Consequences of development asymmetry

Since Independence, India and all the states of the Union have come a long way on the road to progress and development. Particularly in the decades following 1991, there has been significant economic growth and development, as measured by the year-on-year growth-rate of GDP.

The Human Development Index (HDI) introduces additional factors of health and education to provide a better yardstick. The changes in HDI from 1990 to 2019 at 5-year intervals for the northern, western, eastern, north-eastern and southern states and the UTs are available from several sources.

Data from government sources show that some states have developed substantially more than others in human, social and economic indices. Noting that the people of each state elect their government, such progress may be attributed to the quality of governance demanded and received by the people of any given state.

The development asymmetry between states is a reality, with some states in southern and western India having improved their development performance relatively more than some states in northern and eastern India.

Improvement in human and social indices results in a lower rate of population growth because successful family planning and social welfare measures are understood, accepted and implemented at a personal level by ordinary people. A lower population combined with more employment opportunities due to better economic growth causes permanent, semi-permanent and seasonal migration of unskilled, semi-skilled and skilled job-seekers from the less-developed states (LDS) to the more-developed states (MDS). These intra- and inter-state rural and urban population shifts affect demography.

During the Stockholm+50 meeting in June 2022, in the context of the environmental and ecological triple planetary crises of climate change, biodiversity loss and biosphere pollution, UN Secretary General Antonio Guterres said: "We must place true value on the environment and go beyond gross domestic product as a measure of human progress and well-being. Let us not forget that when we destroy a forest, we are creating GDP. When we overfish, we are creating GDP. GDP is not a way to measure richness in the present situation in the world." Therefore, including an appropriately weighted environment and ecology in addition to health and education would provide a more holistic criterion.

Referring to the effect of global warming on people, societies, and nations reacting to extreme weather events and sea-level rise, Guterres spoke of "climate chaos." This will impact habitats, livelihoods, and food-water-fuel security; affect local, regional, and national economies; and lead to intra-national and international migrations.

The additional factors of biodiversity loss and biosphere pollution may affect the direction and scale of population migrations and lead to chaotic situations with global-scale social, economic and political consequences. This deserves attention both in the national context and in the larger context of the Indian subcontinent.

In the Indian context, socio-economic changes and migrations affect people’s representation in state and central legislatures. Today, there is a burgeoning youth population entering voting age in the MDS and LDS. Migrations for job or employment opportunities, especially of the voting-age cohort, will affect electoral politics and governance in the coming years.

Representation in the Lok Sabha is based on the delimitation of constituencies on the basis of population. A fresh delimitation process can only be done after 2026, based upon a national census that may be conducted in 2031. When the re-allocation of Lok Sabha seats takes place, it has been suggested that the MDS may get a relatively lower number of seats than the LDS. This change in the proportion of MPs among and between states would be disadvantageous to some MDS due to their reduced representational strength for policymaking, planning and socioeconomic decisions at the national level.

The Finance Commission recommends distribution of the net proceeds of shareable central taxes to the states, by the Union to the states (vertical devolution), and by the Union among the states (horizontal devolution).

The 15th Finance Commission recommends the vertical devolution of 41% of shareable central taxes to be distributed to the states. At the high end of this distribution, Bihar gets 10.058%, Madhya Pradesh 7.850%, Rajasthan 6.026%, and Uttar Pradesh gets 17.93%; at the low end, Andhra Pradesh gets 4.047%, Telangana 2.102%, Karnataka 3.647%, Tamil Nadu 4.079%, Kerala 1.925%, and Goa 0.386%.

Horizontal devolution of 59% of shareable central taxes is based upon criteria (weightage) of income distance (45%), population (15%), area (15%), demographic performance (12.5%), forest & ecology (10%), tax & fiscal efforts (2.5%).

Income distance is the "distance" of a state’s per capita GSDP income from the state with the highest per capita GSDP income. An MDS has a higher GSDP because it performs better economically and also has a lower population because of better family planning. States receive their share in proportion to the income distance – greater the distance, the greater the share. Thus, due to having a lesser income distance, MDS is disadvantaged by receiving a lesser share than a typical LDS.

Demographic performance rewards states' efforts to control their populations, and a MDS has an advantage over an LDS. However, since the weightage for demographic performance is only 12.5%, it does little to offset the disadvantage of 45% for income distance.

In accordance with Article 38(2), to reduce inequalities, an LDS receives a higher share because it has a large population due to lower demographic performance. Thus, 15% weightage to population again benefits LDS for lower performance.

Although the purpose of weighted horizontal devolution is to help the LDS with more funds without penalising the MDS, the combination of the three population-predicated criteria amounts to at least 60% (45% + 15%) weightage favouring the LDS, despite the good intentions of the 15th Finance Commission.

Double Whammy

The central government may provide more economic benefit to higher-population LDS for its own political-electoral benefit. The lesser funds allocated to MDS by vertical and horizontal devolution, combined with lesser parliamentary representation in national-level governance, is a double whammy for MDS.

The long-term effect of development asymmetry on the federal nature of the Republic is worth careful consideration.