Tamil Nadu Chief Minister J. Jayalalithaa has rejected the recommendations of the Raghuram Rajan Committee for evolving a Composite Development Index of States. It should not be used in any form, she said in a letter to Prime Minister Manmohan Singh.
The committee was set up following repeated demand from the Bihar Government that was seeking ‘Special Category Status’ to get more Central funds to address its developmental deficit. But the terms of reference of the committee were expanded to evolve criteria for identifying backward States and how these conditions may impact devolution of funds from the Centre.
The index of underdevelopment constructed by the committee rates Tamil Nadu as ‘relatively developed’, ranking it third amongst the 28 States. While such a ranking is a recognition of the sustained developmental efforts, the attempt to treat this index as a reflection of the “need” of the States for resources is simplistic and flawed.
“Callous approach”
“I am seriously concerned about the callous approach that the Union Ministry of Finance has adopted regarding this extremely sensitive issue in Centre-State financial relations in the country,” she said in the four-page letter. The performance indicator developed by the committee is flawed, she said. Choosing a short period to measure performance is problematic on two counts. First, States identified as ‘relatively developed’ have made improvements at least over two decades. Therefore, the base period for measuring performance needs to be substantially longer to more accurately reflect strong performance. Second, the ‘relatively more developed’ States have recorded substantial improvements in many of the indicators, and for them to better this is difficult. Whereas for States starting on a lower base, even making some improvement can appears substantial.
The committee recommends that two factors — the share of population of State and share of area of State — be introduced in the formula for resource allocation. But it does not explicitly state which year’s population should taken as the base. Presumably, it is the 2011 Census.
A number of States, including Tamil Nadu, which have contributed significantly to achieving the national goal of reducing the birth rate, have maintained that the 1971 population is the right base for allocation of resources. Using any subsequent population measure penalises these States.
The allocation formula is further skewed by the proposal to square the under-development index so that the least developed States will get disproportionately more resources. This is a highly unfair mechanism. This hurriedly drafted report is a thinly disguised attempt to provide intellectual justification to deliver resources to a potential political ally, she said.