THE MESS IN AP ECONOMY-II

Failures In Socio-Economic Development

M Venugopala Rao

THE Chandrababu Naidu government of Andhra Pradesh has been pursuing over the years the neo-liberal policies vigorously with the false assertions that they would lead to rapid economic growth and ensure social justice. But in practice these anti-people policies have created a mess in the AP economy leading to economic retrogression and unsatisfactory performance on the human development front.

In Part I of this article that appeared in these columns last week, failures on the growth front of the AP economy were vividly analysed. In this concluding part of the article an attempt is being made to explain the failures in the field of socio-economic development. For want of space the discussion is restricted to some select issues such as incidence of poverty, employment, regional disparities, medical care, literacy, primary education and panchayati raj.

INCIDENCE OF POVERTY

Official estimates of income poverty show that the people below the poverty line in Andhra Pradesh declined from 25.60 per cent in 1987-88 to 15.57 per cent in 1999-2000, while the decline at all India level was from 38.85 per cent to 26.10 per cent. The rural poverty declined from 20.92 per cent to 11.05 per cent and urban poverty from 40.11 per cent to 26.63 per cent in Andhra Pradesh, while the incidence of poverty declined at all India level from 39.09 per cent to 27.09 per cent in rural areas and from 38.20 per cent to 23.62 per cent in urban areas. Estimates of Deaton and Dreze (2002) show that during the same period rural poverty in AP declined from 35 per cent to 26.2 per cent and urban poverty from 23.4 per cent to 10.8 per cent, while the same at the all India level declined from 39 per cent to 26.3 per cent and from 22.5 per cent to 12 per cent respectively. However, estimates of poverty for 1999-2000 are not comparable with the estimates of poverty for the earlier years. Therefore one has to be sceptical about the decline in the incidence of poverty during the 1990s.

Secondly, the National Sample Survey data indicate that growth in mean per capita monthly consumption in rural AP had increased from Rs 289 in 1993-94 to Rs 454 in 1999-2000, showing an increase of 57 per cent, while the same at the all India level increased by 73 per cent from Rs 281 to Rs 486. The increases recorded during the same period were 96 per cent in Kerala, 86 per cent in Karnataka and 75 per cent in Tamil Nadu. It indirectly indicates that progress at poverty reduction in AP in the 1990s may have been slower than in many other states. 

Thirdly, growth rates of employment and real wages in AP have declined drastically in the 1990s. The trends in social sector expenditures in AP show that as per cent of GSDP and total public expenditure, they were lower in the 1990s as compared to those of the 1980s.  Moreover, it is to be noted that the outcome of the spending in social sector depends not only on the amount of expenditures but also more importantly on the effective utilisation of these expenditures.  The human development index provided by the National Human Development Report (2002) shows that AP’s index was lower than all India in the last two decades.  AP’s rank among the 15 major states declined from 8 in 1981 to 9 in 1991 and further to 10 in 2001.   In other words, the relative position of AP in terms of human development has not improved over time.

DECLINING EMPLOYMENT

Employment growth rate in AP declined from 2.30 for the period 1983-84 to 1993-94 to 0.31 during 1993-94 to 1999-2000, while at the all India level the decline was from 2.04 to 1.00 for the respective period. The share of cultivators in the total declined while those of agricultural labourers increased. Only around 6 per cent of the total work force is in the organised sector in AP.   The growth of employment in the organised sector has declined over time. In the post-reform period, the growth of public sector employment declined drastically and the growth of private sector employment has not been able to compensate for the loss of jobs in the public sector. The diversification of employment has been slower in AP as compared to all India in the 1990s.  The problem of unemployment is acute in the educated sections and youth. Casualisation has been increasing over time with rural AP now having the second highest percentage of casual labourers in the country. Labour productivity showed high growth in agriculture and manufacturing in the 1990s.  In spite of this, the growth of real wages in rural areas declined significantly in the 1990s. In the eighties, the real wage rates increased in the state at 5.60 per cent per annum for males and 4.83 per cent for females. In the nineties, there was a declining/stagnating trend in the real wage rates at 1.23 per cent per annum for males and 1.64 per cent for females. Around 91 per cent of the rural workers in AP are either illiterate or have been educated only up to primary level.

REGIONAL DISPARITIES

The regional disparities in the levels of socio-economic development in the state have come down over the last 50 years.  However, the regional disparities in the levels of development are still significant in the state.  For example, south coastal Andhra, because it tops in respect of assured sources of irrigation, continues to occupy the top position in regard to agricultural output per hectare, followed by north Telangana and north coastal Andhra. Rayalaseema and south Telangana are at the bottom because of insufficient irrigation coupled with low and erratic rainfall. Moreover, well irrigation is predominant in Telangana and Rayalaseema, entailing high cost of power for pumping water, besides exposing them to weather shocks and shortages of drinking water. The development experience of AP clearly brings out that stepping up public investment in physical and social infrastructure has an immense potential for reducing regional disparities in the levels of development. The gap between the ultimate irrigation potential from major and medium irrigation projects, which can be undertaken only through public investment, and the potential actually created so far is quite high for the drought prone regions of Rayalaseema and Telangana. Public expenditure on health and education needs to be stepped up substantially focusing on the less developed areas. 

