Growth, for redistribution

Prime Minister Manmohan Singh made a candid assessment at the meeting of the National Development Council on Thursday that scoring even an eight per cent annual rate of growth will be difficult in the 12th Five Year Plan. The interesting part of his assessment is that the only states set to exceed this rate are the erstwhile Bimaru states such as Bihar and Madhya Pradesh. They have galloped ahead with growth rates that are not only much above the national average but also beyond the traditionally better off states such as Maharashtra and Gujarat.

Bihar, for instance, grew at 12.11 per cent in the 11th Plan period, when the national average was just 7.9 per cent. If these states facing the same external and domestic constraints did better, why then did the national average fall? It slipped because the domestic constraints this government has built up acted as a roadblock for the industrially advanced states.

So unless these blocks are removed the Bimaru states could also come up against them and start slowing down, after they have exhausted their late mover advantages.

Yet as the Prime Minister pointed out it is the rapid growth of the Bimaru states has led to reduction of interstate income inequalities. If they slow up, these benefits would get corroded. That would be the very anti-thesis of what Singh said should be the goal of this five year plan, which is more growth allowing for more redistribution.

The problem of inequality is not unique to India. China is also grappling with similar inequalities, be it within states or between the rural and urban population. Hopefully as the results of the recent assembly elections in Gujarat and Himachal Pradesh show the people too are voting for development and growth.

The next stage of the reforms would be the appointment of a new Finance Commission. The buzz is that it will also review finances of debt ridden states such as West Bengal and Punjab, helping improve not only the overall economic picture and also cutting down regional disparities.

Surabhi is a Special Correspondent based in New Delhi

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