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Creation of small States does not necessarily catalyse economic growth, says a report by India Ratings.
Coming at a time when the country will soon get its 29{+t}{+h} State – Telangana – the report titled ‘Small States’ Creation – Neither Panacea Nor Placebo’, points out that “creation of small States is not a panacea to improve economic performance, social indicators and other infrastructure statistics. Even though the growth performance of small States is commendable, the belief that they necessarily grow faster than large States is flawed.”
On the basis of analysis of growth performances of the States, the ratings agency said only 11 States grew faster than the country on the whole over 2005-06 to 2012-13. Of these 11, only five were small States – Uttarakhand, Kerala, Haryana, Goa and Himachal Pradesh.
The mixed growth performance of the States formed in 2000 (Uttarakhand carved out of Uttar Pradesh, Chhattisgarh from Madhya Pradesh and Jharkhand from Bihar) also reinforces that carving out a small State does not assure strong growth performance.
“The growth performances of these new States were largely driven by the specifics of the State and the policy framework,” the report said.
Although, the newly formed States have reasonably healthy and improving social indicators, the parent States also managed to prudently improve their social indicators after the split. Notwithstanding the size, States with high literacy rates managed the infant mortality rate better than the rest.
The three smaller States formed in 2000 did upgrade their infrastructure after formation and addressed deficiencies in power, roads and access to drinking water.
However, their parent States also did not lag behind in addressing infrastructure issues. Nevertheless, these infrastructure changes could have been delayed in these regions if there had been no division. That is why the agency does not believe that division alone is the reason for these improvements.
The fiscal performance of small States was diverse during 2005-06 and 2012-13 with a few States being disciplined and following tight fiscal policies, and the rest embracing expansive policies.
“As the performance of small States differs across various economic parameters, carving out a new State is not a remedy,” it said.
Concurrently, formation of a new State would not simply assure robust governance and higher economic growth.
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