'Creation of small states no panacea to improve economic performance'

The creation of small states is not the panacea to improve economic performance, social indicators and other infrastructure statistics, according to a study by India Ratings & Research, a Fitch Group company.

Even though the growth performance of small states is commendable, the belief that they necessarily grow faster than large states is “flawed”, the research agency said in the report.

According to India Ratings’ analysis of Indian states’ growth performance, only 11 states grew faster than the country on the whole over financial year 2006 (FY'06) to 2013. Of these 11, only five were small states – Uttarakhand, Kerala, Haryana, Goa and Himachal Pradesh.

The mixed growth performance of the states formed in 2000 (Uttarakhand, Chhattisgarh and Jharkhand) also reinforces that the carving out a small state does not assure strong growth performance, it said.

The states, irrespective of sizes, with high-literacy rates managed the infant mortality rate better than the rest, according to the analysis.

The fiscal performance of small states was diverse during FY'06 to FY'13 with a few states being disciplined and following tight fiscal policies and the rest embracing expansive policies.

Formation of a new state would not simply assure robust governance and higher economic growth. On the contrary, it is essential to develop a comprehensive administrative and governance framework and ascertain the economic sense before splitting rather than announce the separation first and then sort out the differences and issues on an ad-hoc basis, it added.

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