Smaller states are not the solution

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SummaryNew states have failed to perform better than the parent states both in terms of growth and governance, contrary to what was expected

After Independence, smaller princely states were combined together mainly on linguistic basis. States have been reorganised since then. Andhra Pradesh was carved out of Madras in 1953. In 1956, 14 states and six Union Territories were created. Bombay was split into Maharashtra and Gujarat in 1960. In 1963, Nagaland was carved out of Assam; in 1966, Haryana and Himachal Pradesh were carved out of Punjab. In 1972, Meghalaya, Manipur and Tripura were formed. In 2000, three states were carved out—Uttarakhand from Uttar Pradesh, Chhattisgarh from Madhya Pradesh and Jharkhand from Bihar. The United Progressive Alliance government decided to carve out Telangana from Andhra Pradesh on July 30, 2013.

Generally, regional variation in development has been the major reason for demand for a separate state. Both bigger and smaller states have their own sets of problems. Improved governance is a major argument in favour of smaller states due to the smaller area to be governed. A homogeneous economic environment augurs well for the development of smaller states. However, if the state is not self-sufficient in generating its own resources for developmental needs, its dependence on central government for resources increases. A number of states have problems relating to distribution of river-water. State reorganisation not only aggravates this but also creates complexities with respect to redistribution of power, other resources/assets and liabilities of combined states.

An oft-quoted argument in favour of smaller states is their higher economic growth achievement. Smaller size of operation is not the only condition affecting growth. Initial conditions, proactive growth policies, quality of labour force and governance have a larger role to play in the growth of an economy. A state’s economic growth performance depends on national economic growth performance, which in turn depends on global growth performance. The production structure of a state also weighs heavily on its economic performance. During the global trade slowdown, the states with larger proportion of exports (for example, Karnataka) were adversely affected. The auto sector, at present, is going through a tough time. As a result, the economy of states like Gujarat; Haryana and Tamil Nadu will be more affected compared to other states. Due to different economic regimes, a comparison between pre- and post-state formation economic performance will yield incorrect conclusions.

The state-wise economic growth patterns between FY05 and FY13 throw up some interesting facts. In this analysis, 21 states had been considered. The growth patterns of north-eastern states barring Assam, union territories

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