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From 28 to 45?

We need another States Reorganisation Commission to devise an optimal number of states....

Written by Bibek Debroy |
December 15, 2009 3:38:15 am

Bagelkhand,Bodoland,Bundelkhand,Gondwana,Gorkhaland,Harit Pradesh,Kamtapur,Kodagu,Koshal Ladakh,Maru Pradesh,Paschimanchal,Purvanchal,Rayalaseema,Saurashtra,Tulu Nadu,Vidarbha — after Telangana,these are only a few of the names figuring in India’s so-called Balkanisation. Some propositions are beyond dispute. First,India’s present organisation into states (and UTs) isn’t

rational,if rationality is interpreted as delivering better governance. The word governance is much abused and different people mean different things when they use it. Governance is a process and it is also about delivering public goods and services (law and order,primary health,school education,roads,drinking and irrigation water,electricity). These are still areas characterised by some degree of market failure. In addition,there are anti-poverty programmes. In all these,trading off economies (of scale and scope) with diseconomies,there is an optimal level of administration at which these can be delivered. While there is a case for centralisation for defence and national security,there is a case for decentralisation for public goods. As a rough rule of the thumb,at least in India’s heartland,optimal governance

requires population sizes smaller than 50 million (25 million is more like it) and geographical expanse less than 35,000 sq km.

Second,there is an empirical proposition. Across India’s 28 states and its UTs,work co-authored with Laveesh Bhandari shows smaller states perform better than larger states — on an average. Small states perform better than large states on physical infrastructure,social infrastructure,law and order and anti-poverty programmes. However,this is on an average and isn’t a finding specific to Chhattisgarh,Jharkhand or Uttarakhand. Nor is it the case that administrative restructuring alone solves all governance problems. For instance,the Northeast and Jammu and Kashmir have

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issues that administrative restructuring alone cannot solve. What of the three newly-formed states? A long enough data time-series doesn’t exist. Subject to that,the answer depends on indicators used. Across indicators,Uttarakhand performs better than UP. The Chhattisgarh-MP comparison is iffy,with Chhattisgarh performing better on some indicators and worse on others. For Bihar-Jharkhand,Bihar generally performs better than Jharkhand. If an argument about optimal administrative level is accepted,the question shouldn’t only be about carved-out states like Chhattisgarh,Jharkhand,Uttarakhand. Governance should also improve in what remains — MP,Bihar,UP. Since one cannot control for other variables,there is a post hoc ergo propter hoc danger. With this caveat,governance (however defined) has improved in

MP,Bihar,UP. Third,the British system of governance was unduly centralised,driven partly by land revenue

considerations. This comes out in India-China comparisons,with China much more decentralised even before 1978-79 reforms. For growth and development,we need greater decentralisation and devolution and local bodies (urban local bodies as well as panchayats) are only perfunctory preliminary steps,despite euphoria. But mindsets of control and centralisation die hard. Subhas Kashyap made a profound observation. Why do we use the expression Centre-state relationships when the word “Centre” is never used in the Constitution? The use of “Centre” rather than the constitutionally-correct “Union” underlines this mindset of centralisation and second-class peripheries.

But this mindset isn’t one for Centre-state alone,it spills over into intra-state relationships. Witness state reluctance to contemplate devolution/ decentralisation,diversion of funds meant for backward regions,cavalier attitudes towards State Finance Commission recommendations. When there has been decentralisation of sorts (PMGSY,NREGS),efficiency of public

expenditure has improved. There is a corruption cum leakage issue that needs flagging too. Rajiv Gandhi spoke of 15 per cent of government funds reaching target beneficiaries and this is interpreted as 85 per cent leakage. That’s not true. 85 per cent represents both administrative costs and leakage.

In principle,transparency and accountability should improve with smaller states. But even if this doesn’t happen,there is a geographical shift in location of administrative costs and leakage. They occur in Darjeeling rather than Kolkata,with consequent multiplier benefits also changing geographically. Since Planning Commission (including Central sector and Centrally-sponsored schemes) and Finance Commission transfers have failed to develop backward regions,backward region development through localisation of administrative costs and corruption is hardly unmitigated disaster.

Fifth,other than British systems of governance being unduly

centralised,the legacy of state formation was irrational,both in terms of initial categorisation into three types (Parts A,B and C) and subsequent formation of states on linguistic grounds. There were colonial and historical reasons why this was done in 1950 (the Constitution) and 1956 (States Reorganisation Act),such as the existence of princely states. But there are no reasons why 1950 or 1956 developments should be cast in stone. Indeed,states have been formed after 1956 too. However,what one needs is another States Reorganisation Commission to devise an optimal number of states. With the kind of benchmarks that work for good governance,we would then probably end up with something like 45 states. Had one gone about the exercise rationally,this is what UPA-II should have done.

Sixth,in any federal set-up,efficient inter-state dispute resolution and coordination mechanisms are needed. There are gaps in what was constitutionally provided and what was constitutionally provided has been imperfectly implemented. However,this shouldn’t be interpreted as a higher administrative hierarchy for delivering public goods. These are distinct issues.

Seventh,the decision about Telangana was ad hoc,arbitrary,non-transparent and politically motivated. There cannot be any dispute about that either. Had fasting been the trigger,Manipur’s draconian laws should have changed first. This ad hoc decision has now opened up a can of worms. Occasionally,irrational decisions can catalyse stock-taking and review that lead to rational examination. In the muddied waters of Telangana,there is no evidence yet that this will happen. But as the demand for newer states snowballs,perhaps we will eventually have that elusive second States Reorganisation Commission and break away from linguistic and ethnic categorisations in forming new states. The more homogeneous the entity,the easier governance becomes and tautologically,smaller states are less heterogeneous.

In this controversy over Telangana,there is an impression that there is a great deal of controversy. However,if one thinks about it,there should be complete consensus on these seven propositions. Unfortunately,in its preference towards setting up commissions right,left and centre,the UPA didn’t set up the one it should have and the whirlwind is being reaped now.

Perhaps there is a moral there too. Governments are reluctant to delegate decision-making to commissions. Instead,there is a preference for arbitrary exercise of centralised power,exactly the opposite of what the Constitution intended.

The writer is a Delhi-based economist

express@expressindia.com

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