There is much talk on inter-state inequality, but what about intra-state inequality?

An excellent column by Prof. Indira Rajaraman.

There is much talk on inequality between states. She says we need to also look at inequality within states. We have large issues here as well:

Although there has been some prominence lately in national discourse on inequalities between states, drummed up principally by Bihar, the issue of fair allocation of fiscal resources flowing from Centre to states is largely resolved (which is not to deny that there remains immense scope for improvement). But what has not attracted as much attention is the very considerable inequality existing within states. This issue arises if at all in the context of states with a Maoist problem, or in the current Andhra partitioning; but no one actually questions budgetary allocations between districts within states for the very simple reason that these are not known.

Most public services in states have not been functionally transferred to local bodies, and are still done by line departments of state governments. The allocation of funds between districts would of course be subordinated to some kind of administrative guidelines, if not very tight formulae, but these are not hung out in the courtyard for all to see. They lie buried in files and could only perhaps be uncovered by an application under the Right to Information.

She goes onto show how analysis on intra-state trends throw interesting stuff:

The great problem in all states in India is that districts are so very uneven in size. In a sense, this mirrors the problem at national level as well, where the government has to divide fiscal flows equitably between states varying massively by population and area. But because of the formulaic and very public way in which it is done at the Centre, the allocation is known.

At state level, likewise, districts vary enormously in size by population, and even more by number of village habitations. In an exercise I did for 20 large states using the 2001 Village Directory, I found that the percentage of villages served with a primary school or medical facility was not lower in districts with a larger population (except in two states). Clearly, budgetary allocations do accommodate variations in district population for the most part. But, in 18 of the 20 states, there was systematically lower village coverage in districts where the population was splintered into larger numbers of villages. Gujarat and Tamil Nadu were the two exceptions where there was no fiscal penalty for village splintering.

In nine of the 18 states, more splintered districts had a higher percentage of tribal population; in four states, they had a higher percentage of scheduled castes. There you have it – what a formula failure can do for systematic deprivation of a demographic group, even while avowed policy at both state and central levels is to have special budgetary provisions for disadvantaged castes and tribes. These supplementary budget provisions for scheduled castes and tribes can do nothing to correct a fundamental defect in the formula used for mainstream budgetary allocations.

Budgetary allocation formulae are the kind of deep structural underpinning that very few state governments bother about particularly. Not surprisingly, in the recent round of state elections, a large minority among voters in tribal constituencies rejected all the candidates on offer.

Fortunately, this error can be very easily corrected by states adopting adjustment for number of villages rather than population in budgetary allocations between districts. Even better would be a reorganisation of districts in all states into jurisdictions of roughly even size by number of villages. District boundaries are not as sacrosanct as state boundaries and should in principle pose fewer obstacles to resizing. The only objections to this might come from economists, for whom geographical redefinition introduces an unwanted discontinuity in time-series data at district level.


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