Friday, September 27, 2013

RBI Governor Raghuram Rajan panel termed Tamil Nadu as 5th Developed State



Rajan panel ranks Odisha most backward State

NEW DELHI, September 26, 2013

SPECIAL CORRESPONDENT



RBI Governor Raghuram Rajan leaves after having a discussion with Finance Minister P. Chidambaram, in New Delhi. File photo: Shiv Kumar Pushpakar
RBI Governor Raghuram Rajan leaves after having a discussion with Finance Minister P. Chidambaram, in New Delhi. File photo: Shiv Kumar Pushpakar

Bihar is the second most backward, and Gujarat is less developed

A panel headed by Raghuram Rajan has recommended a new index of backwardness to determine which States need special assistance.

The new methodology ranks Odisha as India's most backward State, Bihar, which has been seeking 'special' status, as the second most backward, and Gujarat as one of the "less developed" States. Goa is India's most developed State.

In May this year, the Union government constituted a committee headed by Mr. Rajan, now RBI Governor, to suggest ways to identify indicators of the relative backwardness of the States for equitable allocation of Central funds. Central allocations are governed by the Gadgil-Mukherjee formula that places the greatest weight on the State's population, followed by other factors like per capita income and literacy. Chief Minister Nitish Kumar's demand for 'special category status' for Bihar has further pushed the government to review how the Centre allocates funds.

The report, which the Prime Minister and the Finance Minister have reviewed, was made public on Thursday. The committee has proposed an index of backwardness composed of 10 equally weighted indicators for monthly per capita consumption expenditure, education, health, household amenities, poverty rate, female literacy, percentage of the Scheduled Caste/Scheduled Tribe population, urbanisation rate, financial inclusion and physical connectivity. The 10 States that score above 0.6 (out of 1) on the composite index have been classified as "least developed," the 11 States that scored from 0.4 to 0.6 are "less developed" and the seven States that scored less than 0.4 are "relatively developed."

The report recommends that each of 28 States get 0.3 per cent of overall Central funds allocated and of the remaining 91.6%, three-fourths be allocated based on need and one-fourth based on the State's improvements on its performance, to be reviewed every five years. Since States now classified as 'special category' will "find their needs met" through the new allocations, the term 'special category' will be retired.

If the recommendations are accepted, Bihar, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh will get a larger share of Central funds than their current share of total Central assistance to State plans and Centrally sponsored schemes, while Kerala, Tamil Nadu and Maharashtra will lose substantially.

One of the panel's five members, Patna-based Shaibal Gupta of the Asian Development Research Institute, has disagreed substantially with the panel's choice of indicators, in a long dissent note appended to the report.

Mr. Gupta's most significant disagreement is with the panel's decision to use monthly per capital expenditure derived from National Sample Survey Organisation reports as a measure of income, rather than per capita State domestic product, which he said substantially altered State rankings.

In its report, the panel, however, defended its choice of indicator: "Since we are interested in measuring the State population's well-being, a majority of the committee agreed that consumption from the household survey seems more appropriate than income from the national accounts. This is a judgment call, and we also present the index calculated using per capita net State domestic product. The correlation between indices is 0.997."

Courtesy_

Also read the related stories

Gujarat fails to make top grade in development index by Raghuram Rajan-led panel

TNN | Sep 27, 2013, 02.42 AM IST

NEW DELHI: A new development index has identified Gujarat as a less developed state, while ranking Odisha and Bihar along with eight others as "least developed" and Goa and Kerala among the seven "relatively developed" states. 

A panel headed by Raghuram Rajan, now the RBI governor, which submitted its report to finance minister P Chidambaram, also recommended a fresh approach to devolution of funds to states and moved away from the special category classification to devise three categories - least developed, less developed and relatively developed. According to the index, there are 10 least developed states, 11 less developed and seven relatively developed states in the country. 

The slotting of Gujarat, which has attracted attention due to its development model, in the "less developed" category is likely to escalate the already bitter political debate on the 'Gujarat model of development'. The other states in this category are Manipur, West Bengal, Nagaland, Andhra Pradesh, Jammu and Kashmir, Mizoram, Tripura, Karnataka, Sikkim and Himachal Pradesh. 

