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The race to be called special

A special status alone will not bring private investment to a state which is vital for a sustainable growth

Published: 10th April 2013 07:20 AM  |   Last Updated: 10th April 2013 07:20 AM   |  A+A-

Presently in India many states are vying for a special category status. Among them Bihar has been the most vociferous while others such as Odisha and Rajasthan are also raising their feeble voices now. More often than not this demand rests on the argument of backwardness and the race to be called special is preceded by the race to be called backward. As we know a special category state (SCS) gets preferential treatment in federal assistance and tax breaks. SCS receive 90 per cent of their central funds as grants; while a general category state (GCS) receive only 30 per cent as grants. The rest is treated as loan.

 Thus, special status reduces the burden of interest and repayment. Also, a SCS gets significant excise duty concessions which should help it attract large number of industrial units to establish manufacturing facilities within its territory and create jobs. The demands for being special or backward remind of a famous paradox devised by Zeno — a Greek philosopher — which involves a race between Achilles and the Tortoise. Before the race, the tortoise, being an inferior athlete than Achilles, asks for a small head start from Achilles. Achilles laughs, agrees and feels confident that he will still win.

The tortoise proves him that on the contrary he will win. The tortoise explains that by the time Achilles would reach the tortoise to cover the head start given, the latter would have run a short distance ahead. It will take Achilles some more time to run that distance, by which time the tortoise would have advanced farther. Thus, whenever the Achilles reaches a point where the tortoise has been, the Achilles still has some distance to cover. Because there are an infinite number of points, the Achilles must reach where the tortoise has already been, the Achilles can never reach the tortoise.

Acceding to the demand of special status by different states might create a Zeno paradox of the tortoise and Achilles where not only economically weaker states — the tortoises — but also the rich states — the Achilles — would want a head start so that they can always be ahead in the race. Will we be able to make a tortoise an Achilles at the end, as per the plan? Let’s hope so. But the likelihood that Achilles would pretend to be a tortoise and tortoise would prefer to remain a tortoise is discouraging.

The way backwardness is welcomed and celebrated is discomforting and we don’t see a similar urge to get rid of the ‘backward’ tag. How do we identify the tortoises, when everyone would like to claim itself to be one? In his 2013-14 budget speech, finance minister indicated to evolve the criteria of determining backwardness and to include human development indicators such as per capita income and literacy in the criteria. This was hailed as ‘victory-in-principle’ by Bihar. In the last five years GDP growth in Bihar has been 12, 7.09, 11, 13  and 9.48 per cent. Among all states it was holding the numero uno position before being toppled by Madhya Pradesh in 2012-13. Of course this growth has come on a low base but shouldn’t we call Bihar a developing state instead of calling it a backward state? The demand to be labeled as backward should be seen as regressive rather than progressive.

Bringing up the tortoise is of primary importance. But we have been doing that ever since third five-year plan (1961-66) and then in subsequent five-year plans. There have been many committees constituted from time to time such as Professor Sukhmay Chakravorty Committee (1972) and B Sivaraman (1981) committee to review regional backwardness and suggest solutions. There has been focus on industrialisation as well on human development indices.

Already many regions of India are considered backward and this is reflected in the fact that 272 of the 640 districts in the country are covered by Backwards Regions Grant Fund (BGRF). Already there are 11 states in India which are declared SCS.  30 per cent of the total funds are earmarked for SCS and adding more states would mean that states would end up getting less from the central pool meant for such states.

It might be a good opportunity for both the State and the Centre Governments to evaluate why the demand for more Central assistance is increasing when we already have so many central schemes? Where exactly are we lacking?

Whether these funds are being utilised properly and whether the current central assistance is sufficient are some of the questions we must answer. A special status alone will not bring private investment to a state which is vital for a sustainable growth. Industries require skilled manpower, good infrastructure, availability of power and land; all of which have remained bottlenecks in the inflow of private investment in many states.

The states’ focus should be to improve these parameters.The government at centre has to instill growth among different states, but at the same time it should not be seen as a source of easy funding. The Central government must have means to motivate states to work for long term measures instead of relying on direct short term funds. How can we instill motivation among the minds of tortoises as well as the Achilles?

It can be done only by giving the tortoise its well-deserved head start just a few times, and not for ever. All these measures of special grants, benefits and funds should be time bound with a thrust to achieve specific objectives. All grants and benefits must be stopped once the objectives are achieved.

We need to look at the modern version of  the tortoise and hare race by taking cognisance of the fact that tortoise and hare are unequal contestants. The new story aptly describes the strategic alliance of the tortoise and the hare, making them capable of crossing the obstacles one by one. We must realise that there is nothing called ‘disabled category’, but just the ‘differently abled’ category. The tortoise may be week at running, but it can swim really good and cross a river quite easily, but the hare can’t. In our pursuit of inclusive growth, let us stick to this modern version of cooperation between states rather than a race between them.

Gourav Vallabh is professor of finance at XLRI Jamshedpur. E-mail: gourav.vallabh@gmail.com



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