So finally, the first step in the creation of Telangana has been taken. After at least half a century of agitation, the demand for this state has been conceded by the Union government. Yet, there can be no denial that the decision was driven totally by political expediency. The United Progressive Alliance (UPA) government, which faces a tough general election in less than a year, decided to use statehood as a weapon to garner parliamentary seats.

There is no denying that India needs smaller states. Some states are simply too unwieldy—due to large populations spread over huge areas—to be effective administratively. The question is how to reorganize these states in an effective and least partisan manner? It is not possible to avoid political considerations in the process as by its very nature the creation of new states is a political act. But at the very minimum concerns about administrative and financial viability of new states have to be addressed. The UPA’s handling of Telangana pushed all these issues to the background until only the maximization of political gains remained important.

There are three issues—one financial and the other two political—that need to be addressed carefully while forming new states.

First and foremost is the question of administrative and financial viability of the new states. Usually, when demands for statehood are made, there are equally strong claims about the viability of these states. In the case of Jharkhand, for example, it was claimed that abundance of mineral resources was enough to make the state prosperous. A decade later, the reality is different. Similar claims are being made in the case of Telangana. This welter of claims and doubts needs to be disentangled carefully. Otherwise, states are sure to fall back on an old demand: special status. Even mineral-rich states are not immune, Orissa is a good example.

The denial of a special status demand is not the end of special and extraordinary fiscal transfers from the Union government to the states. Very often, new states continue to get special grants and outright transfers for extended periods. A proliferation of such demands will be an unhealthy trend. Even as the demand for Telangana was agreed to, immediately there were cries for new states such as Vidarbha and Gorkhaland. If, hypothetically, the latter two are conceded they will certainly require financial help from the Centre for a long time. This has other repercussions. Transfers of resources from the Union government to the states are governed by the recommendations of the Finance Commission (FC), a constitutional body. What will happen to FC recommendations when more and more states demand resources over and above what this body recommends? It will, for starters, dilute FC’s recommendations and move away from rule-based fiscal transfers to a more ad-hoc system where political concerns will dictate such transfers. This will be a dangerous trend with unforeseen consequences.

Second, in the din of these demands the dangers of emergent federal imbalances have been lost sight of. In India, political representation of states in Parliament is not based on any theory of “equality of states" as, for example, in the US. The population of each state determines the number of members it sends to the Lok Sabha. Similarly, there is no notion of equality in the Rajya Sabha. Creation of smaller states automatically gives greater political power to large states. For example, the division of Andhra Pradesh—which had 42 members in the Lok Sabha—will undo this large majority. This also means one less state with 40 MPs or more. This means more political power to states such as Uttar Pradesh that have one less big state to contend with. To be sure, India is not a Union of warring or fractious states. But creating small states without ensuring equity in representation can have unforeseen political consequences. It will certainly upset the inter-state political equilibrium in the country.

Finally, there are strategic and national security issues in creating new states with ethnic majorities especially in border regions. The demand for Gorkhaland is one such example. Take a look at the map of the country and you will see the demand is being made in a region that provides a vital link to the North-Eastern states. This is a politically sensitive issue: the needs of ethno-linguistic minorities need to be balanced with broader concerns about national security.

The question of new states in India needs to be deliberated with care and sensitivity. It also requires a hard-nosed look at financial, administrative and national security concerns.

Does India need more states? Tell us at views@livemint.com

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