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Wednesday, 16 November 2011 00:48
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Small states work better

There’s sound economics to Mayawati’s politics


There is obviously a lot of politics to UP CM Mayawati’s announcement that she plans to take the proposal to divide UP into four states to the state assembly next week. There is a lot of symbolism also, given that BR Ambedkar was a supporter of small states—“a population of approximately two crores … should be regarded as the standard size of population for a State to administer effectively,” Ambedkar said. But there’s also economics since, as a study by Indicus Analytics points out, smaller states tend to grow faster than larger ones as, more often than not, these states have found it easier to push through economic reforms—this may be because they are more homogeneous, or it may be because they don’t have as much minerals, say, as larger ones, the reason is immaterial.

In 1948, India had more than 500 small states that were then merged into 28 units—30 princely states with a land mass of 27,000 sq km, for instance, came together to form Himachal Pradesh. The next big reorganisation came in the mid-60s when Haryana was formed out of Punjab and some districts went to Himachal Pradesh. In 1971, Arunachal, Meghalaya and Mizoram were carved out of Assam and then, in 2000, Uttaranchal, Jharkhand and Chhattisgarh were formed out of UP, Bihar and Madhya Pradesh. Indicus looks at Punjab, Haryana and Himachal’s pre-reorganisation growth for a decade and finds it was lower than India’s by over one percentage point. In the post-reorganisation decade, the growth was higher than that of India by around 1.5 percentage points. Assam’s growth doesn’t do better after it is carved up but, given the law and order problems it has suffered, it’s important to note it didn’t fall that much either.

Of the six states formed in 2000, except for Madhya Pradesh, all the others performed much better in the seven-year period post-reorganisation than the seven preceding years. In the case of Uttarakhand and Chhattisgarh, the annualised growth rates increased by about 6 percentage points in the post-reorganisation years. In Jharkhand as well there was an improvement, about 4 percentage points—the smaller Bihar also found its growth rising by 3.7 percentage points.

It is important to point out that, in the case of Telangana, the issue is somewhat different since the fight is more over who gets Hyderabad. Equally, while smaller states have tended to do well, there is nothing automatic about it—each smaller state has done well because it has reformed. It is difficult to see a smaller Bihar doing well, for instance, had it not been for Nitish Kumar’s reforms.



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