcomes, public spending along with governance was found to Pradhan Mantri Gram Sadak Yojana could lead to an increase in be significant in achieving health outcomes. institutional delivery, thereby, improving health outcomes such as Infant Mortality Rate and Maternal Mortality Rate. Thus, it suggests that at the district level, Madhya Pradesh government should focus not only on increasing public spending, but also on improv- ing the quality of governance that could enhance the efficiency of public expenditure.

Prioritization of Governance and Public Expenditure in Madhya Pradesh Betul Rewa Katni Guna Dhar Datia Sagar Seoni Satna Bhind Harda Ujjain Panna Raisen Dewas Jhabua Sindhi Sehore Ratlam Bhopal Indore Rajgarh Damoh Umaria Mandla Morena Barwani Shivpuri Gwalior Shahdol Sheopur Dindori Jabalpur Shajapur Anuppur Singrauli Alirajpur Khandwa Neemuch Khargone Mandsaur Burhanpur Tikamgarh Chhatarpur Ashoknagar Chhindwara Narsimhapur

Political Index Legal and Judicial Index Administrative Index Hoshangabad Economic Index Social Index Per capita Human development expenditure

Note: Districts are arranged in ascending order based on MDG achievement index taken from NIPFP-UNICEF report, 2016

Impact of PMGSY on Rural Institutional Deliveries in Madhya Pradesh References: 600 DARPP. (2009), State of Governance- A Framework for Assessment. New 500 Delhi: Department of Administrative Reforms, Public Grievances and Pensions, Government of . 400 NIPFP-UNICEF. (2016), Madhya Pradesh State MDG Report 2014-15. New Delhi: National Institute of Public Finance and Policy. 300 Raikumar, A.S. and Swaroop, V. (2008), “Public spending and outcomes: Does governance matter?” Journal of Development Economics, 86(96– 200 111) Rural institutional deliveries institutional Rural 100 0 0 105 1520 25 30 35 40 45 PMGSY (length of road works per 100 square km) (2000-14)

Click & National Institute of Public Finance and Policy. New Delhi, India. Email: [email protected] URL: www.nipfp.org.in comment