It was one of the most shining and also the most shallow expression of concern for the poor. "Woh kehte hain Indira hatao, Main kehti hoon garibi hatao (the Opposition says remove Indira, I say remove poverty)" was the slogan that propelled Indira Gandhi to power in 1971. Yet, Independent India's most powerful catchphrase could not do much for the poor. The percentage of population living in absolute poverty remained about the same between the late 1960s and the early '80s.

THE BIGGEST BANG FOR THE BUCK: PRIMARY EDUCATION
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Some 35 years later the slogan was repackaged as "Congress ka haath, aam aadmi ke saath (The Congress' hand is with the common man)" to help the party ride back to power, this time under the leadership of Sonia Gandhi. Will this slogan have a better chance of proving itself than Indira's slogan? That's difficult to say now, but what is clear is that thousands of crores of rupees of taxpayers' money is spent in the name of poverty alleviation year after year. And the UPA Government has added more than its bit by doubling the spending on some welfare schemes in 2005-6.

PICTURE SPEAK

Access to primary education doubled in Orissa in the 1990s.

That money alone-however huge the amounts allocated are-will not dent poverty was proven by another Gandhi: Rajiv. In the most widely quoted estimate of inefficiency in government spending, Rajiv had said that no more than 15 per cent of the money spent on poverty schemes actually reached the beneficiaries. If that was a stunning confession, some new estimates are even more shocking.

Economist Surjit Bhalla has estimated that the poor received only 9 per cent of the money spent on employment programmes in 1993-94 and just 7 per cent in 1999-2000. For those who dismiss estimates like Bhalla's as those of an unabashed rightist, here is some more bad news. Even Jean Dreze, a member of the National Advisory Council and an unwavering supporter of the Employment Guarantee Scheme, recently called the food for work programme "loot for work" scheme.

The message is unmistakable: when it comes to helping the poor, the most important question to ask is not what to spend but how to spend. Thankfully the message is not lost on Finance Minister P. Chidambaram. After starting his last budget with yet another slogan of "greatest good to greatest numbers", Chidambaram said outlays on public spending must match outcomes. Prime Minister Manmohan Singh also told chief ministers at the July meeting of the National Development Council that "expansion of outlays without regard to outcomes does not contribute to development".

THE BIGGEST BANG FOR THE BUCK: PRIMARY HEALTH
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There is little that Manmohan or Chidambaram can do to improve the outlay-outcome ratio in public investments because the spending is almost entirely in the hands of state governments. The Centre only gives, it does not spend.

What Delhi can do is to monitor the efficiency of spending and link allocation of funds to their best use. In other words, carrots for states where the correlation between outlays and outcome is positive and high, and the stick for the states where it is low. But adopting this policy assumes knowing which states spend most efficiently. Or where in India does the government get the biggest bang for its buck.

PICTURE SPEAK

Primary healthcare in Kerala is 10 times better than in Uttar Pradesh.

To answer this all-important question Bibek Debroy and Laveesh Bhandari, the two economists who developed India Today's annual ranking of states, worked on the Bang for the Buck Index for Indian states. The idea was simple: track states' performance on critical yardsticks of governance-education, health and water-over at least a decade. Find out how much every state spent on these parameters during the years for which performance was tracked. And finally divide the improvement in performance with the increase in spending. The ratio between the improvement and the increase is the Bang for the Buck Index.

Executing the idea was far from simple. Data limitations restricted the number of parameters as also the number of states that could be studied. Only 17 states could be ranked. Since the data analysed was predominantly for the 1990s, Chhattisgarh, Uttaranchal and Jharkhand were clubbed with their mother states. Bijli, pani, sadak (power, water and road) or bipasa defines the new basic minimum that masses expect from governments-replacing the old demand of roti, kapda aur makaan (food, clothing and shelter). It would have been ideal to develop a Bipasa Bang for the Buck Index. But due to data constraints, only education, health and water and sanitation were studied.

THE BIGGEST BANG FOR THE BUCK: WATER AND SANITATION
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A fourth index was also developed-one that tries to capture the human face of reforms. Economic growth is not an end but a means to a better quality of life. One way to judge the quality of growth is to find out what percentage of poor people in a state are directly benefiting from it. This was done by studying the rate of economic growth for the 17 states in the past decade and the rate of poverty reduction in the same states during the same period. The ratio of rate of growth and rate of poverty reduction tells us how pro-poor a state's economic growth is. Economists describe this as the trickle-down effect of growth.

