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The State of States



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Friends:

Jairam Ramesh's assessment of the performance of the States in India =
Today:

Gujarat and Maharashtra accelerated significantly. West Bengal, =
Rajasthan, Madhya Pradesh, Tamil Nadu and Kerala also increased =
considerably. Uttar Pradesh, Bihar, Orissa, Punjab and Haryana =
decelerated sharply. Karnataka remained at the same level while Andhra =
Pradesh saw a small decline. The biggest shocker is Punjab that has all =
it takes to be a 'tiger economy' but is bankrupt. The records of =
Karnataka and Andhra underscore the need to go beyond information =
technology while looking at this otherwise dynamic duo. Ashish Bose, the =
noted demographer, had coined the term bimaru (sickly) for Bihar, Madhya =
Pradesh, Rajasthan and Uttar Pradesh. But Ahluwalia shows that Rajasthan =
and Madhya Pradesh may be breaking out of the bimaru trap.=20

http://www.india-today.com/itoday/20000703/jairam.html



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  KAUTILYA
      The State of States=20
      By Jairam Ramesh

      A new analysis of the performance of states in the 1990s has fresh =
insights

      In its present structure, shape and style, the Planning Commission =
is an anachronistic nuisance. But it can be a great intellectual =
watering hole for anyone with a scholarly bent of mind. And so it has =
been for Montek Singh Ahluwalia, India's distinguished =
economist-administrator who was banished to Yojana Bhavan in August =
1998.

      Twenty-two years ago, Ahluwalia produced a masterpiece on rural =
poverty that is still a standard reference work. During his PMO and =
Finance Ministry tenure he had little time for academic output, although =
he did contribute to various edited volumes. Now, after producing a =
comprehensive and authoritative monograph on the new global financial =
architecture for the Commonwealth finance ministers last year, he has =
come up with another landmark work. This is on the growth performance of =
states, a paper that he presented last month at Stanford University, US.

      Ahluwalia concludes that in the 1990s as compared to the 1980s =
growth rates of gross state domestic product (GSDP) in:

        a.. Gujarat and Maharashtra accelerated significantly.=20
        b.. West Bengal, Rajasthan, Madhya Pradesh, Tamil Nadu and =
Kerala also increased considerably.=20
        c.. Uttar Pradesh, Bihar, Orissa, Punjab and Haryana decelerated =
sharply.=20
        d.. Karnataka remained at the same level while Andhra Pradesh =
saw a small decline.=20
      The biggest shocker is Punjab that has all it takes to be a "tiger =
economy" but is bankrupt. The records of Karnataka and Andhra underscore =
the need to go beyond information technology while looking at this =
otherwise dynamic duo. Ashish Bose, the noted demographer, had coined =
the term bimaru (sickly) for Bihar, Madhya Pradesh, Rajasthan and Uttar =
Pradesh. But Ahluwalia shows that Rajasthan and Madhya Pradesh may be =
breaking out of the bimaru trap.

      What influences poverty most in this country is farm growth. =
Ahluwalia's conclusions on the growth rate of agricultural SDP in the =
1990s as compared to the 1980s is as follows:

        a.. Punjab and Haryana have witnessed a sharp slackening but =
this is after over two decades of high growth.=20
        b.. Gujarat and Maharashtra have shown significant step-up along =
with Rajasthan, Kerala and West Bengal.=20
        c.. A modest to appreciable fall has occurred in Bihar, Uttar =
Pradesh, Madhya Pradesh, Andhra and Karnataka.=20
        d.. Orissa and Tamil Nadu have seen a steep decline.=20
      Ahluwalia calculates that inter-state inequalities have increased =
over the past decade although the popular notion that the rich have got =
richer and the poor poorer is not entirely accurate. The growth rates of =
per capita GDP, which is the most basic index of well-being, present a =
more complex pattern. Nevertheless, he is on very tentative grounds =
while trying to explain the differentials in growth performance. =
However, his failure to find a statistically significant relationship =
linking growth with various investment and infrastructure factors should =
not blind us to a very basic fact -- that as long as states continue to =
be financially strapped, hopes of their sustaining a growth momentum are =
bleak. The finances of the 10 "special category" states (the seven =
North-east sisters, Sikkim, Himachal and Jammu and Kashmir) that are =
almost completely dependent on the Centre are in terrible shape. For the =
rest, as judged by the ratio of interest payments to revenue receipts:

        a.. West Bengal, Uttar Pradesh, Rajasthan and Punjab are in a =
perilous situation.=20
        b.. Orissa, Gujarat, Haryana, Bihar and Andhra are not in dire =
straits but their position is not encouraging either. Bihar has survived =
fiscal stress by not increasing expenditure while Andhra Pradesh is now =
experiencing it on account of growing commitments.=20
        c.. Kerala, Goa, Karnataka, Maharashtra, Tamil Nadu and Madhya =
Pradesh have kept their debt burden down, at least for the time being. =
But this is little consolation. In Karnataka, for example, over half of =
the state's revenues are consumed by salaries and pensions (including =
that of teachers and police).=20
      Ahluwalia's paper should trigger a lively debate. But this debate =
must not take place in an adversarial manner and the Centre must become =
less preachy. Undoubtedly, growth in states will be determined largely =
by their own governance and fiscal capability. But it will also be =
influenced by Central policies which determine not only the terms of =
borrowing through Central loans and assistance but also through loans =
via agencies like LIC, HUDCO and NABARD. The states are not benefiting =
from a lower interest rate regime while the 70:30 loan: grant mix in =
central assistance, fixed when the revenue component of State Plan =
expenditure was around 30 per cent, is clearly outdated given that this =
share is now over 50 per cent.

      The author is secretary of the AICC's Economic Affairs Department. =
The views expressed here are his own.=20


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