“A state on the basis of size is not a solution for all the ills plaguing states,” India Ratings said in a report titled ‘Small States Creation and Economic Performance’.
The report comes a few months after the government announced the formation of Telangana state. According to the report, the growth rate of only 11 states was higher than the national average between 2005-06 and 2012-13.
Of these 11 states, only five were small states—Uttarakhand, Kerala, Haryana, Goa and Himachal Pradesh.
The report said that among the new states formed in 2000, Uttarakhand’s average gross state domesticproduct (GSDP) growth between FY06 and FY13 surpassed that of Uttar Pradesh, the state it was carved out of, while Chhattisgarh and Jharkhand underperformed compared to Madhya Pradesh and Bihar, the parent states, respectively.
“Growth performances of these new states were largely driven by specifics of the state and the policies framework,” India Ratings said. The study revealed that while a few states implemented fiscal discipline, and followed tight fiscal policies, the others had embraced expansive policies.
“As the performance of small states differs across various economic parameters, carving out a new state is not a remedy,” the report said, adding that it is essential to develop a comprehensive administrative and governance framework and ascertain economic sense before splitting, rather than announce the separation and then sort out the issues on ad-hoc basis.
The report, pointed that the size of state does not play a decisive role in protracting or shortening the decision-making process.