It is not easy to rank the states on their performance. The thankless task was undertaken by Debroy and Bhandari using, in their words, objective data obtained from Central government sources, the NCAER (National Council for Applied Economic Research) library and www.india stat.com. They picked eight heads (plus the ninth head of overall performance), identified the parameters under each head, normalised the data, aggregated the variables, used principal components analysis, arrived at a score for each head for each state and ranked the states according to the scores. A pretty impressive effort, considering that it was the first exercise of its kind.
The methodology has its drawbacks. It is invidious to compare small states with big states, for example Goa with Uttar Pradesh (UP). Besides, the states did not start at the same level in 1991. During the decade, exogenous factors like drought, riots or immigration were different for different states. While the ranking may have been objective, the exercise does not explain or purport to explain the reasons for the low rank obtained by some states. The State of the States report is a snapshot, and snapshots do not explain why some people are ugly.
The final results were not startling. In fact, they reaffirmed our intuitive conclusions about the performance of different states since the process of economic reforms began in 1991. It did not require a study to tell us that the worst performing states lie to the east of Kanpur or that Goa, Delhi, Gujarat, Maharashtra and Karnataka have, during the period 1991-2001, grown as fast as the tiger economies of east Asia. In many ways, 1991 to 2001 has been a splendid decade of growth. At the end, however, we find that there are more questions about governance than answers and more fears about the future than hope.
The case for small states
The report makes out a nearly uncontestable case for small states. Goa, Delhi, Himachal Pradesh, Kerala, Haryana and Punjab easily outscore the bigger states. And among the bigger states, it is the biggest in terms of population and size that have performed the worst. With hindsight, it is possible to say that that the division of Punjab and Maharashtra were wise decisions; otherwise, would Haryana and Gujarat have recorded such impressive development Not all states need to be bifurcated or trifurcated, but if there is a demand based on size, population and geographical characteristics, it seems that division would be a wise solution. The jury is still out on Chhattisgarh, Jharkhand and Uttaranchal, but the early indications are that development will get a boost in these new states unless, of course, misgovernance takes over. In my view, there is a strong case for the creation of Vidharba (out of Maharashtra, population 9.67 crore) and Telengana (out of Andhra Pradesh, population 7.57 crore). UP and Bihar should also be further divided.
Small states have some inherent disadvantages such as a high proportion of administrative expenditure to total expenditure and political instability. It appears, however, that once the states are pushed into a competition mode, political parties try to overcome these disadvantages and work out arrangements under which the government of the day can get on with the business of government. There was less instability in Haryana in the nineties than in the seventies and eighties. Goa had 11 chief ministers during the check period of 10 years, but that does not seem to have affected development. It is also likely that the people depend less on government in the smaller states.
The perils of misgovernance
The consequences of the misgovernance of a state do not stop at the borders of that state. They pull down the whole country and its progress. Take the cases of UP, Bihar and Orissa. These three states have 45 per cent of all Indians living below the poverty line. They have the lowest growth rates, the lowest per capita incomes and among the poorest human development indices. Yet, their constitutional claim for a large share of the resources of the Central government cannot be denied. Most of these funds are poured into a bottomless pit of corruption and inefficiency. It is the progressive states that subsidise the laggards, and soon someone will ask the question why the revenues from income tax, corporation tax and excise generated from the hardworking and producing states should be shared with states that contribute little to the national exchequer. As the disparities between the states grow, so also will the mutual resentment.
The best human resources of the backward states for example engineering and medical graduates from Bihar tend to migrate to states that have jobs to offer them, besides a better quality of life. Even unskilled labour tends to migrate in search of jobs. The backwardness of a state may become a self-perpetuating phenomenon. The politics of such a state will also remain hostage to those who exploit the very backwardness that they helped to create.
We cannot abandon the people of Bihar or UP to their respective fates. The Constitution that proclaims India as one nation must assert itself. The Central government, and instrumentalities like the Planning Commission and the Finance Commission, must call these states to account. The Comptroller and Auditor General must show no mercy to those who are responsible for the misrule. Above all, mainstream political parties that claim to have the larger national interest at heart must stop cohabiting with political parties that have brought ruin and misery to millions of human beings.
(The author is a former Union finance minister)