MEDICAL CARE

In AP, female illiteracy and infant mortality are relatively high but fertility decline has been faster. The existing fertility levels, however, are higher among the illiterate and low-income groups, and in backward or less-developed districts. Health indicators, such as life expectancy and infant mortality, show that the performance of the state is lower as compared to the rest of the southern states. The life expectancy at birth which was around 49 in the early 1970s has increased to nearly 62 during 1992-96 period.  There had been some decline in infant mortality in the state. However, the present level of infant mortality (63 per 1000 live births in 1997) is relatively high compared to Kerala (12) which has the lowest infant mortality level in India. 

AP is one of the few states where the private sector in medical care has outgrown the size of public sector through direct and indirect state patronage. The financial incentives to the private sector and overcrowding at the public hospitals have created conditions for the rapid growth of private hospitals in the state. Further, absence of any control on the quality as well as pricing has made the medical care a very attractive source of investment for the private capital. In achieving the predominant position, the private sector, mainly the corporate segment, has exploited all the financial and other incentives offered by the state but did not honour the precondition of providing free medical care to the poor. The corporate hospitals still siphon off huge amounts of public resources through inflated bills for the treatment of employees in the government and public sector undertakings, medical insurance claims from public sector insurance companies and through income tax concessions by registering themselves as trusts and research centres. The past experience shows that the poor did not benefit from the huge amounts of public resources doled out to the private hospitals. The state legislature has recently enacted a law to create regulatory framework for private medical establishments but the operational guidelines are not yet finalised. The share of public expenditure in GSDP on health services declined from 1.29 per cent during 1985-1990 to 1.08 per cent during 1990-2001.

At present the public sector investment in the medical care is very meagre.  It accounts for about 1 per cent of GSDP and its share in the total health expenditure incurred together by the state and households in the state was less than 25 per cent.  The health sector reforms, guided by the World Bank, are aimed at limiting the role of the state mainly to the provision of primary care and to encourage the private sector in the provision of tertiary care. At the secondary care level, the basic objective is to secure complete autonomy to the AP Vaidya Vidhana Parishath in introducing user charges, subcontracting of services, staff recruitment on contract basis, etc. The ultimate objective of complete autonomy, financial and administrative, would imply privatisation of public hospitals.

LITERACY AND PRIMARY EDUCATION

As per 2001 census, the literacy rate in AP increased from 52 per cent as per 1991 census to 61 per cent against increase from 52 per cent to 65 per cent at the all India level. The state is doing better in access indicators like school density, size distribution of habitations, student-teacher ratios, etc. However, in terms of expenditure, the state’s budgetary allocations to education are lower in comparison with all states taken together. There seems to be some improvement in the allocations towards education in the late 1990s in terms of its ratio to GSDP and per student expenditure. But, there is no improvement in the case of primary education.  In fact, the allocations towards primary education in 2000-01 and 2001-02 are lower than that of 1995-96.  The declining allocations to primary education may further aggravate the situation. Dropout ratios are also high in the state, which may be due to fictitious enrolment. There are wide variations in dropout ratios across the districts ranging from 7 to 63.       

PANCHAYATI RAJ

Keeping in view the main objectives of the 73rd Constitutional Amendment Act, the government of AP had passed the AP Panchayati Raj Act, 1994. The actual performance so far in terms of genuine decentralisation/devolution to the local bodies is far from satisfactory. In the functional domain, the present status in AP shows that it transferred functions in respect of 16 subjects, of which 5 subjects with funds and only 2 subjects with functionaries are transferred to the local bodies. The performance of AP in this respect is much lower than that of Karnataka, Kerala and West Bengal. Moreover, a majority of the line departments in AP have not been brought under the control of Panchayati Raj bodies. Only the relatively less important functions have been transferred to the local bodies. The District Rural Development Agency (DRDA), which commands sizeable resources, functions independently of the PR bodies. Similarly, corporations like AP Scheduled Castes Corporation, AP Backward Castes Corporation, AP Women Development Corporation work independently of PR bodies in the state.

The panchayats have no financial autonomy either in raising financial resources or in deciding on the allocation of funds across different sectors. Funds for centrally sponsored public works schemes form the bulk of the panchayats’ budgets.  The allocations to different activities are generally decided by the central/state governments. The devolution of funds to panchayats in AP is much less than in Kerala where around 40 per cent of state plan funds are allocated to local bodies. There are some structural aspects of AP Panchayati Raj system, which impede the local bodies from functioning effectively. The state government, the commissioner and the district collector have been given powers under various sections of the Act to control PR institutions at all the three levels.  Besides, the AP Act does not provide for the constitution of District Planning Committee (DPC), which is a glaring omission.  Another feature which undermines the PR institutions in AP is the practice of diverting the funds of these institutions for special programmes to be implemented by functionaries of other government departments.