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...
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