What's New

Re-organisation of States

Q. Discuss whether the formation of new states in recent times is beneficial or not for the economy of India.

Answer

Reorganization of states has been one of the most contentious issues since the Independence of India. Besides political bargains, creation of new states has attracted the attention of policy makers and intellectuals who hold divergent views regarding the formation of smaller states.

Arguments in favor of newer states as boon for economic development:

1. The Economic Survey 2016-17 stated that smaller states in India, trade more than the rest.
2. New states offered better and efficient administration which led to creation of infrastructure, strengthening the connectivity in the area, expanding its access to markets and boost trade for the overall economy of the country.
3. People of the region gain control over its resources and an organic model of growth can emerge to address their economic aspirations.
4. Political stability that arises from better representation of people creates a conducive environment for investment in the region. Thereby encouraging regional economic development.
5. School enrolment also increased suggesting greater investment in human capital.
6. Durable goods remained comparable across the two sides of the state border, suggesting that free movement of labor and capital can mitigate differences in economic opportunities across proximate geographies.
7. Recently formed state Telangana has continuously been among the top ranks in the list of ease of doing business in the country, since its formation.

Some issues and concerns:

1. Uttarakhand continues to be at the end in the Human Development Index. The recent floods showed the inability of the state to deal with rehabilitation of the displaced residents.
2. Chhattisgarh has witnessed largest tribal displacement in the recent times. The inclusive economic development is far from the reach of the state giving the increased miserable conditions of the tribal and their forceful displacement.
3. Jharkhand has failed from the governance and administrative perspective and became a state of coal scams and corrupt practices.
4. Telangana, recently carved out from the state of Andhra Pradesh is heavily relying on the central grants to pay for its newly created administrative and institutional machinery.
5. Creation of new states means establishing new administrative machinery and new institutions which leads to increased revenue expenditure in turn puts pressure on fiscal pressures for the government.

To catch up with the growth trajectory of the other states, the above mentioned states started unmindful exploitation of resources such as mining of the minerals, converting agricultural land into real-estate which is not sustainable as far the economy of the country is concerned in the long run.