Should India be broken up into smaller states? After the decision to give statehood to Telangana, many analysts want a new States Reorganization Commission.
India today has 28 states. Assuming 20% population growth since the last census, Uttar Pradesh has 198 million people, more than Brazil, Russia or Pakistan. Maharashtra has 106 million, West Bengal 96 million and Andhra Pradesh 90 million. All are much bigger than France or Britain. At the other end of the scale, Sikkim has just 0.6 million people, Mizoram 1.1 million and Arunachal Pradesh 1.3 million. Clearly, statehood has been determined by political expediency, not logic.
Is there an economic case for carving smaller states out of large ones? Some analysts say small states won’t be economically viable. Others believe small states will fare better, since ordinary people will have better access to power elites. Consider the record of three states carved out of larger ones in 2000 - Jharkhand, Chhattisgarh and Uttarakhand. Ignore data for the first few transitional years. Instead, focus on the average growth rate of gross state domestic product for the last five years, from 2004-05 to 2008-09.
Amazingly, all three new states have grown fabulously fast. Uttarakhand has averaged 9.31% growth annually, Jharkhand 8.45%, and Chattisgarh 7.35%. All three states belong to what was historically called the BIMARU zone, a slough of despond where humans and economies stagnated. Out of this stagnant pool have now emerged highly dynamic states.
Some caveats are in order. The central government exempted industries in Uttarakhand from excise duty, a concession already applicable to other hill states such as Himachal Pradesh, Kashmir and the north-eastern states. Many big industries rushed to Uttarakhand for the tax break, giving the state’s growth an artificial boost. Still, Uttarakhand easily outperformed Himachal Pradesh (8.47%) and Kashmir (5.98%). Remember, Uttarakhand was once considered the poorest, most backward part of UP. After statehood, it has become a growth champion.
Jharkhand and Chhattisgarh were the most backward parts of Bihar and Madhya Pradesh, which in turn were among the most backward states of India. Yet, after becoming separate states, Jharkhand and Chhattisgarh have emerged as industrial dynamos. Both have large tribal belts with pathetic infrastructure. In Chhattisgarh, four-fifths of habitations lack road access. Both states have ample minerals like coal and iron ore. But this was not an economic advantage when they were part of larger states. Rather, their mineral revenues were diverted to state capitals. This diversion ended after they became separate states.
Their rapid economic growth has been tainted by massive corruption. Sheer money power enabled an independent, Madhu Koda, to become chief minister of Jharkhand and rule for years. He handed out dozens of mining licences, instead of auctioning them to the highest bidder. Alas, this problem affects the whole of India: Natural resources from coal to the telecom spectrum are constantly gifted to favoured parties instead of being auctioned, and this enables politicians to amass fortunes. But just as the telecom revolution has been good for India despite corruption, so has private entry into mining and processing.
Jharkhand and Chattisgarh are not growing fast simply through mining. They have experienced a manufacturing boom. Read what research firm Indicus Analytica has to show:
"Since 2001, Jharkhand and Chhattisgarh have moved up into the top 10 (industrial states), displacing Rajasthan and Punjab... The phenomenal growth in these two states has seen the share of manufacturing in their GDP rise dramatically as they have attracted industrial projects. Looking at the share of income that originates in the manufacturing sector, these two states have shown higher levels than Maharashtra, Haryana and Tamil Nadu...Being newer and smaller states, they responded more rapidly than their larger — and in some cases better endowed - neighbours… Raipur in Chhattisgarh has now entered the top 10 districts of India in manufacturing, with two industrial estates at Urla and Siltara".
Now, millions of tribals have been bypassed, especially in remote areas where Maoism flourishes. However, the biggest tribal agitations against giant mining projects are in Orissa. The big Jharkhand projects of Tata and Mittal are in limbo since the state has stalled land acquisition.
The neglect of tribals and consequent rise of Maoism is a blot on the record of Jharkhand and Chattisgarh. The creation of the vigilante Salwa Judum to counter Maoists in Chattisgarh has widely been condemned for violating civil rights.
The two states account for 68% of all Maoist attacks. That’s bad for civil rights and security. Yet, achieving fast growth amidst such insurgency is a major economic feat. It highlights the dynamism created when backward regions become separate states. Hopefully, this economic dynamism will help mitigate the backwardness on which Maoism thrives.
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Comments:
Sort by: Oldest | Newest | Recommended (15) | Most DiscussedDecember 20,2009 at 01:17 AM IST
Thank you Aiyar ji for such a wonderful article.
Atleast now the so called enlightned educated class opposing new states will realize that hard facts dictate new smaller states
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December 20,2009 at 02:36 AM IST
Maoism is not so much a disease as it is a symptom. The kind of *progress* that India is following, which is highly inequitable, makes corruption inevitable. We cheer the growing number of billionaires, but look the other way when desperate debt-burdened farmers commit suicide. How many people have a real stake in this emerging capitalist-exploitative system? Very few.
