A panel headed by Raghuram Rajan has recommended a new index of backwardness to determine which States need special assistance and recommended how the criteria may be reflected in future planning and devolution of funds from the Central Government to the States.
The committee has proposed a Multi dimensional index of backwardness composed of 10 equally weighted indicators of monthly per capita consumption expenditure, education, health, household amenities, poverty rate, female literacy, percentage of the Scheduled Caste/Scheduled Tribe population, urbanisation rate, financial inclusion and physical connectivity. The 10 States that score above 0.6 (out of 1) on the composite index have been classified as the “least developed,” the 11 States that scored from 0.4 to 0.6 are “less developed” and the seven that scored less than 0.4 are “relatively developed.”
The report recommends that each of these 28 States get 0.3 per cent of overall Central funds allocated and of the remaining 91.6%, three-fourths be made allocations based on need and one-fourth based on the State’s improvements on its performance, to be reviewed every five years. Since States now classified as a ‘special category’ will “find their needs met” through the new allocations, the term ‘special category’ will be retired.
Using the index, the Committee has identified the “Least Developed” States as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar Pradesh.
If the recommendations are accepted, Bihar, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh will get a larger share than their current share of the total Central assistance to State plans and Centrally sponsored schemes, while Kerala, Tamil Nadu and Maharashtra will lose substantially.
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