Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Assessing the Infrastructure Performance of Indian States Ramakrishna Nallathiga Associate Professor, National Institute of Construction Management Research, 25/1, Balewadi, Pune – 411 045 Tel: 040 6685 9146 email: ramanallathiga@yahoo.co.uk 1. 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 clear indicate that the level and quality of infrastructure significantly 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). The experience of Asian economies like Japan and Korea also point to the fact that infrastructure development has been one of the key drivers of economic development in them (Kim 2006). However, 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. 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. 1.1 Study Framework India has been growing extensively in the terms of infrastructure development through the planning and implementation project investments in the five year plans. The eleventh five year plan had set an investment target of 1 trillion. However, some states have grown very fast while some have been sluggish in their infrastructure development, due to various reasons. It is in this context that an attempt has been made to assess the performance of Indian States on infrastructure (here, only ‘Developable Infrastructure1) 1 The categories under this include Power, Roads, Railways, Posts, Telecommunication and Banking. -1- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 through a study using the framework of inter-State analysis. 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. These studies were focussed on the development of States – economic, social and human – but touched upon the importance of infrastructure development in providing effective development. In another study by Mundle et al (2012), the authors bring out an inter-state comparison of how the Indian States performed on governance front. 1.2 Study Methodology The study has drawn a sample of 15 Indian States2 and compiled secondary data on the infrastructure categories viz., roads, railways, power, postal services, telecom and banking, over the time period of 15 years covering two point observations (1995/96 and 2005/06). The secondary data is published records of Bureau of Statistics and Economics. The infrastructure performance of these States has been analysed first using levels data i.e., showcasing better/poor performers by comparing with group average. Subsequently, the growth performance has also been analysed by comparing within the group. For a better presentation, ‘quadrant analysis’ has been done to imply the status of States. The assessment of the Infrastructure performance of the States has been done later with reference to each infrastructure categories through the ranking of States in terms of levels (over two time periods – 1990/91 and 2005/06) and growth performance. Those States that have performed on both counts have further been categorised into – top and bottom performers. The overall assessment of infrastructure performance of States has been done subsequently by aggregating the sector rankings and they have further been categorised into top and bottom overall performers. In this section, we have laid down an introduction to the study by giving background literature, study framework and its methodology. In the next section, we discuss the quadrant analysis of infrastructure performance of sample states. Subsequently, we will discuss the ranking of the performance on levels and growth. Finally, we conclude with a ranking structure based on the above assessment. 2 The sample states include: Andhra Pradesh, Karnataka, Punjab, Assam, Kerala, Rajasthan, Bihar, Madhya Pradesh, Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, Haryana, Orissa, West Bengal -2- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 2. Quadrant Analysis of Infrastructure Performance of the States Throughout the section, quadrant analysis of infrastructure performance of Indian states has been carried out with sector levels and growth rate forming X and Y axes. 2.1 Power Sector Figure 2.1 shows the quadrant analysis of power generation in the States. Among the States, the four States of Maharashtra, Tamil Nadu, Andhra Pradesh and West Bengal have been outperformers in terms of recording above average growth and levels of power generation (top right quadrant of figure). There are a good number of States that are poor performers (bottom left quadrant of figure). Karnataka and Gujarat were able to achieve above average power generation but its growth rate is below average (bottom right quadrant). Further, Rajasthan, Orissa and Uttar Pradesh were able to achieve well above average growth rates but below the average generation levels (top left quadrant). Figure 2.1 Growth Vs Generation of Power in the States 1600.00 Growth in Power Generation (%) 1400.00 1200.00 1000.00 800.00 600.00 400.00 200.00 0.00 -200.00 0 10000 20000 30000 40000 50000 60000 70000 80000 Power Generation (2004-05) -3- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 2.2 Roads Sector Figure 7.2 shows the quadrant analysis of road length in the States. The four States of Maharashtra, Andhra Pradesh Orissa and Uttar Pradesh have been outperformers in terms of recording above average growth and levels of road formation (top right quadrant). A good number of States – Bihar, Haryana, Rajasthan and Punjab - are poor performers (bottom left quadrant). Karnataka, Kerala and Madhya Pradesh were able to achieve above average road formation but their growth rate is below average (top left quadrant). Further, Tamil Nadu, Assam, Gujarat and West Bengal were able to achieve below average growth rates but above average levels of road length (bottom right quadrant). Figure 2.2 Road length level vs growth in States 80.00 Growth of road length (%) 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 -10.00 0 -20.00 50000 100000 150000 200000 250000 300000 Road Length (Km) 2.3 Railway Sector Figure 2.3 shows the quadrant analysis of railway line length in the States. The six States of Maharashtra, Karnataka, Andhra Pradesh, Gujarat, Rajasthan, Uttar Pradesh and Tamil Nadu have been outperformers in terms of recording above -4- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 average growth and levels of railway line formation (top right quadrant). Assam and Bihar are the poor performers (bottom left quadrant). There are a good number of States – Haryana, Orissa, Kerala, Punjab and West Bengal - that were able to 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). Figure 2.3 Railwayline Length Vs Growth in the States 20.00 10.00 0.00 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 -10.00 -20.00 -30.00 -40.00 2.4 Postal services Figure 2.4 shows the quadrant analysis of postal services in the States. The States of Orissa, Tamil Nadu and Madhya Pradesh have been the outperformers in terms of recording above average growth and levels of postal services (top right quadrant). Assam, Haryana, Maharashtra, Punjab, Uttar Pradesh and West Bengal are the poor performers (bottom left quadrant). A good number of States – Andhra Pradesh, Gujarat, Karnataka, and Rajasthan were able to achieve above average level of postal services level but well below -5- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 average growth rate (bottom right quadrant). Only Bihar and Orissa achieved above average growth but below average service levels (top left quadrant). Figure 2.4 Post offices Levels Vs Growth in the States 5.00 0.00 0 500 1000 1500 2000 2500 -5.00 -10.00 -15.00 -20.00 -25.00 -30.00 2.5 Telecom services Figure 2.5 shows the quadrant analysis of telecom services in the States. The States of Gujarat, Tamil Nadu and Orissa have been outperformers in terms of recording above average growth and levels of telecom services (top right quadrant). Maharashtra, West Bengal and Uttar Pradesh are the only poor performers (bottom left quadrant). A good number of States – Assam, Bihar, Haryana, Kerala and Punjab - achieved above average growth rate but below average telecom services (top left quadrant). Also, Andhra Pradesh, Karnataka, Madhya Pradesh and Rajasthan achieved below average growth rate but above average level of telecom services (bottom right quadrant). -6- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Figure 2.5 Telephone Exchanges Levels Vs Growth in the States 300.00 Growth of Telexes (%) 250.00 200.00 150.00 100.00 50.00 0.00 -50.00 0 500 1000 1500 2000 2500 -100.00 Telephone Exchanges (No.) 2.6 Banking services Figure 2.6 shows the quadrant analysis of banking services in the States. The States of Andhra Pradesh, Haryana, Karnataka, Kerala, Punjab and Tamil Nadu outperformed by recording above average growth and levels of banking (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). -7- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Growth rate (%) Figure 2.6 Bank Branches Levels Vs Growth in the States 15.00 10.00 5.00 0.00 -5.00 0 -10.00 -15.00 -20.00 -25.00 -30.00 -35.00 -40.00 200 400 600 800 1000 1200 Bank Branches (No. per 1000 people) 3. Ranking of the States and Correlation Analysis In this section, we perform ranking and correlation analysis of the States so as to give their relative position on each infrastructure parameter and also to check if there is any convergence or divergence of performance rankings. 3.1 Power Sector Table 3.1 shows the ranking of States on power sector performance. It can be seen that while Gujarat has more or less maintained its top ranking, the States of Maharashtra, Andhra Pradesh, Tamil Nadu, Rajasthan and West Bengal have improved their ranking during the period. The States such as Assam, Bihar, Madhya Pradesh, Haryana and Kerala also went down in terms of ranking. It can also be seen from the table that Andhra Pradesh, West Bengal, Rajasthan and Maharashtra have achieved top ranking in terms of growth performance in power sector. The States of Madhya Pradesh, Haryana, Assam and Bihar have failed in terms of growth performance. -8- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Table 3.1 Ranking of States on Power Sector State Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Level Rank (1990/91) 15 9 10 1 6 2 3 4 7 11 5 13 12 8 14 Level Rank (2005/06) 3 14 15 2 12 6 13 10 1 11 7 8 4 9 5 Growth rank 1 14 15 8 12 10 13 11 5 6 9 3 4 7 2 The rank correlation analysis of power generation levels (2005/06) and growth indicate a strong correlation (Cr = 0.75), implying that larger capacity addition leads to higher growth. Also, we may want to know if there is any effect of generation levels at first reference time point (1990/91) on that of next reference time point (2005/06). The correlation analysis indicates that both of them are not related positively and significantly (Cr=-0.06) implying the importance of capacity addition. 