Opinion The 50-state future

Will we soon have a decision on Telangana? In all probability,we won’t. It is unlikely the Srikrishna panel will come up with clear recommendations. That’s the nature of committees. It will set out pros and cons. It will indulge in “on the one hand,on the other”. It will waffle. It will have statements about equitable allocation of resources between the two regions,but stop short of recommending a clean divide. Even if there are clear recommendations,the government is caught in a cleft stick. It can’t afford to take a decision either way. So it may appoint another committee to consider the recommendations of this committee. The UPA promise of 2004 was premature and when it made the promise,the implications weren’t thought out. We know that Indian states haven’t been created on rational considerations. There were histories and colonial legacies. Linguistic considerations were unnecessarily brought in. This should never have been about Telangana. Instead,it should have been about rationalisation of states. It should have been about setting up a second States Reorganisation Commission. That would have imparted objectivity and transparency and injected rationale into state formation,instead of the present ad hocism. Will we now have other committees for Maharashtra,Uttar Pradesh,West Bengal and whatever other splintering we have in mind?Governance is about providing public goods and services. That may be national security; international relations; defence; law and order; or development,involving the provision of physical and social infrastructure and the delivery of anti-poverty programmes. There is an optimum level at which they can be provided. For instance,national security,international relations and defence are best ensured at the national level. Not only are there economies of scale,those result in the aggregate being greater than a mere sum of the parts. Had India been 50 individual countries instead,none of them would have possessed the clout and soft power India possesses today. Africa would have been different had it been a United States of Africa. Had the European Union not transpired,today’s Europe wouldn’t have been the same. But that logic doesn’t apply to development,delivery of anti-poverty programmes and what goes by the name of planning. Everyone agrees China is more decentralised than India and decentralisation is desirable. But we do little beyond paying this lip service,notwithstanding the 73rd and 74th Amendments to the Constitution. Think of the Planning Commission. Why does it exist? It no longer needs to be a government-funded think-tank and research body. There’s no market failure in such areas today. If plans are to be developed at district-level and aggregated upwards,we no longer need Mark XI or Mark XII of the First Five-Year Plan. If funds are increasingly transferred directly,we no longer need plans and Gadgil formulae and Central sector and Centrally sponsored schemes. Flows can,and should,be through the Finance Commission.That we don’t believe in decentralisation is evident from our use of the word “Centre”. Where does this come from? It isn’t one used in the Constitution. The Constitution only uses the word “Union”. That’s what India should be — a Union with a Seventh Schedule that is purged of the vestiges of centralisation. However,decentralisation doesn’t only mean so-called Centre-state issues. It also means decentralisation within states. No state voluntarily wishes to do that. Witness the cavalier attitude towards recommendations of state finance commissions. If states don’t push decentralisation voluntarily,we must recognise that today’s states are the outcome of historical accidents. Their geographical boundaries have no economic or other rationale. Taken to its logical extreme,we should have a Union with perhaps 600 districts,weeding out the inconvenience of states in between. However,that makes the Union too powerful and no individual entity — district or state — will be powerful enough to exert countervailing pressure. Historical evidence doesn’t suggest we can trust Delhi to be democratic enough. Had that not been the case,we would have followed Gandhiji more and quoted him less.If 600 is too much,there is another way to look at the problem.When does a state become too large to govern optimally,in the sense of providing those public goods and services efficiently? As a rough rule of thumb,it becomes ungovernable if its population crosses 25 million and geographical area crosses 25,000 sq km. We not only have states that are too large. We also have states that are too small.Ideally,India should have around 50 states,with some splitting up and some mergers. Smaller states are more homogeneous. That makes it easier to plan and administer and handle inter-group trade-offs. Governments are closer to people. The chief minister can act more like a CEO and less like a non-executive chairman. There is always corruption associated with public expenditure. But that leakage isn’t always siphoned off to Swiss bank accounts overseas. The dividing line between black and white is blurred and black income does get spent. A smaller state means leakage gains are typically spent within a smaller radius and,therefore,consequent multiplier benefits also tend to be local. This is over and above infrastructure creation becoming more broad-based (new state capitals,say).These theoretical propositions can be tested empirically. J&K and the Northeast have their own special problems. Disregarding these,on an average,smaller states perform better than larger ones,regardless of economic indicators. Even if one ignores Delhi,think of Kerala,Goa and Himachal. When a state is bifurcated,not only does the relatively smaller state improve its performance,so does the relatively larger state. Earlier,think of Gujarat/ Maharashtra and Punjab/ Haryana. In more recent times,think of Uttarakhand/ UP,Bihar/ Jharkhand and MP/ Chhattisgarh. Both the theoretical and empirical arguments are robust. Smaller states perform better. Had there been a second States Reorganisation Commission and had it looked at the issue objectively,independent of historical,colonial and linguistic baggage,it would have come to the same conclusion. It would have recommended breaking up Andhra,Maharashtra,MP,UP,Rajasthan,Karnataka,J&K and West Bengal and recommended consolidation in the Northeast. Apart from there,it would have recommended smaller states,not small states in the sense of their being too small. But we don’t believe in such objective exercises,do we? We believe in political opportunism and ad hocism. Thus,a wind has been sown in Andhra. And regardless of what the committee has recommended,a whirlwind will be reaped. The UPA government deserves no sympathy on this one. To use the phrase WikiLeaks put on our front pages,it never misses an opportunity to miss an opportunity.

The writer is a Delhi-basedeconomist,express@expressindia.com