Centralisation And Decentralisation

Are Small States Desirable?

I Satya Sundaram

Is the demand for small states justified? There is no consensus on this issue. The issue is important from more than one point of view. There is of course a broad agreement that the framework of centralised economic planning and governance on federal principles could not adequately provide a solution to the serious challenges of inter-state disparities, unemployment and mass poverty. Because of globalisation, the issue has become much more complex.

The poor, particularly in the poorest regions, are likely to get further marginalised, more so when some regions continue to stagnate and suffer. Of course, often a case is advanced for small States more for political reasons than for other reasons.

The State, big or small, requires economic viability which depends on the State’s ability to:
1.   match revenue and expenditures after meeting of debt servicing of the Centre’s loans;
2.   raise financial resources adequate enough to maintain minimum standards of service;
3.   increase the revenue resources for ensuring a satisfactory rate of growth; and
4.   improve revenues so that there is no too much dependence on central transfers which may lead to reverse flow of resources in the form of interest payments and loan repayments.

Of course, linguistic fanaticism and provincialism should be discarded to safeguard unity, strength and national security. A case is advanced for small States as they can bring people close to administration and ensure eradication of corruption. Also, it is easy to ensure rational allocation of resources, improve cost effectiveness, accountability and resource mobilisation.

In a State like Uttar Pradesh, governance has become very difficult. It is too big to succeed. Uttarakhand was spliced from UP in November 2000. It has been making satisfactory progress. Experts say the creation of smaller States is a necessary condition for better governance.

In his treatise, Thoughts on Linguistic States, Ambedkar argued “one State to have such preponderating influence in the Centre is a dangerous thing.” He also said: “The Commission in designing linguistic States has created a consolidation of the North and balkanisation of the South. It is necessary that this situation must be rectified. The only way is to divide the States of Uttar Pradesh, Bihar ad Madhya Pradesh.”

There are some who believe mere division of a State does not ensure progress. The formation of Uttarakhand, Chhattisgarh, and Jharkhand offer some lessons. Jharkhand with vast natural resources accounted for 70 percent of the GDP of Bihar before 2000. Yet, it remains one of the most backward States of the country. It also suffers from political instability. Chhattisgarh witnessed the largest displacement of tribal population in recent times.

The creation of smaller States is justified as it leads to decentrali-sation. But, decentralisation is not properly understood. If the State Government creates more districts, the general belief is that it would ensure more decentralisation. Even when there are more districts, the State may opt for centralisation. The fact is, there will be decentrali-sation only when the local bodies are empowered functionally and financially. In Andhra Pradesh, the panchayats have been pulverised. Yet, the Government says it has promoted decentralisation!

It may be concluded that what ultimately matters is not the size, but the intrinsic merits of the administrative unit.

Back to Home Page

Vol 55, No. 51, Jun 18 - 24, 2023