Higher social spending in Indian states is not enough to boost standards of living, says a study

• The State Bank of India released its Subnational Human Development Index (SHDI) today.
  
• The list was topped by Kerala, Goa, Himachal Pradesh, Haryana, Punjab and Tamil Nadu.
  
• The report offered an interesting assessment on the effect or lack thereof of higher social spending: it doesn’t necessarily translate into higher standard of living.
  

The State Bank of India released its Subnational Human Development Index (SHDI) today. The index ranks states on the basis of three indicators; Education, Health and Standard of Living.

The list was topped by Kerala, Goa, Himachal Pradesh, Haryana, Punjab and Tamil Nadu.

While some findings weren’t very surprising - South Indian states consistently do better than their Northern counterparts while Northeastern states score poorly - the report offered an interesting assessment on the effect or lack thereof of higher social spending: it doesn’t necessarily translate into higher standard of living.

In order to determine whether higher social expenditure resulted in a higher human development index (HDI) ranking, the report’s authors compared the compounded annual growth rate (CAGR) of social spending with the improvement in HDI scores for a 27 year period starting in 1990.

The report showed that there was a low correlation between the two, indicating that a number of impediments such as red tapism, institutional bottlenecks, implementation inefficiencies and a lack of awareness prevent an increase in social spending from being fully effective.

The conclusion will be a sobering one for India’s political parties, most of which promise significant handouts and higher social spending ahead of elections. In a perfect world, India’s voters would understand that spending alone does not help.


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