The illiterate Keralite is a fictional character-well, almost. The only Indian state to have achieved a global standard in public education, Kerala's literacy rate has reached levels that other states could only aspire to. Its achievement in primary health too has remained unrivalled for decades. Rid of these fabled achievements, Kerala will have little to be pleased about and plenty to worry about.

PICTURE SPEAK
FUN & FOOD: India's top two states Punjab (left) and Goa (right) offer the best of life—at work and after work

Perhaps that moment is already upon the southern Indian state. Himachal Pradesh from the far north and Tamil Nadu from across the border are ready to dethrone Kerala from the top ranks it monopolised on indicators of human development. Kerala is not the only best performing state under siege in the India Today annual study of the state of the states. Punjab, which bagged the maximum top honours in the past two years, also has other states snapping at its heels. That's why the picture of calm and stability that the ranking on overall performance of states reflects (see preceding page) is deeply deceptive. Scratch beneath the surface of overall rankings, and the first signs of future changes in the state rankings become clear-changes that will redraw the demographic and economic maps of India in the years to come.

INFOGRAPHIC

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That's the central message from the third annual India Today study of the quality of life and work across 30 states and five Union Territories. The 2005 study also goes beyond the annual rankings to analyse and explain four more issues of current and common interest to states: a set of indices has been created to measure the efficiency (or lack of it) in government spending (see following story: In Search of the Human Face). Finance Minister P. Chidambaram and Prime Minister Manmohan Singh have asked states to ensure that "outcomes match outlays"-i.e. let the public benefit from public spending. An index that captures the human face of reforms was also developed to assess how far states have been able to reduce poverty.

For the first time ever, states were also rated on their level of economic freedom (see story: Economic Freedom of States). Finally, a report card of sorts on India's three new states of Uttaranchal, Chhattisgarh and Jharkhand is presented. It has been five years since the creation of these states, and it is time to check if people have benefited from the change in their state citizenship.

LAW & ORDER

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Like last year, for the overall performance ranking, the states were divided into two groups of big and small. All states with area greater than 35,000 sq km and a population of more than five million are categorised as large. These are 20 in number. The remaining 10 are small states, including Delhi and Pondicherry which are yet to become full states. In an important distinction from the past, both scores and ranks of all the 35 states and UTs are published for all eight factors on which the performance was evaluated (see tables). Scores (or index values) weren't published in the past and were made available only on request simply for the fear of information overload. But after three years of revision and refinement, it's clear that ranks conceal more than they reveal. For instance, two states may have scores of 2.11 and 2.10 on a factor and be ranked first and second. Or they may have scores of 2.11 and 1.11 and still be ranked first and second-simply because no other state has scored between 2.11 and 1.11. If only ranks are known, the gap between the performance of the two states will look identical in the two cases, despite the wide variations in their scores.

PRIMARY HEALTH

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As in the past, the study has been done by economists Bibek Debroy and Laveesh Bhandari and is based on objective performance data sourced from credible and consistent sources (see methodology). Historical (e.g. past governments' policies and programmes) and geographical developments also affect a state's performance positively or otherwise, but the study does not factor in such developments. It is a study of states' performance-and not necessarily the performance of current chief ministers. The 50-odd factors on which state performance was evaluated point to many big and small trends. But the major takeaways from the study are as follows.

A NEW ORDER IS EMERGING

God seems to be thinking of relocating from His own country-Kerala. And the new God's own country is Himachal Pradesh. After years of consistent strides in primary education, Himachal Pradesh has finally beaten Kerala to the second place. Sure, Kerala still has the highest literacy rate (91 per cent of Keralites can read and write, compared with only 76 per cent people in Himachal Pradesh) and it also has the largest percentage of girl child population enrolling in school. But Himachal Pradesh has taken the lead in the teacher-pupil ratio and the hill state spends more than double the amount that Kerala does on school students. Among small states, Sikkim beats even states like Delhi and Goa on education. Apart from having the country's second highest teacher-student ratio (the highest is in Nagaland), Sikkim's more heartening achievement is putting more girls in school than boys-a lesson that more prosperous and prominent states like Punjab and Haryana can imbibe. But then, empowerment of women is very high in north-eastern states.

PRIMARY EDUCATION

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On health too, Himachal Pradesh is closing its gap with Kerala. Another state with an impressive performance is Tamil Nadu. Though the state trails its southern neighbours Kerala and Karnataka on infant mortality (Kerala is the only Indian state with infant mortality in single digit per thousand children) and sex ratio, a high 62 per cent of families in Tamil Nadu have access to tap water and there are 111 doctors per lakh of population-a figure lower than only Punjab and Karnataka among the big states. Punjab's top positions on investment environment and budget and prosperity are under attack. Gujarat has scaled four ranks to beat Punjab as the state with the best investment environment. How did the poster child of communal hatred become the most investment friendly state in India?

