New Delhi, Sept. 26: The Sun doesn’t shine on the East.
Six states on the eastern board — Odisha, Bihar, Jharkhand, Assam, Meghalaya and Arunachal Pradesh — rank among the 10 least developed states in the country.
The new ranking of states — based on their needs assessed on the basis of a simple index of under-development, and performance based on the efficiency of resource utilisation — was thrown up by a report prepared by a committee headed by Raghuram Rajan, who is now the RBI governor.
The panel crafted its own formula to determine how much money the Centre ought to commit to help the indigent states. The report ranks Narendra Modi’s Gujarat among “less developed states” — which the Congress might find useful to repudiate his tom-tommed record of achievement. Bengal also falls in the same category.
Four Congress-ruled states — Haryana, Uttarakhand, Maharashtra and Kerala — figure among the eight “relatively developed” states, which should give the party something to crow about in its election campaign next year.
The report, which was submitted on September 5, was placed in the public domain today for comment.The report has been released after a public spat between Gujarat chief minister Modi and Union finance minister P. Chidambaram over the growth rates achieved by the NDA and the UPA regimes.
The report not only counters Modi’s much-vaunted claims on his Gujarat model of development but also holds out the promise of granting more funds to potential allies of the Congress, like Nitish Kumar’s Janata Dal (United) and Mulayam Singh’s Samajwadi Party, ahead of the general election next year.
Uttar Pradesh, Madhya Pradesh and Rajasthan also figured on the list of stricken states, indicating that the yardsticks of measuring indigence may have changed but the results haven’t since economic analyst Ashish Bose coined the expression Bimaru in the mid-1980s to describe the woeful development in these three states and Bihar.
The committee headed by Rajan, the former chief economic adviser to the finance ministry and now the RBI governor, was asked to develop a composite index of development.
The committee said its recommended framework should be “used to allocate some of the development funds” that are given by the Centre to the states.
The report proposed a general method for allocating funds based on a state’s development needs and its development performance. However, it did not suggest what proportion of the Centre’s divisible pool of funds should be funnelled to states using this formula.
The underdevelopment index used 10 parameters to measure performance of states. The parameters are: monthly per capita consumption expenditure, education, health, household amenities, poverty rate, female literacy, percentage of SC/ST population, urbanisation rate, financial inclusion and connectivity.
The Rajan formula will probably determine the allocations under the Backward Region Grant Fund, which is capped at Rs 11,500 crore this year. It may also be used to distribute funds under central schemes managed by the rural development ministry.
Fund transfers to states are guided by the Constitution-mandated Finance Commission which determines the allocation of 54 per cent of the divisible pool of central funds meant for states. Another large stream of cash is routed through the Planning Commission that oversees about 46 per cent of central fund allocations.
Releasing the Rajan report, Chidambaram said the committee had been asked to determine the criteria for assessing backwardness amid a growing clamour from states for funds from the BRGF corpus. He said it was up to the central ministries to decide whether they should use the new formula to dole out funds to states once the government accepts it.
The Rajan panel said the old criteria for identifying “special category” states should be dumped while determining which ones are entitled to additional assistance.
There are 11 special category states at present: the seven states in the Northeast, Himachal Pradesh, Jammu and Kashmir, Sikkim and Uttarakhand. It is difficult to say what impact the formula will have on funds allocation.
Bengal, for instance, got only Rs 344 crore from the BRGF this year and officials expected it to remain at around that level even though it had been ranked 12th, a few notches below Gujarat.
Plan panel advisers said cash disbursals for a few flagship development schemes such as the Prime Minister’s funds for rural roads could be determined by the new formula. They estimated the quantum of funds at Rs 21,000 crore, which will be divided among 28 states.
Bharat Ramaswami, a development economist who was a member of the panel which designed the index, told The Telegraph: “We never discussed it (the report) with respect to any specific funds which may be awarded using this criterion…. That’s up to the government.”
Finance ministry officials said many states, which may have done well in terms of per capita income or in attracting investment such as Gujarat, plunged in the development rankings because of poor human indices that had been factored into the underdevelopment index.
A Human Development Report compiled by the government in 2011 had also placed Gujarat among middle-ranking states.
Officials said Gujarat had stood 19th in terms of female literacy and ninth in terms of health indicators using the human development index barometer.