Regional Balance in Indian Planning by Montek Singh Ahluwalia Introduction
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- TABLE 1 DEVELOPMENT LEVELS ACROSS THE STATES
- All-India 61,654 0.47
- State 1999-2000 2005-06 (except where indicated)
- TABLE 3: CENTRAL TRANSFERS TO STATES AND UT’s (Rs. Crore) (% of GDP in Parentheses)
- Sl. No. Items 2006-07
- Centrally Sponsored Schemes
- Table 4: Growth Rates in Gross State Domestic Product in Different States
- SI. No. States/ UTs Eighth Plan 1992-97 Ninth Plan 1997-2002
Conclusion We now attempt to summarise the main conclusions emerging from this paper. Six main points should be noted. First, there is clearly a very wide difference across states in per capita incomes and in other measures of socio-economic development, and a reduction in these differences is a natural planning objective for any democratic country. Differences within states are also substantial and pressure is building up to take corrective steps in this area as well. Second, fiscal transfers are seen as a critical instrument for bringing about greater regional balance, and they are indeed important, but they are only one element in what must be a more comprehensive strategy. The level of development in any state or region is the consequence of the interaction of many determinants of development including the state of governance, the level of investment, which in practice means private investment to a substantial extent, the availability of essential infrastructure including infrastructure for agricultural development, the state of human resources and access to essential services such as health and education. To promote development in a state or district, it is necessary to design a policy framework which impacts effectively on all these elements. This aspect of policy to achieve regional balance receives less attention than it should. It is true that effective intervention in many of these areas requires additional resources, and since the poorer states have relatively less fiscal capacity, fiscal transfers have an important role to play. However, the effectiveness of transfers depends upon how they are used to support a multi dimensional strategy for promoting development of backward regions. In the absence of such an effective comprehensive policy to address all the causes of backwardness, transfers alone will not be effective. Third, the adequacy of the current level of fiscal transfers for the poorer states has to be determined on the basis of a holistic approach, taking account of transfers through the Finance Commission and those through the Planning Commission. The total of these transfers, including the Centrally Sponsored Schemes is over 6 per cent of GDP. The transfers are also progressive in the sense that poorer states get a higher per capita transfer, but the extent of progressive varies across transfers. It is always possible to ask for greater progressivity, but given the limitations total resources available, increased progressivity is only possible if the size of the transfers to richer states can be reduced. This is bound be resisted by the richer states. The debate on whether transfers to poorer states are sufficiently progressive can be settled only if there could be some agreement on the principles on which progressivity of transfers should be determined. Furthermore, this must be done in a holistic manner taking all transfers together, rather than focussing on one or the other, and also taking into account the optimal effort that must be made by the state itself. Fourth, there is a contentious issue of whether transfers to states should be conditional or unconditional. Centrally Sponsored Schemes are a form of conditional transfers which in absolute size are much larger the Normal Central Assistance, which is unconditional. States argue for abolishing Centrally Sponsored Schemes, and transferring the resources thus saved to the states through normal central assistance, which is not conditional. However, if the purpose of the transfer is to address the causes of imbalance there may be merit in linking the transfer to particular uses, especially if the linkage increases expenditure in areas which would address the root cause of imbalance. One way of meeting the concern of the states, halfway is to retain the sector linkage of CSS, but introduce greater flexibility in the guidelines under which CSS operate to allow states to reflect state specific considerations. This is proposed to be implemented in the Twelfth Plan. Fifth, the experience of growth in recent years suggests that the earlier disequalizing trend witnessed in the immediate aftermath of reforms is being reversed and the poorer states have begun to perform much better. Bihar has done the best in the Eleventh Plan, though all other erstwhile BIMAROU states have also improved their