Raghuram Rajan panel suggests composite development index for judging backwardness. Bihar and Uttar Pradesh recommended highest allocations; will it help UPA win new alliance partners?
A six-member expert committee appointed by the Union finance ministry to determine backwardness of states has recommended that 60 per cent of the Central funds assistance should go to the seven poorest states of the country. Bihar and Uttar Pradesh, the two poorest and most populous states, should alone get more than one-fourth of the Central allocation, the report has said while suggesting the new mechanism for allocation called the composite development index for states.
The expert panel—Committee for Evolving a Composite Development Index of States—is headed by Raghuram G Rajan, former chief economic adviser to the finance ministry who was recently appointed governor of the Reserve Bank of India. The committee submitted its report to the government in the first week of September. The government released the report on Thursday.
The committee has suggested a new index to judge (under) development of states. The index has 10 criteria carrying equal weightage: (i) monthly per capita consumption expenditure, (ii) education, (iii) health, (iv)household amenities, (v) poverty rate, (vi) female literacy, (vii) per cent of SC-ST population, (viii) urbanization rate, (viii) financial inclusion, and (x) connectivity. States that score above 0.6 in the index will be categorised as “least developed”, below 0.6 and above 0.4 score means a state is “less developed” and a score below 0.4 means a state is “relatively developed”. The new criteria include human development indices which was not there earlier.
|How the new formula works
|Comparison between present funds allocation share and under new formula (in %)|
|States||Present committee share||Total central assistance to State plan&
|Normal Central Assistance
(NCA) as per Gadgil-Mukherjee formula
share in Central Taxes)
|Under-development/need index and allocation share (in %)|
|Fixed Share||Share based on need||Share based on performance||Total share|
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