The Rajan committee played safe in its choice of development indicators
The Raghuram Rajan committee report, which aims to evolve a composite index to rank states based on certain development indicators, is not just an academic exercise. It is also a political exercise. The genesis of this report lies in the clamour among various states, especially less developed ones, for special category status, which entails Central funds and other concessions. Nonetheless, despite its political overtones, the report needs to be judged primarily on its merits as an academic exercise.
The committee certainly needs to be congratulated for expanding the scope of the development index to include a substantial number of human development indicators (HDIs) instead of restricting it to economic indicators alone. The transparency of its dealings also needs to be appreciated — unlike previous committee reports, which remained the preserve of commissioning agencies.
But any such exercise is bound to yield many more questions than answers. Partly because of the nature of the development debate itself, where no indicator can be treated as the ultimate measure of development. That is why we have a myriad measures, from the most basic ones, such as per capita income or poverty rate, to more complex ones, such as HDIs or the multi-dimensional poverty index. The real issue in any such exercise boils down to the choice of indicators and the aggregation mechanism used to arrive at the composite index.
The committee seems to have taken a cautious route, emphasising on indicators that are generally acceptable. But a glaring omission in the set of 10 indicators used by the committee is an indicator related to employment or productivity. Incidentally, most of the earlier committees had some measure of per worker productivity, mostly in terms of agricultural productivity or wages. This committee's overemphasis on consumption expenditure data is certainly questionable. Apart from the issue of prices and other questions that have been raised by the dissenting member of the committee, the focus on consumption expenditure indicators at the cost of employment and productivity indicators obscures the the developmental role played by the primary vehicle of inclusion — employment generation.