Electric power has been restored across northern India to the 600 million people who recently found themselves sweltering in the dark. But the massive blackouts have left lingering questions about the country’s ability to provide the infrastructure necessary to sustained growth and poverty reduction.
CGD Fellow Arvind Subramanian puts the blame on populism—a tendency of politicians to promise free or heavily subsidized electricity and officials to turn a blind eye to power theft—that has left India with an undercapitalized, inefficient power sector that has much higher transmission and distribution losses than other countries at a similar level of development.
He backs these assertions with some startling charts in a recent blog post drawn from previous research. I was eager to have him join me on the Wonkcast to learn more about India’s difficulties in providing reliable electricity to its billion-plus people, and the progress in addressing these problems.
At the end of the show we also discuss CGD’s new India Initiative, which Arvind heads.
“What you find is that states that are poorly governed in the power sector tend exhibit lower rates of growth. If you don't have power, industry suffers, growth suffers, and the private sector is not competitive,” Arvind says.
“Free and subsidized power has often meant no power or no uninterrupted power for vast swathes of the population in India. Power is regulated and legislated at the level of the states, predominantly. So they have policy control of the sector and that's the reason for linking how these states perform economically. ”
China’s transmission and distribution losses have been lower than India’s since the 1980s and have fallen, even as India’s soared. I ask whether this can be attributed to China’s authoritarian political system.
He concedes that China benefits from efficient decision making and centralized political power but is unwilling to let India off the hook.
“You go to bat with the political system you have, not the system you wish you had. What you need, the political system that you have should be able to deliver.”
On the upside, he says, India’s decentralized political structure, in which states have substantial autonomy, has opened the way to state-level experimentation with the hope that successful experimentation will be rewarded in the polls.
“If successful experimentation is rewarded…good economics becomes good politics. That I think is India's hope for the future,” he says.
One such experiment is occurring in the formerly lawless state of Bihar, which according to Arvind has seen a turnaround under Chief Minister Nitish Kumar.
“In the first term he made sure the roads would be built and crime would be addressed, and also he did a lot for education. This [second term] he's trying to boost industry and focus more on the economic aspects of development.”
Bihar is “not the most rapid growing state, but it’s no longer the laggard state in terms of growth. People think that another couple of terms of his governance, and maybe Bihar can break the governance trap that it was stuck in.”
I ask Arvind about the contrast between the faltering electricity sector and the new Universal ID program, which some experts hail as a model for the world (for more on how ID systems and development, see my Wonkcast with Alan Gelb). Is there an opportunity, I wondered to transfer technological lessons from the ID program to the energy sector?
“I'm not very hopeful on that score,” Arvind says. “In the case of the power sector I think the problem is explicitly political.”
He adds, however, that technology can be used to improve governance and notes that one of the themes of the new CGD India initiative is how to improve state capacity and governance in a democratic polity like India, in hopes that it might offer lessons for newly emerging democracies in other parts of the world, including Africa.
The goal of CGD’s India initiative is better understand the development challenges it faces and the lessons it has to offer for others. I note that CGD’s mission is to hold up a mirror to the rich and powerful countries, not to try to tell developing countries what to do, so the work on India could be seen as a departure, and perhaps a presumptuous one.
“Indians are a bit prickly about being lectured to, and rightly so,” Arvind explains. “But India has a lot to learn from the outside world as well, so hopefully it will be a mutually beneficial interaction for India, those who study India, and those who study other countries.”
My thanks to Aaron King for his production assistance on the Wonkcast recording and for drafting this blog post.