PICTURE SPEAK

Tamil Nadu's water and sanitation improved by almost 50% in the 1990s.

Each of the four index contains a few surprises. When it comes to providing primary education, Kerala has stood tall among all states for decades. But others like Himachal Pradesh and Tamil Nadu are catching up, and catching up fast. Kerala has been India's most literate state with the highest primary education index value of 7.3 in both 1991 and 2003 (see table). But while its Primary Education Index remained static through the 1990s, Himachal Pradesh, Tamil Nadu and Maharashtra recorded huge improvements. There is a catch in recording improvement. Improving a public service is relatively easier when the service is abysmal to begin with. But as the spread of that service widens across a state, improving it further becomes more difficult. For instance, Bihar and Jharkhand's Education Index was at 0.1 in 1991 compared with Himachal Pradesh's 4.6. By 2003 the index for Bihar and Jharkhand had improved to 0.9 (rise of 800 per cent), while that of Himachal Pradesh had gone up to 6.3 (a 37 per cent rise). Bihar is clearly the more improved state, yet its index in 2003 is way behind that of Himachal Pradesh. Besides, the journey from 4.6 to 6.3 is tougher than going from 0.1 to 0.9.

To account for achievements of states like Bihar and still not penalise more efficient states for a slower rise in index because of their higher base, the improvement index in the study was defined as the distance covered by each state in its journey to the ideal index on each parameter. The ideal index is the index value of 10 (see methodology). With an education index value of 4.6 in 1991, Himachal Pradesh was 5.4 points away from the ideal index of 10. By 2003 the state had reached 6.3. So Himachal Pradesh covered 1.7 (6.3 minus 4.6) of the 5.4 that was required for it to become an ideal state. Bihar and Jharkhand, despite the massive growth, were able to cover only a small percentage of what was needed for them to reach the ideal situation. That is why Himachal Pradesh (and many other states) are higher on the Improvement Index than Bihar and Jharkhand.

THE MOST PRO-POOR ECONOMIC GROWTH: THE HUMAN FACE
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That's the performance part. For each of the 17 states growth in per person spending on education by the state government between 1991-92 and 2001-2 was also calculated. The highest growth in spending on education took place in Himachal Pradesh. But Himachal Pradesh was not the most efficient spender of money on primary education. To get at that state, a ratio of improvement in education and increase in spending was taken. The surprise winner is Orissa. It is the state with the biggest bang for the buck spent on primary education. Or, every rupee spent on primary education gave the highest return in Orissa in the 1990s.

PICTURE SPEAK

Share of poor population in J&K fell from 24% to 3.5% in the 1990s.

A similar methodology was followed to identify the highest achiever, the most improved, the highest spender and the most efficient spender on primary health and water and sanitation. Kerala is the healthiest of all states. Tamil Nadu has improved its primary healthcare more than any other state in the 1990s. And West Bengal has spent more than other states on primary health. Kerala still manages to show the biggest bang for the buck in primary health. Punjab has the most accessible water and sanitation facilities. But Tamil Nadu, which ranks 12th on the state of these services, has improved the most in the 1990s. The highest spender is again West Bengal, but Tamil Nadu is the most efficient spender on water and sanitation.

The mother of all performance barometers is the index showing pro-poor economic growth-one that shows the human face of economic growth. Surprises here surpass all previous shocks. Jammu & Kashmir (J&K) saw the fastest reduction in poverty in the 1990s. In 1987-88, 24 per cent of the state's population lived below the poverty line. By 1999-2000, just 3.5 per cent of people in J&K were officially poor. The miraculous disappearance of poverty in the state-in times of blazing guns and terrorist attacks-defies conventional wisdom about strong linkages between peace and prosperity.

Reduction in poverty may or may not be the result of economic growth of the state alone. That was emphatically the case with J&K. Among the 17 states studied, it was Gujarat that had the highest growth rate of 7.8 per cent a year during the 1990s. Maharashtra and West Bengal were other top rankers in economic growth rate. J&K's rank on growth index was 11th. Yet given the spectacular speed of poverty removal, J&K emerges as the state with most pro-poor economic growth-the state where gains of growth are trickling down to the poor the fastest.

The result may raise some eyebrows in disbelief, but poverty data for J&K have been verified more than once. One possible, but only partial-explanation is the presence of a large number of armed forces in the valley. Armymen are like well-spending tourists boosting the state's economy with demand for products and services. If true, this turns the economic theory of "Guns Versus Butter" on its head. Because what we are seeing in the J&K is guns breeding butter!

Index