Daily Mains Answer Writing - PrayaasPrayaas – February 2019Prayaas – February 2019 – Week 2

Daily Answer Writing for IAS Mains Examination – PRAYAAS Series – Day 54

Q. Discuss whether formation of new states in recent times is beneficial or not for the economy of India. [Answer in 250 Words]



Brief Description of Formation of New States

  • Ever since the independence of India, the issue of state reorganization or the formation of new states has been a debatable one. India has witnessed the formation of several new states since independence.
  • Formation of Uttarakhand, Jharkhand, Chhattisgarh and Telangana are some of the recent ones.
  • On one hand this formation has led to better economic development of the hitherto underdeveloped regions (thereby contributing to the development of overall Indian Economy) while on the other hand some of the newer states face certain challenges as well (lack of revenue sources etc.).
  • The economic benefit of the formation of new states in recent times can be discussed by assessing the performance of these recently created states.

Increase in Socio-Economic Activity
  • According to various findings (ex a paper by Sam Asher and Paul Novosad), a significant increase in socio-economic development has been found in the newly created.
  • For example, the gross enrolment in schools and the per capita income of the people has increased in the newly created states of Chhattisgarh and Jharkhand.
  • Local control over the institutions of governance can have large economic impacts.
Increase in Socio-Economic Activity
  • In addition to this some findings have also indicated that the new states are growing faster than the old states.
  • It has been found that after nearly 10 years of the formation, new states have nearly 25 percent more economic activity than the parent state .
More Fiscal Prudence
  • It has also been found that the new states in recent times are better able to streamline their resource allocation and expenditures.
  • The decentralization of power has resulted in better redistribution of resources among the regions that become the part of the newer state thereby augmenting the economic development.
Demand for newer states by backward regions of larger states
  • The fact that new states are beneficial for the economy is also evident from the emerging demands for smaller states by the economically backward sub-regions of the larger states.
  • The demand for formation of Vidarbha, Bodoland and Saurashtra among other areas are some fine examples in this regard.
  • However, an alternate perspective also exists that counters these findings and observations. According to this opinion, smaller states are no guarantee for better lives and economic development for those social groups for whom new states have been created. This can be discussed through the following arguments.
Low Human Development Index in some States
  • Based on various surveys, it has been found that Uttarakhand continues to be at the lower end in the Human Development Index.
  • The floods of 2013 showed the inability of the state to deal with rehabilitation of the displaced residents.
Lack of inclusive development
  • Although its true that economic activities and the consequent development have increased in the newly created states, but these developments have not been as inclusive as one would have projected them to be.
  • For example: Chhattisgarh has witnessed largest tribal displacement in the recent times. The inclusive economic development is a distant dream amidst miserable conditions of the tribal and their forceful displacement.
Administrative Lacunae
  • Although its true that a local control over the institutions of administration is likely to result in more economic benefits for a state but administration of these newly created states lack the capacity to address the challenges that are faced by a new born state.
  • For example, Jharkhand’s inexperience in administration turned it into a state of coal scams and corrupt practices.
  • Similarly the reorganized state of Andhra Pradesh is facing fiscal crisis since most of the revenue generating Industrial Centers have gone into to the kitty of Telangana.
  • Thus, amidst these factors, it may as well be said that certain benefits for the economy of India is surely associated with the creation of new states. But there is no guarantee for it because certain shortcomings are evident as well.
  • This implies that both large and small states have fared well and that poor performance is not necessarily linked to size.
  • The need of the hour is to harness and utilize the technological developments and e-governance programs as much as possible that can help in governing larger territories easier and bring even distant and remote areas closer.

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