The least developed states include, apart from Odisha and Bihar, Madhya Pradesh, Chhattisgarh, Jharkhand, Arunachal Pradesh, Assam, Meghalaya, Uttar Pradesh and Rajasthan. The relatively developed states according to the index are Haryana, Uttarakhand, Maharashtra, Punjab, Tamil Nadu, Kerala and Goa. 

The panel has developed a multi-dimensional index of backwardness based on monthly per capita consumption expenditure, education, health, household amenities, poverty rate, female literacy, percent of SC-ST population, urbanisation rate, financial inclusion and connectivity. The panel said less developed states rank higher on the index and would get larger allocations based on the need criteria. 

"The committee has proposed a general method for allocating funds from the Centre to the states based on both a state's development needs as well as its development performance," Chidambaram told reporters. 

"The committee has recommended that each state may get a fixed basic allocation of 0.3% of overall funds, to which will be added its share stemming from need and performance to get its overall share," Chidambaram said. 

The panel was set up after persistent demand from Bihar CM Nitish Kumar who insisted a the special category status to help access more funds for its development. This sparked off a demand from several other states such Odisha for the special category state status. 

While the new index will ensure more funds for Bihar from the central kitty, it has stopped short of conferring the "special category" tag on the state, Shaibal Gupta, seen as Nitish's nominee on the panel to submit a 10-page dissent note. 

However on Thursday, Nitish concealed his disappointment, if any, to celebrate the recommendation as a triumph even as BJP taunted him for failing to have his way despite cozying up to Congress. 

"It is a very decent report. For example under this index Odisha is at the bottom of the list and then Bihar. Therefore it recognizes that Odisha, Bihar, Madhya Pradesh are among the most backward states of India. That is I think the demand," Chidambaram said. 

"The demand of these states is please recognize the fact that for a variety of reasons we are the most backward states. I think this index captures the degree of backwardness and acknowledges that Bihar is among the most backward states of India. Special category is the present categorisation. Now they are moving away from that," finance minister said while detailing the recommendations of the panel. 

"This is not an answer to all the demands of the states. This is meant only to be a way forward on how to devolve funds to the more backwards states and areas of India. 

He said the index better captures the stage of development in a state, how backward it is or how relatively less backward it is and is a good measure for planning and devolution of funds. 

"Because some states are small very limited resources it is necessary to have a threshold below which the devolution of funds does not fall. So the committee has recommended that each one of the states will get a basic allocation of 0.3%," Chidambaram said. 

The finance minister said that the report will be examined by various stakeholders before being implemented. 

"It will not be in the current year. It has to go through the examination process and will be implemented in an appropriate time in the next financial year. To which funds this should be applied a decision will be taken," Chidambaram said. 

The report said that the National Development Council had accorded the status of special category state to eleven out of 28 states. They were based on a number of characteristics such as hilly and difficult terrain, low population density and or sizeable share of tribal population, strategic location along the borders with neighbouring countries, economic and infrastructural backwardness and non-viable nature of state finances. 

State under this category have a low resource base and are not in a position to mobilise resources for their developmental needs even though the per capita income of some of these states is relatively high, the report said.

Courtesy_

Also read the related stories

Expert panel to evolve composite development index for States

K.R.SRIVATS

NEW DELHI, MAY 15: The Centre has set up an expert committee for evolving a composite development index for States.

This committee will be headed by Raghuram Rajan, Chief Economic Advisor to the Finance Ministry. It will comprise of six members including the Chairman.

This panel will consider backwardness of the States in terms of measures like distance of the State from the national average under criteria such as per capita income and other human development indicators, an official release said.

The committee has been asked to submit its report within sixty days. The terms of reference will be issued separately, the release added.

The other members of this committee are Shaibal Gupta, Bharat Ramaswami, Najeeb Jung, Nirija G Jayal and Tuhin Pandey.

Finance Minister P Chidambaram had in Budget 2013-14 proposed evolution of new criteria for determining backwardness of a region for devolution of funds under the Backward Region Grants Fund.

The present criteria for determining backwardness are based on density of population, terrain and length of international borders.

Bihar Chief Minister Nitish Kumar has been demanding special category status for Bihar to spur the State's development process.

Courtesy_

Also view the related Wiki Links about Raghuram Rajan

1. In English: http://en.wikipedia.org


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