May 10, 1999

What India can learn from World Development Indicators.

By Kaushik Basu

Last week, amid much media hype, the World Bank published the World Development Indicators (WDI) for 1999. This is arguably the most important publication of the Bank -- an enormous compendium of inter-country statistics on the state of the economy, population and environment. Unlike the better-known World Development Report, this is a rather sombre publication, its 399 pages crawling with numbers. What is surprising is that it is fun to browse and is full of unexpected information.

Let us start at the top end of the table. Of the 148 countries for which detailed income data are listed (this includes pretty much all nations with population exceeding 1 million), which country do you think is the richest in terms of per capita income? Before reading the answer in the next paragraph, also try your guess at the following. In which country do schoolchildren have the highest mathematical skill? In which country is infant mortality the lowest?

The answer to all three questions is Singapore, though on infant mortality it shares the top berth with Sweden, Norway, Finland and Japan. The super performer in this year's WDI is clearly Singapore.

Where does India stand on income? With a per capita income of $370 per annum, its absolute standing is very disappointing. Where India has done well is in terms of growth. Our national income has maintained an average annual growth rate of 6 per cent through the '90s. This may not match up to Singapore's 8.5 per cent but it compares well with the world average of 2.4 per cent.

While it may be interesting to look at per capita income, I believe it is morally incumbent upon us to evaluate a society by looking at the condition of its poorest people. Of course, the poor in a developing country will be much worse off than the poor in Switzerland or the US. But if we ask what percentage of the national income goes to the poorest 20 per cent of a nation, India with a figure of 9.2 per cent does much better than most other nations, such as China (5.5 per cent), the US (4.8 per cent) and even Switzerland (7.4 per cent).

The section on the environment has a mass of data, from traffic congestion to air quality. We learn, for instance, that in India there are seven motor vehicles for every 1,000 persons. This is much below the world average of 121 and that of the world's topper, the US with 773. But do not despair. We may have few vehicles but they are clearly more active than in most other nations. The number of people injured or killed in 1997 by every 1,000 vehicles was 17 in the US, 14 in Japan, and five in Norway, whereas India's rickety fleet managed an impressive 61.

Air quality can be measured in many ways. One of them is micrograms of total "suspended particulates" -- scientific term for dirt -- per cubic metre. Among India's four major cities, Delhi leads with 415, followed by Calcutta 375, Mumbai 240 and Chennai 130. Once we take other cities into account, Delhi loses the lead to Lucknow, which scores 463. At this rate one will not have to enter the Imambara to feel a little lost. And for a sense of how this compares with other nations, Mexico City, so famous for its pollution, has 273 particulates per cubic metre, and Tokyo only 49.

The large amount of statistics provided are not without their controversies and conundrums. Take for example per capita income, the average income earned per person in a nation. Given that an Indian earns in rupees and a Japanese in yens, how do you compare these? The standard practice is to convert all these into dollars by using the going exchange rate. By this conversion, India's per capita income turns out to be $370 and the US' $29,080.

One problem with this is that if the rupee is devalued, India's per capita income will go down even though nothing may have happened to the standard of living of Indians. To correct this, the World Bank tries to make adjustments to a nation's income by taking account of the purchasing power parity (PPP) of the nation's currency. If, for instance, it turns out that with $370 in India you can buy twice as much as you can in the US, then India's per capita income with PPP correction will be $740. As it happens, with PPP correction India's per capita income rises to $1,660.

For all their faults, these kinds of statistics can inform us and help us define our policies better. Of course, the numbers do not tell us what causes what. But this does not bother me too much as I do not believe anything can inform us about causality. Causality is a construct of the human mind. What the statistics can help us with is "induction", that is, to learn from past regularities. If no nation with literacy below 70 per cent has done well economically, induction would suggest that it would be wrong for India to expect otherwise. The laws of induction can get falsified, but to disregard them systematically is to court trouble.

When my sister's son was a little kid in elementary school in Canada, his class teacher had explained, "The Japanese come from Japan, the English come from England, the Russians come Russia," and then asked, "Now you tell me where do the Chinese come from?" My nephew had to contend with the teacher's displeasure when disregarding the laws of induction he had answered earnestly, "Restaurants".

In designing policy in India we have also got our induction wrong far too often, and with consequences rather more momentous than they were for my nephew.

The author is C. Marks professor of economics, Cornell University.

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