Governance performance of Indian states: 2001-02 and 2011-12

  • Blog Post Date 13 December, 2016
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Samik Chowdhury

Institute of Economic Growth

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Sudipto Mundle

National Institute of Public Finance and Policy

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Satadru Sikdar

National Institute of Public Finance and Policy

Defining governance as service delivery, this column develops a measure of the quality of governance – also adjusting for the impact of the level of development - and provides a ranking of major Indian states. The analysis suggests that there are two distinct paths of development in the less- and more-developed states.

There are widely varying conceptions of governance. These range from a simple, Statist interpretation that governance is what governments do, to a much wider interpretation of governance as the way in which individuals, groups, and institutions, both public and private, manage their affairs and resolve conflicts of interest in an orderly manner (Weiss 2000, Department of Administrative Reforms and Public Grievances (DARPG), 2009). In a recent study (Mundle, Chowdhury and Sikdar 2016), we adopt the Statist interpretation that has a historical lineage going back two and a half millennia, stretching across different regions of the world. Based on a contemporary interpretation of this concept, we develop a measure of the quality of governance as service delivery.

Measuring the quality of governance

of governance quality implies that they have been given priority over inputs such as governance capacity, institutions, and processes. If these inputs impact outputs, then they will be reflected in the outputs and should not be double-counted along with the outputs. If they do not affect outputs then perhaps they do not count for much. What would it mean to say a government is excellent in its capacity, institutions, and processes, if those inputs do not result in a high level of service-delivery outputs?

This should not be taken to imply that capacity, institutions, and processes are unimportant. On the contrary, such inputs are arguably the key determinants of the quality of governance. However, the purpose of this exercise is to rate the quality of governance, defined as service delivery, across Indian states, not identify the determinants of governance quality. Hence, this question is not addressed here. The only exception is the interaction between governance and development which is discussed below.

The literature suggests that there is a strong correlation between quality of governance and economic development, measured here in terms of per capita gross state domestic product (GSDP). This is partly because of their dependence on the same underlying drivers and also because of their mutual interdependence, giving rise to a governance rating bias in favour of more developed states. In other words, a higher value of some indicator of governance may simply be attributable to the higher level of development of the state (Mundle et al. 2012). We correct this upward bias in an alternative scoring system, the Development Adjusted Governance Index (DAGI) based on the distance of the actual indicator value from its predicted value as a function of the level of development.

Ranking governance performance of major Indian states

We apply the measure of governance as service delivery to rate and rank the governance performance of major states in India in 2001-02 and 2011-12. The governance measure has been derived from the three main pillars of the government, that is, the legislature, the judiciary and, especially, the executive. These pillars are represented by five dimensions: infrastructure services; social services; fiscal performance; justice, law & order; and quality of the legislature. We measure the performance on these dimensions of governance using a set of 14 indicators that are based exclusively on official factual data, not perceptions or opinions drawn from samples of respondents.

We pull together the scores for individual service delivery outputs to yield the overall governance performance indices (GPI) and the DAGI in Table 1. Two main features that stand out from composite GPI and DAGI ranks are the relative stability of the composition of the best- and the worst-performing states, and the sharp changes that appear when the rankings are adjusted to control for the impact of development. GPI rankings indicate that, Gujarat, followed by Tamil Nadu, were the two best-performing states in 2001 as well as 2011. Also, five of the six best-performing states in 2001 remained the best performing in 2011: Gujarat, Tamil Nadu, Andhra Pradesh, Kerala, and Punjab. At the other end, four of the six worst-performing states in 2001 remained the worst performing in 2011: Odisha, Jharkhand, Uttar Pradesh, and Bihar.

Table 1. Governance Performance Index (GPI) & Development Adjusted Governance Index (DAGI)

