Rajan proposals will do justice to states

Justice in allocation of funds to really deserving least developed states will finally be done with the recommendations of the Raghuram Rajan panel giving its criteria and evolving a new backwardness index for identifying backwardness of states. The panel headed by Mr Rajan, now governor of the Reserve Bank of India, has also proposed how Central funds should be allocated to these states. One can gauge how unfair and iniquitous the existing manner of devolution of funds to the states was since 11 states are now out of the “special category” status under the proposed new regime. Funds were usually allocated on the basis of clout and political consideration. Now, whether it is Mamata Banerjee, Akhilesh Yadav or Nitish Kumar, the Centre will not be able to use funds as a stick to get them to fall in line. Much is being made about Gujarat being 12th and among the “less developed” states. It was a well known fact that Gujarat was way behind in the human development index in education, health and poverty alleviation. Gujarat chief minister Narendra Modi is hopefully mature and positive enough to take this as a wake-up call to improve his state on various other parameters besides focusing on foreign investment or ease of doing business. These achievements, however, cannot be belittled when India is desperate for foreign investment as a more stable way of funding the burgeoning current account deficit. And with money coming in, Mr Modi is in a position to evolve schemes that would enhance the quality of life of the marginalised people in his state on more inclusive lines. Orissa and Bihar, which rank among the least developed states, will finally get justice. The chief ministers will now get the badly needed funds as a right, and not as a matter of patronage, or as a lifeline thrown by the Centre to win them over as allies in the coming elections. It is a surprising revelation that Goa emerges the most developed state in the country followed by Kerala and Tamil Nadu, with Maharashtra ranking fifth among the relatively developed states. Maharashtra, incidentally, gets the highest amount of foreign investment. Perhaps there is some sort of message here: that the very small states fare better. Size is the only common denominator between the first two states, otherwise they are as different as chalk and cheese. It would be interesting to see how these two states managed this ranking. It is hoped that the government processes these recommendations and does not shelve or implement some of them half-heartedly, like it did with several other committee reports, including the financial stability report prepared by another committee headed by Raghuram Rajan in 2008.