Divide and Conquer: Are Smaller States the Answer in India?Published: August 04, 2011 in India Knowledge@Wharton
One of the first things Mamata Banerjee did after becoming chief minister of West Bengal was to spearhead a bill to return to farmers the land acquired by the Tatas for the Nano auto manufacturing plant in Singur. That issue is now with the Calcutta High Court (with instructions from the Supreme Court that the case be decided in three months). Banerjee's second major move has been somewhat less controversial, but it is bound to have much wider ramifications. Her government has signed an agreement with the Gorkha Janmukti Morcha (GJM), a political formation, to set up a Gorkhaland Administrative Tribunal to give greater autonomy to the northern hill region -- a move described as letting a "genie out of the bottle," by The Telegraph, a Kolkata-based morning newspaper.
On the face of it, Banerjee's efforts are praiseworthy and should have attracted universal plaudits. After all, the Gorkhaland region has been in turmoil for nearly three decades now. A demand for statehood has so far been denied and violence in its support has claimed more than 1,000 lives.
But the opposition Left Front has come out strongly against the accord; they claimed that setting up the tribunal is the first step toward dismemberment of West Bengal. The plains around Darjeeling -- the natural capital of the hill region -- went on a 48-hour bandh (a complete closedown) even as the agreement was being signed. In addition, despite Banerjee's claims that West Bengal would not be split, GJM leaders alluded to the agreement as a "semifinal" within hours of the accord. The finals would come with full statehood.
Gorkhaland is a problem for Banerjee. For Union Home Minister P. Chidambaram, who was present at the signing, it is just another of his plateful of autonomy-related woes. The flashpoint today is not West Bengal but Andhra Pradesh in South India. Leaders from the Telangana region -- the part of Andhra that is striving for statehood -- had earlier resigned en masse from the state assembly and the Lok Sabha (the lower house of Parliament). They are threatening to do so again. There is opposition to the Telangana movement, too. Non-Telangana leaders of Andhra have met with Chidambaram and Prime Minister Manmohan Singh to plead for keeping the state intact.
For Chidambaram, this is one of many such delegations. There's Vidarbha (in Maharahtra), parts of northeast India and at least a dozen other places that are campaigning for more autonomy. And territorial disputes over Kashmir have been a source of unrest for many years now. "Telangana has been a demand for a few decades, as have movements for Vidarbha, etc," says Rajeev Gowda M.V., chairperson of the Centre for Public Policy at the Indian Institute of Management in Bangalore (IIMB). "The new settlement in Bengal seems to address both political and economic aspects through the creation of an empowered elected body for the region and the guarantees of significant investments by the state and central governments. This may become the new model for addressing unrest within states on issues involving unequal economic development."
Gowda implies that it is mainly "unequal economic development" that causes states to become divided. But the issue is more complicated than that. Look at the two key examples today -- Gorkhaland and Telangana. The Gorkhaland separatist movement started in 1907, when a delegation of the Hillmen's Association of Darjeeling approached the British administration for an independent governing structure. The request wasn't about economic deprivation of any sort. Darjeeling originally belonged to Sikkim, which, in 1975, voted to become the 22nd state of the Indian union. It was taken from Sikkim by the ruling British as a sort of holiday home for the country's army officers. Thus, when Bengal suffered famines, Darjeeling was living off the fat of the land. The desire to have a government separate from the rest of Bengal came from a feeling of superiority, not for being discriminated against.
Telangana was part of the Nizam of Hyderabad's empire. (Hyderabad is today the capital of Andhra Pradesh.) It never came under British rule. The region was combined with coastal Andhra and Rayalaseema on purely linguistic grounds under the States Reorganization Act of 1956. The cultural divide between Telangana and the rest of the state dates back to that time as well. "Telangana is demarcated along the lines of the Telugu-speaking portion of the erstwhile Nizam of Hyderabad's kingdom," notes Gowda of IIMB.
What is the advantage of smaller states? "The logic of creation of small states should be to lead to more efficiency and better governance," according to B. Venkatesh Kumar, a professor at the School of Management and Labor Studies at the Tata Institute of Social Sciences (TISS). "It also helps in addressing local concerns and giving more autonomy." But the smaller states first need to be economically viable, he adds. Sunil Bhandare, advisor for government and economic policies at the Tata Strategic Management Group (TSMG), notes that smaller states have done better by way of social and economic development, administration and reaching out to the people. "The smaller states are more responsive to local aspirations," he says.