Small states or large won't make a difference, except to the statistics, which are damned lies anyway.
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(Reply to AMAN SNH)-
vish
says:
December 20,2009 at 11:04 AM IST
I agree with you 100 percent Aman SNH...India cannot shine with millions starving.
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(Reply to AMAN SNH)-
swamy
says:
December 20,2009 at 09:18 AM IST
Be it maoist or small states the rule of the area will be person and coatary dominated. The solution is not in the reactions but in evolution of the optimal. Telangana issue is years old, succeessive governaments ignored. In any system particularly as large and as diverse as India, real or imaginary causes can always be created. A once in two decades review of constitutuion and all pending issues will time-mark the issue and will allow dispassionate debate. A debate o district states will reduce multiple political order and perhaps will be an option.
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December 20,2009 at 02:44 AM IST
Good research, But i regret that decision to make the states are made by politicians based on vote bank not the growth oriented.
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December 20,2009 at 03:58 AM IST
A case for smaller states should be needing in-depth study of all pros and cons. Any hasty steps should be avoided.
Maoists have created serious problems for development of tribal areas, they are thriving on backwardness of area and corruption issues. Activities of Maoists must be controlled.
Agitational approach may not be encouraged for creation of new states but a commission may be deputed to undertake exhaustive study and present recommendations. A well considered solution should be found to solve this matter.
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December 20,2009 at 08:53 AM IST
Yes,
we too feel our southern part of tamil nadu are left out in the developements of Chennai,
When chennai developes only neighbouring districts and people from other states like North/maharasra/andhra/Kerala get the benefit by moving in there.
The south tamils has to face the tough task of competeting with them and finding extreamly difficult task of making co-opeartion between tamils.Even a earlier settled from one south village don't guide and help a new incoming person.
The lack of unity cause the exteam difficulty and some times giving up the oppurtunity to others.
Particularly business are taken away from the tamils.
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December 20,2009 at 09:10 AM IST
Excellent article with crystakl clear views that supports the reorganisation in favour of smaller states.But why you have not taken the growth data for the tinier states of the north east. I think the data will cast a different picture to clarify that smaller states are not the answer for faster growth.
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December 20,2009 at 09:42 AM IST
My be some statistics provided by Mr.Aiyer might prove initially that smaller states are are making better economic progress than bigger states, but in the long run other things, being equal,as long as muscle and money power that is swaying the electrical system now is likely to prove very costly with ayrams and gayarams changing the Govt.,s at their whims and facny.Forther, it is not the political expediency that that has to be depended upon to create a new state but its economic viability is more important keeping in view even bigger states such as Maharastra or Tamilnadu are dependent on central grants/ assistance with out which they can not balance budgets.All said and done, unless the our politicians are prepared to shed certain portion of their selfishness and cultivate to work for the public good nothing can be achieved.
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December 20,2009 at 10:23 AM IST
Hmm, your article makes a strong case for smaller states. Would you apply the same logic to smaller corporates and recommend their break up too.
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December 20,2009 at 02:30 PM IST
I am someone who supports having smaller states. But, there are some problems in the arguments. First, using GDP growth rates to evaluate development is not correct in this context. You could have very high grown rates and still the majority not benefit. This is even more relevant in cases where the growth is driven by usage of Natural resources. Take a look at the middle east for example.
The other bit about Jharkhand. I would like Mr. Aiyer to get some facts correct. The part of Bihar that was taken out to form Jharkhand was not the most backward part. It had places like Jamshedpur, Ranchi and Dhanbad, some of the most advanced bits of Bihar. So the argument that this part started showing higher growths after making them separate state is not correct.
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December 20,2009 at 03:30 PM IST
More states will mean more jobs ;if you divide a big state into 4 smaller ones then you will have 4 CM,4Commissioners of police,
and so on and you will increase the number of babus by a factor of four thus helping employment statitics.
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December 28,2009 at 11:38 AM IST
all is well but what about there political stebility it was seen that these new states are politicaly unsteble
what you think about telengana and vidarbha
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January 10,2010 at 01:49 AM IST
thank you very much sir for the use full data. this is simply awesome writing, after reading this article i have annexed myself in your fans list.
thank you again.
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January 14,2010 at 11:11 AM IST
1.the gdp growth of new small states would have been based on a small base.from a base of 10 if you grow 1 unit , the growth will be 10% but consider a base of 100 and the growth has to be 10 units.
2.smaller states tend to be more vulnerable to the fancies of politicians.
3.Atleast after some time, small states will have to go for resource procurements from neighbouring ares.small states will make the issue of resource sharing a big problem.
4.admn machinery ,cost of maintaining the staff and their allowances will be an unproductive expenditure and it have a multiplier effect over time and place.
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