performance. If the regional balance objective is defined as convergence of growth rates we have made great progress. However, if the objective is defined as equalizing inter-state per capita incomes, we have a long way to go. This is because convergence in per capita incomes can only take place if the per capita incomes of the poorer states grow faster than the country as a whole. Since their population growth is higher, this will require a large differential between their GSDP growth rate and the GDP growth of the country. Bihar is the only BIMAROU state to have achieved a growth rate in per capita terms, which exceeds the national average in the Eleventh Plan. Finally, it is important to acknowledge that even if we are able to go beyond mere convergence of growth rates and achieve the more challenging objective of poorer states growing faster in per capita GSDP than richer states, it will still take a long time to narrow initial differences in per capita income. This is illustrated by a hypothetical projection, if Bihar's per capita GSDP grows a full one per cent faster than the country for the twenty years, Bihar's per capita GSDP will only rise from 33 per cent of the national average to 40 per cent at the end of the period. Achieving inter-regional balance should therefore be recognized to be an objective that can only be achieved gradually. After all, significant within country differences continue to exist even in developed countries. However, that should not be a reason for not trying to bring about convergence, even if the horizon over which significant progress can be made is the long term. ......... TABLE 1 DEVELOPMENT LEVELS ACROSS THE STATES
Source: CSO and India Human Development Report (2011) Table 2: Coefficient of Variation in District Level Domestic Product
Source: Directorate of Economics and Statistics, Respective State Governments 1. 2004-05; 2. 2006-07; 3. 2007-08; 4. 2008-09. TABLE 3: CENTRAL TRANSFERS TO STATES AND UT’s (Rs. Crore) (% of GDP in Parentheses)
Table 4: Growth Rates in Gross State Domestic Product in Different States (% per annum)
Source: Central Statistical Office (CSO); Average Growth Rates of different years 1 HDI is a composite index comprising standard of living measured by per capita GSDP, health status measured by life expectancy at birth and education status measured by adult literacy rate and enrolment in schools. 2 In effect, if the transfer from the Centre to a state is in accordance with the state’s entitlement, the need for special resources for the backward regions within a state should be a matter for intra-state equitable distribution of available resources. 3 The practice of earmarking grants for particular purposes has emerged over the years in successive Finance Commissions and introduces a degree of ‘weak conditionality’ for this part of the transfer in the sense that the funds have to be spent for the particular purpose broadly defined whereas the other Finance Commission transfers are completely unconditional. 4 The Gadgil-Mukherjee formula is based on a set of criteria for distribution of central assistance. It provides 60 per cent weightage to the population; 25 per cent weightage to per capita income; 7.5 per cent weightage to performance and 7.5 per cent weightage to special problems. 5 Kerala, for example, benefits very little from the Sarva Shiksha Abhiyan because they already have the school infrastructure needed, which many other states, especially in the North, have yet to complete. Similarly Punjab does not benefit from the PMGSY rural roads programme since they had built the rural roads long ago. These states argue that the formula for transfers should build in incentives for success. 6 See, Rao (2013). 7 It is much higher at Rs 9,500 in Haryana and around Rs7,000 in Gujarat, Maharashtra, Tamil Nadu and Karnataka. 8 There are no reliable data on district-level GDP which would enable comparable assessment of changes in the intra-state balance over time. 9 The inter-state Gini coefficient is constructed by assuming that each person in a state has an income equal to the per capita GSDP of the state and then constructing a Gini for the county as a whole on the basis of this distribution of individuals. Directory: aboutus aboutus -> News release aboutus -> November 17, 2004 The Honorable John W. Snow aboutus -> The National Parks – America’s Best Idea aboutus -> A voice In The Wilderness aboutus -> Curriculum vitae daniel allen weymouth aboutus -> Mock or skit: Date: April 21st 2016 Location: Kennard-Dale High School Time: 0700-1245 aboutus -> Indonesia individual Action Plan Update for Indonesia for 2016 aboutus -> Spartan Speak Newsletter aboutus -> Ryan Minor aboutus -> Concern behavioral and Management Solutions Download 430.7 Kb. Share with your friends:
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