Active Stocks
Tue Mar 19 2024 15:01:05
  1. Tata Consultancy Services share price
  2. 3,985.40 -3.84%
  1. Tata Steel share price
  2. 149.25 -0.23%
  1. Bharti Airtel share price
  2. 1,229.90 0.40%
  1. Power Grid Corporation Of India share price
  2. 259.65 -2.02%
  1. ITC share price
  2. 409.50 -1.89%
Business News/ Opinion / Online Views/  The storm over small states
BackBack

The storm over small states

There are sound economic and political reasons to reorganize India’s large and unwieldy states

Narrow electoral and political considerations aside, the impasse over Telangana raises some serious questions for incumbent and future Union governments about the basis for the creation of smaller states. Photo: Noah Seelam/AFP (Noah Seelam/AFP)Premium
Narrow electoral and political considerations aside, the impasse over Telangana raises some serious questions for incumbent and future Union governments about the basis for the creation of smaller states. Photo: Noah Seelam/AFP
(Noah Seelam/AFP)

With an apparent solution in sight to the decades-long Telangana agitation, political climate in Andhra Pradesh and in New Delhi has somewhat begun warming up. The arguments in favour and against the creation of a new state can be heard loud and clear. With the Rayalaseema region also witnessing protests—both for and against a separate state—Andhra Pradesh seems to be in for continued political unrest till the general election in 2014.

Narrow electoral and political considerations aside, the impasse over Telangana raises some serious questions for incumbent and future Union governments about the basis for the creation of smaller states.

Most of the arguments in this fiercely contested debate can be put into three categories: emotional, administrative and economic. Emotional arguments highlight the self-respect of an apparently subordinated people. This once-powerful idea that generated movements for nation-states, cannot form the basis for creation of states as it can lead to balkanization with no end. It is a moot question if politicians are provoking sub-regional identities to protect their political interests or are merely following or echoing the sentiments of their constituents. Either way, creation of smaller states based on people’s sentiment can be quite a dangerous thing, since such sub-regional movements need not stop with one round of reorganization of states. For example, one can already see the movements in Rayalaseema, northern Andhra and elsewhere in the name of self-respect of the people of various sub-regions.

The proponents of administrative argument highlight that smaller states can be better managed administratively and lead to better development. The issue is how to decide the optimal number of states and the optimal size of a state. Against this is the argument about smaller states generating security risks. One hears politicians from coastal Andhra suggesting there is a possibility of Naxalism becoming serious threat to regional and national security if Telangana were to be created. This is not a tenable argument as the issues of internal security will need to be handled separately and firmly at the Union level and a policy of states reorganization cannot be held hostage by a law and order problem. On the contrary, with better administrative supervision and control leading to development in neglected areas, creation of smaller states can potentially moderate anti-state movements.

The real argument for state reorganization in the present context is economic: the big question is if the creation of new states will benefit the economic well-being of people of new states as well as those of the old states, or at the least, if the hiving off of a state will benefit the people of one region without significant loss to the people of the other. Even when there are no clear and significant differences between the economic backwardness of some regions vis-à-vis others, there can still be a case for the creation of smaller states in order to promote balanced regional growth across all regions.

In a research paper, titled Regional Disparities in Andhra Pradesh (published in Local Economy in 2012), Amarender Reddy and M.C.S. Bantilan argue, “A process of cumulative causation is apparent, in which agglomeration has stimulated innovation and productivity growth, further accelerating the attraction of factors to the leading, or core, region" and “a large urban centre (Hyderabad), which acts as a hub for economic activities, has attracted factors of production, and has stimulated income and employment opportunities in the surrounding local economy, but its impact on the peripheral districts is limited. There is a need for policy intervention in these peripheral districts in order to reduce regional disparities".

Almost 35% of public investment and about 65% of private investment during last 15 years took place in the Hyderabad region. A significant part of investments from the rich in coastal Andhra also went into the relatively unproductive real estate in and around Hyderabad. And much like the well-known Dutch disease, in which development of North Sea oil sector in the Netherlands caused a decline of development in other sectors and regions, this aggravated the concentration of economic activity in one region and for the detriment of other cities in the state.

The creation of a separate state of Telangana, with Hyderabad being a common capital in the interim, can diversify the investments and growth across the state with focus being shifted back to cities like Vijayawada, Guntur and Visakhapatnam in coastal Andhra, and Kurnool and Anantapur in Rayalaseema. Because of the popular attention, there will be pressure on politicians to develop other cities in Telangana as well. The arguments and apprehensions about people of which region have right over mines, river water, land, etc., are baseless as these are fundamentally national resources (as pronounced by the Supreme Court) and their devolution and sharing can be determined by central tribunals as is currently being done between states.

In sum, in the socio-economic and political mess created in the name of Telangana agitation, one can see an opportunity to set right the path of economic development for the whole state by coming out with a plan that leads to a far more balanced sub-regional growth and development. And such a plan can become a template for the creation and reorganization of states across the country.

The author works for an investment bank in Mumbai. These are his personal views. Comments are welcome at theirview@livemint.com

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 14 Jul 2013, 10:51 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App