Model Answer
0 min readIntroduction
The reorganization of states in India has been a recurring theme since independence, often driven by socio-cultural and political considerations. Recent instances, such as the creation of Telangana (2014), Chhattisgarh, Jharkhand, and Uttarakhand (all 2000), and more recently, the proposed state of Bundelkhand, raise crucial questions about their economic viability and overall impact on India’s economic landscape. While proponents argue that smaller states foster better governance and targeted development, critics point to increased administrative costs and potential economic fragmentation. This answer will discuss the economic benefits and drawbacks of recent state formations in India, providing a comprehensive assessment of their impact.
Arguments in Favor of New State Formation – Economic Benefits
- Improved Resource Allocation: Smaller states can lead to more efficient allocation of resources based on regional needs and priorities. This targeted approach can address specific developmental challenges and promote inclusive growth.
- Enhanced Administrative Efficiency: A smaller geographical area and population can facilitate better administration, reducing bureaucratic delays and improving service delivery.
- Increased Investment: New states often attract investment due to focused industrial policies and incentives offered by the state government.
- Regional Development: Statehood can empower marginalized regions, leading to increased investment in infrastructure, education, and healthcare, thereby fostering regional development.
Arguments Against New State Formation – Economic Drawbacks
- Increased Administrative Costs: Creating a new state involves significant administrative costs, including establishing new infrastructure, staffing government departments, and maintaining separate administrative machinery.
- Economic Fragmentation: Dividing existing states can disrupt established economic linkages and create barriers to trade and investment.
- Fiscal Imbalance: New states may face fiscal challenges due to limited revenue sources and increased expenditure requirements. They often rely heavily on central transfers.
- Duplication of Infrastructure: New states require duplication of infrastructure like secretariats, legislative assemblies, and administrative offices, leading to wasteful expenditure.
Case Studies of Recent State Formations
| State | Year of Formation | Economic Impact (as of 2023 - Knowledge Cutoff) |
|---|---|---|
| Telangana | 2014 | Demonstrated strong economic growth, particularly in the IT sector. GSDP growth rate consistently higher than the national average. However, regional disparities within the state persist. |
| Chhattisgarh | 2000 | Rich in mineral resources, but development has been hampered by Naxalite insurgency and challenges in resource extraction and equitable distribution. |
| Jharkhand | 2000 | Similar to Chhattisgarh, abundant mineral wealth but faces challenges related to land acquisition, displacement of tribal populations, and infrastructure deficits. |
| Uttarakhand | 2000 | Tourism and pilgrimage are key economic drivers. Faces challenges related to environmental sustainability and infrastructure development in hilly areas. |
The Bundelkhand Example
The proposed state of Bundelkhand, encompassing parts of Uttar Pradesh and Madhya Pradesh, exemplifies the complexities of state formation. Proponents argue it will address the region’s chronic backwardness and water scarcity. However, concerns exist regarding the division of resources, particularly water, and the potential for administrative inefficiencies. A detailed economic feasibility study is crucial before any decision is made.
Impact on Fiscal Federalism
The formation of new states invariably impacts India’s fiscal federalism. The share of central taxes allocated to states needs to be revised, potentially affecting the revenue of existing states. The 15th Finance Commission (2020-2026) considered the impact of state reorganization while recommending tax devolution. Furthermore, increased reliance on central transfers for new states can strain the central government’s finances.
Conclusion
The formation of new states in India presents a mixed bag of economic consequences. While smaller states can offer advantages in terms of targeted development and administrative efficiency, they also pose challenges related to increased costs and potential fragmentation. The economic success of a new state hinges on effective governance, prudent resource management, and strategic investment in infrastructure and human capital. A thorough cost-benefit analysis, considering both economic and socio-political factors, is essential before undertaking any state reorganization. Ultimately, the goal should be to promote inclusive and sustainable economic growth across all regions of India, regardless of state boundaries.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.