In addition, Gowda points out, "Smaller states have been able to garner a [proportionately larger] share of centrally-distributed resources, including IITs [Indian Institutes of Technology] and IIMs [Indian Institutes of Management], on the grounds of equity. They have also been able to attract investment through special concessions."
Gowda explains that the opposition to new -- and smaller -- states is because it is a politically sensitive issue. "Governments have been reluctant to change the status quo, right from the time of India's independence," he says. "Governments have acted only when their hand was forced. Changing state boundaries has as many opponents as supporters."
According to Kumar of TISS, governments prefer larger-sized states because "it gives them political power, [including] more political representatives at the state level, as well as their presence in the federal parliament, and access to economic resources arising out of a large geographical space -- more so, if the state is endowed with rich resources and if the tax-collection buoyancy is high. In addition, the human capital or the demographic dividend is also available with a large state."
Bhandare of TSMG agrees, noting that "Government is reluctant for various reasons. One, it reduces the sphere of influence of politicians. Two, in a large state there are some regions that do very well in terms of economic development and other parameters. The state politicians exploit this in order to disguise their incompetency in other regions. Three, the larger states have a stronger influence on national politics. And four, no one wants to take unpopular decisions. There are political considerations to be met. It's a question of both mindset and political will."
Rajesh Chakrabarti, professor of finance at the Hyderabad-based Indian School of Business (ISB), raises another point. "State break-up requires considerable costs for the new governance set-up, including infrastructure investment in the new capital for the smaller state. There is a political battle in parallel as well, with major political personalities reluctant to give up direct control over large regions."
An International Issue
The small states versus big states argument is an international issue. "Many countries across the world look at India and learn from our nation-building process," says Kumar of TISS. Almost all the major countries have the problem of fissioning states. The Soviet Union was composed of 15 republics, most of which have since broken away from big brother Russia. But problems in regions such as Chechnya continue. Here again, the move for greater autonomy is of ancient vintage. The first uprising was during the Russo-Turkish War of 1877-1878 when the Chechens tried to take advantage of Russia's preoccupation with the conflict. The same pattern that has repeated itself every time the former Soviet Union has been engaged in military operations. In China, Tibet and Inner Mongolia have been problem areas.
In the U.S., too, there has been a lot of noise though very little action. The last state created by carving out part of another is West Virginia. That was way back in 1863. But practically every state has witnessed split proposals since then. In an article titled, "Divided We Stand", The Wall Street Journal asked: "What would California look like broken in three? Or a Republic of New England? With the federal government reaching for ever more power, redrawing the map is enticing."
Have smaller states in India worked better? The jury is still out. According to a study by economic research firm Indicus Analytics: "We find evidence that the reorganization of states in the past has been followed by higher economic growth. Moreover, we find that states that have been a small part, or on the periphery of, a larger entity gain much more than states that were significant parts of the larger states. However, whether all of India's large states should be broken into smaller entities requires much more analysis."
It has been a mixed experience on the ground. The smaller states of an earlier generation -- Haryana and Himachal Pradesh, for instance -- are doing very well. The more recent examples -- Chattisgarh, Jharkhand and Uttarakhand, which were carved out of bigger entities in November 2000 -- have recorded solid growth. But they also have been hard hit by violence from Left extremists. In Jharkhand, rogue politicians have been running riot. One former chief minister, Madhu Koda, is in judicial custody for illegal money transfers. Another, Shibu Soren, was sentenced to life imprisonment in a murder case, although the judgment was later set aside by the Delhi High Court. "The case of Jharkhand has shown that the levels of corruption and maladministration can be extraordinary," says Gowda of IIMB.
The fact that there are no clear answers is evident from Telangana. In early 2010, facing mounting protests including hunger strikes and suicides, the Union government announced the formation of a committee under retired judge of the Supreme Court B.N. Srikrishna to look into all aspects of the matter and come up with a recommendation. On 30 December 2010, a day before the deadline, the committee published a 505-page report. It gave six options, with "maintain status quo" at one end and various bifurcation options at the other. According to the report's epilogue, "The facts of the case have been fully investigated and findings placed on record. It is hoped that the Union Government may now be able to find a solution to this long-standing and contentious issue."