Unique features of EEI

The Economic Environment Index (EEI) by the Centre for Development Finance (CDF), in partnership with the Centre for Monitoring Indian Economy and association with the Confederation of Indian Industry – Tamil Nadu Chapter, comes as a first of its kind effort in India on two counts:

• 1. This study is at the district level for all districts of a state – Generally, such studies have focused on the regional level – country or the state¹ ; and at the sub-regional level, they have focused on the capital city of the state². However, in India, a need to study district level governance requirements has already been recognized. In particular, the Planning Commission of India has taken cognizance of the need for decentralized planning process at the district level and further at the panchayat level in the Eleventh Five Year Plan, and has released a “District Planning Manual” to help this process. This manual succinctly observes the importance of taking into account “…resources locally available, infrastructure status and gaps, the aims and vision of the local people and weighing options of lead sectors…” to foster inclusive growth. It also calls for an enhanced level of transparency at all levels, that would not only help in understanding the disparities between the living standards of people but also enable equitable and humane planning³.
• 2. This is a study of both the household and the business sectors in the districts – almost invariably, similar studies, including the successful ones highlighted earlier, strive to reflect the views of the businesses; other studies focused on households are generally the human development indices concentrating mostly on outcomes such as per capita income and life-expectancy, which are important in their own ways. However, households are important constituent of the economy at whom much of the governance programmes are directly targeted at to improve their economic wellbeing.
  It is common to find district-level variances in economic performance and in the socio-economic indicators within states. This diversity in delivery and outcomes necessitates that the study of EEI in India be at the district level. In India, the planning and policy parts of the economic environment are vested with the Central and State governments, while the principal responsibility of delivery rests with the district administrations. Thus, EEI, for the first time in India, has facilitated measurement of the enabling environment for households and private enterprise at the district level. This study undertaken in the state of Tamil Nadu is a pilot study as we believe that we would have significant learning from this experience to take this effort forward in the state during the coming years and also in other states.

A significant deviation from other similar indices is the inclusion of households in our proposed Economic Environment Index. Apart from making Economic Environment Index more inclusive, it makes the index more relevant for policymakers who want to show attention to all constituents. Also for a developing country like India where the line between household and small business, and household and labour market is thin, inclusion of households enables this index to be a better reflection of economic governance. This is the one aspect of the index which we intend to study very closely in the pilot. One of the criticisms of including social infrastructure indicators that largely have an impact on the households is that these indicators, especially the ones focused on outcomes, take time to change and are long-term policy matters. However, there have been studies which have shown measurable changes in such social parameters on a yearly basis⁴. Moreover, the infrastructure inputs that are the basis for several indicators we use can be scaled up quickly with concerted public action.