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Smaller states: An Economic Perspective

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India should be broken up into smaller states!

If someone said that, you would definitely think the guy is a fanatic and vehemently oppose it. One of the arguments we usually give against such ideas of disintegration is that the smaller parts that are created will not be able to survive economically.

The argument seems logical. The areas which want to be regarded as a separate state are economically backward. They seem likes leeches on the other parts of the state which are well developed. They are like the black sheep of the state. So how will they survive on their own? It’s not possible.

Well to my surprise, I found out that it is in fact quite possible. What is even more surprising is that these new states develop at a better and faster rate than the parent states. Surprised? I sure was.

Let us consider the record of three states that were carved out in 2000- Jharkhand, Chhattisgarh and Uttarakhand. We have to ignore the first three four years as they are the transitional years, the new state is still organising itself.

Let us concentrate on the time duration from 2004-05 to 2008-09. The GDP of rise in the three states was Jharkhand 8.45%, Chhattisgarh 7.35% and Uttarakhand 9.31%. Now that is fast. It is even more astonishing if we consider the fact that these areas (when part of the parent state) were considered stagnated economies.

Of course they were exemptions by the government. There are a few states like Kashmir (5.98%) and Himachal Pradesh (8.47%) that are given the same exemptions. The fact that the new states have outdone the old states in terms of GDP growth is commendable.

Although we cannot ignore the widespread corruption that is prevalent in these states. Mining licenses were ‘sold’ instead of giving them to the highest bidder. . To quote Mr. Swaminathan S. Anklesair Aiyar, “Alas, this problem affects the whole of India: Natural resources from coal to the telecom spectrum are constantly gifted to favoured parties instead of being auctioned, and this enables politicians to amass fortunes. But just as the telecom revolution has been good for India despite corruption, so has private entry into mining and processing.”

Jharkhand and Chhattisgarh account for 68% of the Maoist attacks. There is gross violation of civil rights. Inspite of all this, it has been able to achieve such high growth rates which is surprising, in a good way.  

What will happen to Telengana? I don't know. I am napster not Nostradamus. 

A foreigner who had come to India and lived here for a couple of years had once told me, “India is a Union of 28 countries rather than a union of 26 States”.

It is better if I make it clear that this post deals with only the economic advantages that have been seen due to creation of new states. I am not taking sides on whether formation of new states is good or bad. There are various other things that need to be taken care of while making a decision. This is almost like a myth buster, it just goes to show that sometimes, when economically backward areas are given the opportunity to grow separately, they can exceed expectations. I have no intention to belittle any state or region so please do not get that impression. 

All the statistics have been taken from reliable internet sources and government notifications in newspapers. This is clearly my personal view. I would love to know what you think about it.  

Constructive suggestions  and blog requests are welcome. :)



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  • napster
    napster Tuesday, 29 Jun 10

    No appreciation is fine but no criticisms too ? Now that is new. :D

  • Guest
    Anonymous guest Wednesday, 7 Jul 10

    making more states especially in the north east as demanded by soeme organisations will lead to balkanisation and it might have severe political impact.

    dividing MP, UP and Bihar or AP is still fine as they are too big and administratively difficult to manage...

    but if this happens with other states (especially on the grounds of religion or sons of soil type crap) then india would join the league of USSR and Yugoslavia!

  • napster
    napster Thursday, 29 Jul 10

    I have mentioned that this is only an economic perspective. I know that division on the basis of caste and religion is definitely not viable.

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