3.2 Roads Sector Table 3.2 shows the ranking of States on roads sector performance. It can be seen that while Maharashtra and Uttar Pradesh have maintained the top rankings, the States of Andhra Pradesh, Orissa, Gujarat, Karnataka and West Bengal have improved their ranking through road development during the period. The States such as 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 to create better connectivity through construction of roads. -9- Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 It can also be seen that Gujarat, Andhra Pradesh, West Bengal, Assam and Uttar Pradesh have achieved top rankings in terms of growth performance in roads sector. The States of Kerala, Rajasthan, Haryana, Bihar and Tamil Nadu have failed in terms of growth performance. Table 3.2 Ranking of States on Roads Sector State Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Level Rank (1990/91) 7 12 10 11 14 8 6 5 1 4 13 9 3 2 7 Level Rank (2005/06) 4 12 13 9 15 7 8 6 1 3 14 10 5 2 4 Growth rank 3 4 14 1 13 8 11 9 7 6 10 12 15 5 2 The rank correlation analysis of road length levels (2005/06) and growth indicate a strong correlation between them (Cr = 0.73), implying that larger network creation leads to higher growth. Also, we may want to know if there is any effect of road line length at first reference time point (1990/91) on that of next reference time point (2005/06). The correlation analysis indicates that both of them are related positively but not significantly (Cr=0.27), implying again the importance of new projects. 3.3 Railways Sector Table 3.3 shows the ranking of States on railways sector performance. It can be seen that while Uttar Pradesh, Rajasthan, Maharashtra and Gujarat have maintained their top rankings, the States of West Bengal and Andhra Pradesh have improved their ranking through railway line development. The States such as Punjab, - 10 - Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Orissa, Kerala and Haryana remained at bottom in terms of ranking and appear to have lost opportunity to create better connectivity through rail network development. It can also be seen that Gujarat, West Bengal, Andhra Pradesh, Assam and Uttar Pradesh have achieved the top rankings in terms of growth performance in railways sector. The States of Kerala, Rajasthan, Haryana, Bihar and Tamil Nadu have failed in terms of growth performance. Table 3.3 Ranking of States on Railways Sector State Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Level Rank (1990/91) 7 12 10 11 14 8 6 5 1 4 13 9 3 2 7 Level Rank (2005/06) 4 12 13 9 15 7 8 6 1 3 14 10 5 2 4 Growth rank 3 4 14 1 13 8 11 9 7 6 10 12 15 5 2 The rank correlation analysis of railway length levels (2004/05) 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). Also, we may want to know if there is any effect of railway line length at first reference time point (1990/91) on that of next reference time point (2004/05). The correlation analysis indicates that both of them are related positively and strongly correlated (Cr = 0.92), implying that ‘legacy’ rather than new projects holds key to performance. 3.4 Postal Sector Table 3.4 shows the ranking of States on Postal sector performance. - 11 - Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 It can be seen that while Orissa, Andhra Pradesh, Tamil Nadu and Karnataka have maintained their top rankings, the States of Bihar and Madhya Pradesh have improved their ranking through railway line development during the period. The States such as Haryana, Maharashtra, Uttar Pradesh and West Bengal remained at the bottom in terms of ranking and appear to be on losing ground of communication through postal network. It can also be seen that Madhya Pradesh and Bihar achieved top rankings in terms of growth performance and these are the only States with positive growth rate. The States of Uttar Pradesh, Gujarat, Rajasthan and Haryana have failed in terms of growth performance by remaining at bottom. Table 3.4 Ranking of States on Postal Sector State Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Level Rank (1990/91) 1 9 14 6 11 5 8 9 12 2 7 3 4 13 15 Level Rank (2005/06) 2 9 11 7 13 4 8 5 12 1 10 6 3 14 15 Growth rank 8 7 2 13 15 9 3 1 10 5 11 14 4 12 6 The rank correlation analysis of post office levels (2005/06) and growth indicate positive and weak relation between them (Cr=0.29), thereby implying that larger network may or may not lead to higher growth, which is the case of sector like postal services that faces competition from private sector. Also, we may want to know if there is any effect of post offices at first reference time point (1990/91) on that of next reference time point (2005/06). The correlation analysis indicates that both of - 12 - Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 them are related positively and strongly correlated (Cr = 0.9). It implies that ‘stagnation’ or ‘decline’ in postal services that is barrier to performance. 