INFRASTRUCTURE

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To be sure, with the highest rate of economic growth among all big states in the 1990s (7.8 per cent a year) and fifth largest contributor to India's GDP, Gujarat has always been an economic powerhouse. Till the communal violence tarnished its image in 2002, Gujarat was-and to a large extent still is-one of the safest states for the common man and businessmen alike. The state has shown a huge jump in government investment and has contained the spending on state administration remarkably. A bigger surprise is the emergence of Chhattisgarh as the state with second-best investment environment. The state's score on this factor almost doubled in a year. Himachal Pradesh has almost pipped Punjab to the post on budget and prosperity by jumping from sixth rank to the second. The growing divide between Punjab's rich population and its pauper government is taking its toll. The state with the highest rank on this factor is Delhi. It is one of the rare states which has a cash rich government and relatively affluent citizens.

IMPROVED PERFORMANCE MAY NOT MEAN IMPROVED RANK...

CONSUMER MARKET

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... just as a fall in performance may not always lead to a fall in rank. The ranks show relative performance, scores show both relative and absolute performance-how much better a state has done compared with other states as well as with its own past performance. For instance Gujarat's score on law and order has fallen consistently in the past two years (from 1.25 to 1.02), but its rank hasn't slipped. At the same time the state has improved its performance on infrastructure significantly from a score of 1.44 to 2.53 between 2003 and 2005, but its rank has actually slipped from fifth place to seventh. Reason: all Indian states, including Bihar, are improving in infrastructure, and many of them at a rate faster than Gujarat. The scores of Punjab and Maharashtra have almost doubled on infrastructure in the past two years-without any significant change in their ranks. Delhi, Goa and Pondicherry remain leaders on these factors among small states. The good news for the country is that the infrastructure is improving in all states.

AGRICULTURE

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Conversely the factor on which most states' performance is either stagnant or falling, including those of Kerala, Punjab and Himachal Pradesh, is law and order. The only big states that have bettered their law and order score in the past one year are the usual laggards-Bihar, Jharkhand and Orissa. So performance is improving at the bottom, but it is falling at the top. Ironically, the average score of states is improving on consumer markets, which tracks levels of consumption and affluence. One obvious inference is that peace and prosperity aren't walking hand in hand in India.

BEING BIG ISN'T A BIG DEAL

"Small is beautiful" was the message from the first India Today ranking of states. In some form or the other, the message comes out of every year's study quite compellingly. One obvious reason is that the study lays equal emphasis on spread and level of development. And by measuring performance on most factors in per capita terms, the adequacy of a public service is assumed to be as important as its availability. And since access is almost invariably easier in small states, the study returns to this theme every year. At a conclave of chief ministers in 2003, Chidambaram (not in the government then) had made a convincing case for carving out newer and smaller states out of Maharashtra and Uttar Pradesh. Economist and Congress MP Jairam Ramesh has also argued for bifurcation of existing big states (see column: Outlay Vs Outcome). Ramesh represents Andhra Pradesh in the Rajya Sabha-a state that is debating carving out a new Telangana state.

INVESTMENT SCENARIO

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True, on factors such as economic growth, industrial production or overall prosperity big states will continue to show up well. But even a high average performance in a big state is likely to be more unevenly distributed than it would be in a small state. Though the recent demands for grant of statehood for Mumbai (made following the city's virtual submergence in the monsoon rains) may be a case of stretching the argument too far, but the experience of the three new states created in 2000 are case studies in benefits of small states (see story: Predicament of the Young). Though convincing data will take a few more years to emerge, there is enough already to prove that Jharkhand, Chhattisgarh and Uttaranchal are better off today than they were as parts of Bihar, Madhya Pradesh and Uttar Pradesh. The crux of the argument is this: governance is easier in small states. That's particularly so since some of the big Indian states are also the ones with the fastest rate of growth in population.

BUDGET & PROSPERITY

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Finally, a few words about north-eastern states and Union territories. Building on their always strong social indicators, states like Sikkim and Mizoram have improved substantially on investment environment and infrastructure. If something is holding back a big bang economic resurgence of these states it is the limitation that they lie beyond the relatively stagnant states of east India. If West Bengal, and to some extent Orissa, revive their economic fortunes, access to and investments in northeast states will go up. A more engaging trade relations with India's north-east neighbours can also swing the wheels of fortune in favour of these states. As for UTs, Chandigarh is heads and shoulders above the other four. That is most unsurprising. Sandwiched between two of India's most prosperous states, Haryana and Punjab, and pampered for years by both, Chandigarh has the best of both the worlds. Suburbs like Mohali are now hotspots for new economy businesses. It is a good instance of a city helping strengthen and revive business fortunes of a state-Punjab.

Index