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| July 03, 2000 | ||
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| KAUTILYA The State of States By Jairam Ramesh A new analysis of the performance of states in the 1990s has fresh insights
Twenty-two years ago, Ahluwalia produced a masterpiece on rural poverty that is still a standard reference work. During his PMO and Finance Ministry tenure he had little time for academic output, although he did contribute to various edited volumes. Now, after producing a comprehensive and authoritative monograph on the new global financial architecture for the Commonwealth finance ministers last year, he has come up with another landmark work. This is on the growth performance of states, a paper that he presented last month at Stanford University, US. Ahluwalia concludes that in the 1990s as compared to the 1980s growth rates of gross state domestic product (GSDP) in:
The biggest shocker is Punjab that has all it takes to be a "tiger economy" but is bankrupt. The records of Karnataka and Andhra underscore the need to go beyond information technology while looking at this otherwise dynamic duo. Ashish Bose, the noted demographer, had coined the term bimaru (sickly) for Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. But Ahluwalia shows that Rajasthan and Madhya Pradesh may be breaking out of the bimaru trap. What influences poverty most in this country is farm growth. Ahluwalia's conclusions on the growth rate of agricultural SDP in the 1990s as compared to the 1980s is as follows:
Ahluwalia calculates that inter-state inequalities have increased over the past decade although the popular notion that the rich have got richer and the poor poorer is not entirely accurate. The growth rates of per capita GDP, which is the most basic index of well-being, present a more complex pattern. Nevertheless, he is on very tentative grounds while trying to explain the differentials in growth performance. However, his failure to find a statistically significant relationship linking growth with various investment and infrastructure factors should not blind us to a very basic fact -- that as long as states continue to be financially strapped, hopes of their sustaining a growth momentum are bleak. The finances of the 10 "special category" states (the seven North-east sisters, Sikkim, Himachal and Jammu and Kashmir) that are almost completely dependent on the Centre are in terrible shape. For the rest, as judged by the ratio of interest payments to revenue receipts:
Ahluwalia's paper should trigger a lively debate. But this debate must not take place in an adversarial manner and the Centre must become less preachy. Undoubtedly, growth in states will be determined largely by their own governance and fiscal capability. But it will also be influenced by Central policies which determine not only the terms of borrowing through Central loans and assistance but also through loans via agencies like LIC, HUDCO and NABARD. The states are not benefiting from a lower interest rate regime while the 70:30 loan: grant mix in central assistance, fixed when the revenue component of State Plan expenditure was around 30 per cent, is clearly outdated given that this share is now over 50 per cent. The author is secretary of the AICC's Economic Affairs Department. The views expressed here are his own. |
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In
its present structure, shape and style, the Planning Commission is an
anachronistic nuisance. But it can be a great intellectual watering hole
for anyone with a scholarly bent of mind. And so it has been for Montek
Singh Ahluwalia, India's distinguished economist-administrator who was
banished to Yojana Bhavan in August 1998.