3.5 Telecom Sector Table 3.5 shows the ranking of States on Telecom sector performance. It can be seen that the performance of States is highly uneven. The States of Karnataka, Rajasthan and Madhya Pradesh have maintained their top rankings, while the States of Orissa, Kerala, Andhra Pradesh, Gujarat and Tamil Nadu have improved their relative ranking during the period (with only Andhra Pradesh having not achieved an increase in telephone exchanges). The States such as Assam, Bihar, Haryana and Punjab remained at the bottom in terms of ranking and appear to be on losing ground of landline communication network. It can also be seen that Assam, Orissa, Kerala, Bihar and Punjab have achieved top rankings in terms of growth performance through an increase in the number of telephone exchanges (therefore subscribers) and these are the States with positive growth rate. The States of West Bengal, Karnataka Madhya Pradesh, Uttar Pradesh and Maharashtra have failed in terms of growth performance to remain at bottom. Table 3.5 Ranking of States on Telecom Sector State Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Level Rank (1990/91) 5 15 11 8 12 4 13 2 1 14 9 6 7 Level Rank (2005/06) 2 15 12 3 14 6 11 5 1 13 10 8 7 - 13 - Growth rank 5 3 13 1 12 14 8 15 4 7 9 11 6 Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Uttar Pradesh West Bengal 3 10 4 9 10 2 The rank correlation analysis of telephone exchange levels (2005/06) and growth indicate positive but weak relation between them (Cr=0.17), which implies that larger exchange base may or may not lead to higher growth, which is the case of sector like telecom services that faces competition from private sector (mobile telephony). Also, we may want to know if there is any effect of post offices at first reference time point (1990/91) on that of next reference time point (2005/06). The correlation analysis indicates that both of them are related positively but weakly correlated (Cr = 0.03). It implies that expansion of telecom service is not dependent upon/ constrained by ‘level at begin’. 3.6 Banking Sector Table 3.6 shows the ranking of States on Banking sector performance. It can be seen that while Punjab, Kerala, Karnataka, Tamil Nadu and Haryana have maintained their top rankings, the States of Andhra Pradesh, Uttar Pradesh and West Bengal have improved their ranking during the period. The States such as Assam, Bihar, Uttar Pradesh and West Bengal remained at the bottom in terms of ranking and appear to be not gaining much in terms of reaching out banking services to the public at large. It can also be seen that Kerala, Haryana, Punjab, Tamil Nadu and Andhra Pradesh achieved top rankings in terms of growth performance by registering lower decline of bank branches (only Kerala achieved positive growth rate). The States of Assam, Bihar, Gujarat and Madhya Pradesh have registered a greater decline in bank branches thereby remained at the bottom. Table 8.6 Ranking of States on Banking Sector State Andhra Pradesh Assam Level Rank (1990/91) 7 15 Level Rank (2005/06) 6 14 - 14 - Growth rank 2 12 Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal 12 4 5 2 2 7 7 7 1 7 5 12 12 14 6 4 3 1 11 8 8 1 8 4 11 11 15 13 2 6 1 14 7 7 2 7 2 10 10 N.B. Same rank is given to some States that are at same level/growth rate The rank correlation analysis of banking levels (2005/06) 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. Also, we may want to know if there is any effect of banking units at first reference time point (1990/91) on that of next reference time point (2005/06). The 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. 4. Findings and Conclusions Having analysed the performance of States on individual sectors, now we conduct the same for the infrastructure sector comprising the above sectors. For this purpose, cumulative rankings were computed from individual sector ranking tables (tables 3.1 through 3.6) and they were further used to construct rankings. Table 4.1 shows the overall ranking of the States on infrastructure sector performance. It can be seen from the table that Karnataka, Tamil Nadu and Gujarat have maintained their top rankings at two different time periods, while the States of Andhra Pradesh and Orissa have improved their rankings significantly to reach top - 15 - Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 positions. Andhra Pradesh, in particular, has moved up by 7 ranks to become overall ranked 1 on infrastructure, which is a big achievement. The States such as 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. 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. Table 4.1 Overall Ranking of States on Infrastructure State Level Rank (1990/91) 8 Level Rank (2005/06) 1 Assam 15 15 9 Bihar 13 14 15 Gujarat 4 4 7 Haryana 13 13 13 Karnataka 2 5 11 Kerala 9 11 5 Madhya Pradesh 1 8 14 Maharashtra 3 2 6 Orissa 11 9 3 Punjab 9 10 8 Rajasthan 7 7 10 Tamil Nadu 5 3 4 Uttar Pradesh 5 6 11 West Bengal 12 12 2 Andhra Pradesh Growth rank N.B. Same rank is given to some States that are at same level/growth rate - 16 - 1 Paper for 20th Thinkers and Writers Forum of Skoch Summit, June 2014 Acknowledgments This paper is based on the Draft report of the research work carried out as a part of the institute sponsored research project entitled “An assessment of infrastructure levels and performance”. The author thanks the Director General, National Institute of Construction Management and Research (NICMAR), Pune for the sanction of project. He is also thankful to Dr Mona Shah, Dean, School of Project, Real estate and Infrastructure Management, NICMAR, Pune for the comments on Draft Report. 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