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12. Discuss whether formation of new states in recent times is beneficial or not for the economy of India? (2018)
Recently formed state Telangana has continuously been among the top ranks in the list of ease of doing business in the country, since its formation. Creation of new states offer possibilities of having better governance structure, greater participation for people, administrative convenience for the State and equitable distribution of resources. Regional development strengthens the equitable and symmetric growth of India.
Benefits from the Creation of New States:
- The Economic Survey 2016-17 stated that smaller states in India trade more than the rest. Smaller states offer better and efficient administration which leads to creation of infrastructure strengthening the connectivity in the area, expand its access to market and boost trade for the overall economy of the country.
- People of the region gain control over its resources and an organic model of growth can emerge to address their economic aspirations.
- Political stability that arises from better representation of people creates conducive environment for investment in the region. Thereby encouraging regional economic development.
- The new states can have political freedom to frame legislations that address the unique and specific economic problems of the region affected by its geographical location, sociological conditions, technological advancement, availability of human capital etc. Factors that can hinder the economic growth following the creation of new states:
- New states may find itself lacking in infrastructure (administrative and industrial), which requires time, money and effort to build. As was observed in the creation of Telangana from Andhra Pradesh.
- The stabilization of the government and administrative institutions requires time for resolution of various issues such as division of assets, funds and of the state civil services. Also the creation of sustainable linkage from the other parts to the newly formed state’s capital can take time affecting the overall economic stability of the country.
- Territorial issues, disputes over water sharing (eg Krishna water dispute between Telangana, Andhra Pradesh, Karnataka and Maharashtra), disagreements over capital (as observed in the case of Andhra Pradesh and Telangana over Hyderabad) are some other issues that can hinder the economic progress of these States and the country.
- Mere creation of newer states out of the existing ones cannot guarantee faster and inclusive economic development in the region. The economic benefits from the creation of new states can only be reaped if it is followed by establishment of good governance, sustained socio-political stability and better coordination with the rest of the country.