GPI 2001 GPI 2011 DAGI 2011
1 Gujarat 0.66 1 Gujarat (0) 0.65 1 Chhattisgarh (+7) 0.64
2 Tamil Nadu 0.6 2 Tamil Nadu (0) 0.61 2 Madhya Pradesh (+11) 0.63
3 Punjab 0.6 3 Andhra Pradesh (+3) 0.59 3 Karnataka (+3) 0.62
4 Kerala 0.57 4 Kerala (0) 0.59 4 Tamil Nadu (-2) 0.61
5 Haryana 0.55 5 Punjab (-2) 0.58 5 Andhra Pradesh (-2) 0.61
6 Andhra Pradesh 0.53 6 Karnataka (+1) 0.57 6 Gujarat (-5) 0.6
7 Karnataka 0.51 7 Uttarakhand (+7) 0.56 7 Punjab (-2) 0.58
8 Maharashtra 0.5 8 Chhattisgarh (+2) 0.54 8 Rajasthan (+4) 0.58
9 Himachal Pradesh 0.5 9 Haryana (-4) 0.53 9 Kerala (-5) 0.57
10 Chhattisgarh 0.48 10 Maharashtra (-2) 0.5 10 Bihar (+8) 0.55
11 West Bengal 0.44 11 Himachal Pradesh (-2) 0.5 11 Uttarakhand (-4) 0.5
12 Assam 0.43 12 Rajasthan (+4) 0.5 12 Haryana (-3) 0.5
13 Madhya Pradesh 0.38 13 Madhya Pradesh (0) 0.49 13 Maharashtra (-3) 0.46
14 Uttarakhand 0.36 14 Assam (-2) 0.35 14 Himachal Pradesh (-3) 0.46
15 Odisha 0.35 15 West Bengal (-4) 0.34 15 Uttar Pradesh (+4) 0.45
16 Rajasthan 0.34 16 Odisha (-1) 0.31 16 West Bengal (-1) 0.43
17 Jharkhand 0.27 17 Jharkhand (0) 0.3 17 Odisha (-1) 0.42
18 Uttar Pradesh 0.19 18 Bihar (+1) 0.29 18 Assam (-4) 0.41
19 Bihar 0.16 19 Uttar Pradesh (-1) 0.29 19 Jharkhand (-2) 0.41

Note: Figures in parentheses indicate "the change in ranks under 2011 is with respect to 2001, while the change in ranks under DAGI 2011 is with respect to GPI 2011.

Bengal and Assam slipped down to the bottom category in 2011, while Rajasthan and Uttarakhand moved out of this category. In fact, these were the two states that gained the most in their relative ranking, with Uttarakhand moving up seven ranks and Rajasthan by four ranks. The maximum decline in relative rankings was noted in Haryana and West Bengal, both of which dropped four ranks each.

Adjusting the rankings for development impact (DAGI) results in some sharp changes in relative ranks. Madhya Pradesh, Bihar, and Chhattisgarh are the biggest gainers, going up by 11, eight and seven ranks respectively. Conversely, Gujarat and Kerala drop down by five ranks each, and Uttarakhand and Assam drop down by four ranks each. Thus, in addition to the quality of administrative inputs, a positive or negative development legacy seems to have a strong cumulative impact on the quality of service delivery.

Two distinct paths of development

This has led to the emergence of two quite distinct paths of development in the more- and less-developed states. In the former, state governments mainly play an enabling role, providing good infrastructure, efficient administrative processes, etc., for private enterprise-led development. In some of these advanced states like Tamil Nadu, such an enabling role is combined with a high level of social service delivery. But in others, like Gujarat, the challenge is their deficit in social development. Thus, Gujarat tops the list for overall governance and also for infrastructure, but comes lower down in the list for social service delivery. It drops down even further when the ratings are adjusted for its level of development.

In the other path, seen in less-developed states like Bihar, governments play the dominant role in development since private enterprise is quite weak. Governments need to drive both public investment-led growth as well as social development. It is a moot question whether this government-led path of development will enable these less-developed states to 'catch-up' with the developed states; whether there will be convergence or divergence across Indian states in the years ahead.

The central government and Finance Commissions have a key equalising role in this context. But whether such equalising interventions will be sufficient for catch-up is not clear. If not, regional disparities will continue to widen, with potentially severe political consequences.

Further Reading

  • DARPP (2009), 'State of Governance: A Framework for Assessment', Department of Administrative Reforms and Public Grievances, Government of India, New Delhi.
  • Mundle, Sudipto, Samik Chowdhury and Satadru Sikdar (2016), "Governance Performance of Indian States: Changes between 2001–02 and 2011–12”, Economic & Political Weekly, Vol. 51, No. 36, pp. 55-64, 3 September.
  • Weiss, Thomas G (2000), "Governance, good governance and global governance: conceptual and actual challenges”, Third World Quarterly, Vol. 2, No. 5, pp. 795-814. Available here.
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