CG, MP to be major gainers if Centre applies Rajan report

Nine more states including AP to get double Central aid

Raipur, October 16

Chhattisgarh and Madhya Pradesh (MP) will be major gainers in terms of fund flow from Centre if the union government implements Raghuram Rajan Committee report based on multi-dimensional index to provide financial assistance to the states. The report will also benefit nine more states including Andhra Pradesh (AP) as their Central aid will be doubled. The report, however, recommends slashing of current Central shares to 12 states including north-eastern states by three to fivefold.

Presently, the Centre is adopting Gadgil-Mukherjee formula to provide normal financial assistance to the states. Under this formula, Chhattisgarh and MP are receiving 1.21% and 3.15% Central aid. On implementation of Rajan panel report, the Central shares of Chhattisgarh and MP will increase to over threefold, i.e. up to 3.70% and 9.56%. The aid of AP will also increase from 2.72% to 6.85%. Besides, Bihar, Gujarat, Jharkhand, Karnataka, Odisha, Rajasthan, Uttar Pradesh and West Bengal will also get double benefit.

The methodology proposed by the committee adequately allocates funds to naxal-affected states. Presently, the insurgency spans nearly 106 districts spread over nine states.

Surprisingly, despite keeping Arunachal Pradesh, Assam and Meghalaya under category of least developed states, the panel has recommended to prune their Central aid by 4.5 times, 3.4 times and 4.3 times.

According to information, the union finance ministry wants to implement Rajan panel’s suggestions before general elections while the Planning Commission is in no haste to change Gadgil-Mukherjee formula. The commission reportedly wants Rajan panel report to be first approved by National Development Council (NDC) which had earlier nodded Gadgil-Mukherjee formula.

The Rajan panel proposes a general method for allocating funds from Centre to the states based both on a state’s development needs as well as its development performance. Contrarily, Gadgil-Mukherjee formula gives weightage to population (55%), per capita income (25%), fiscal management (5%) and special problems (15%) for the allocation of Central assistance.

The Rajan panel has assessed the states on ten sub-components of its multi-dimensional index - monthly per capita consumption expenditure, education, health, household amenities, poverty rate, female literacy, percentage of SC-ST population, urbanization rate, financial inclusion, and connectivity. It has kept states that score 0.6 and above on the index under least developed category. It further terms states that score below 0.6 and above 0.4 as less developed states, while states that score below 0.4 as relatively developed states.

The panel has recommended fixed basic allocation of 0.3% of overall funds to each state and additional assistance to ten least developed states.

The panle puts Odisha, Bihar, Madhya Pradesh, Chhattisgarh, Jharkhand, Arunachal Pradesh, Assam, Meghalaya, Uttar Pradesh and Rajasthan among least developed states.

The list of less developed states consists of Manipur, West Bengal, Nagaland, Andhra Pradesh, Jammu and Kashmir, Mizoram, Gujarat, Tripura, Karnataka, Sikkim and Himachal Pradesh while Goa, Kerala, Tamil Nadu, Punjab, Maharashtra, Uttarakhand and Haryana have been considered as relatively developed states.

States	Aid based on Rajan panel (in percetage)	Aid based on Gadgil-Mukherjee panel (in percentage)
Andhra Pradesh	6.85	2.72
Arunachal Pradesh	0.97	4.38
Assam	3.05	10.31
Bihar	12.04	4.95
Chhattisgarh	3.70	1.21
Goa	0.30	0.22
Gujarat	3.69	1.72
Haryana	1.33	0.88
Himachal Pradesh	0.67	5.81
Jammu & Kashmir	1.83	9.03
Jharkhand	3.88	1.47
Karnataka	3.73	2.03
Kerala	0.38	1.44
Madhya Pradesh	9.56	3.15
Maharashtra	3.94	3.01
Manipur	0.50	3.34
Meghalaya	0.65	2.74
Mizoram	0.40	3.26
Nagaland	0.45	3.45
Odhisha	6.53	2.48
Punjab	1.07	1.05
Rajasthan	8.42	2.76
Sikkim	0.35	2.18
Tamil Nadu	2.51	2.66
Tripura	0.52	5.05
Uttar Pradesh	16.41	8.87
Uttarakhand	0.79	5.90
West Bengal	5.50	3.92