Raghuram Rajan Committee Report on Composite Development Index

Almost half of India’s population resides in the states that could be categorised as least developed going by the report of the Raghuram Rajan Committee, which was released on September 26.

The committee had been asked, by the Ministry of Finance, to suggest methods for identifying backwardness of states using a variety of criteria and also recommend how the criteria may be reflected in future planning and devolution of funds from the central government to the states.

The committee has come up with a multidimensional index of backwardness, or the development need index, based on averages of 10 sub-components — (i) monthly per capita consumption expenditure, (ii) education, (iii) health, (iv) household amenities, (v) poverty rate, (vi) female literacy, (vii) per cent of SC-ST population, (viii) urbanisation rate, (ix) financial inclusion, and (x) connectivity.

Less developed states rank higher on the index and would need larger central allocations based on the need criteria.

The committee has prepared the index for 28 states, leaving out the seven union territories of NCT-Delhi, Chandigarh, Puducherry, Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, and Lakshadweep, which together account for around 2 crore population, or a little less than 2 per cent of the country’s population.

The committee has recommended that states which score 0.6 and above on the index may be classified as ‘Least Developed’; states that score below 0.6 and above 0.4 may be classified as ‘Less Developed’; and states that score below 0.4 may be classified as ‘Relatively Developed’.

In terms of this classification, there are 10 states classified as ‘Least Developed’, 11 states as ‘Less Developed’ and 7 states as ‘Relatively Developed’.

The Raghuram Rajan Committee has proposed a general method for allocating funds from the Centre to the states based on both a state’s development needs as well as its development performance. The committee recommended that each state may get a fixed basic allocation of 0.3 per cent of overall funds, to which will be added its share stemming from need and performance.

COMPOSITE DEVELOPMENT INDEX FOR STATES

Underdevelopment Index
Development Index
Population (Million)
Least Developed States
Odisha
0.798
0.202
41.947
Bihar
0.765
0.235
103.805
Madhya Pradesh
0.759
0.241
72.598
Chhattisgarh
0.752
0.248
25.540
Jharkhand
0.746
0.254
32.966
Arunachal Pradesh
0.729
0.271
1.383
Assam
0.707
0.293
31.169
Meghalaya
0.693
0.307
2.964
Uttar Pradesh
0.638
0.362
199.581
Rajasthan
0.626
0.374
68.621
Less Developed States
Manipur
0.571
0.429
2.722
West Bengal
0.551
0.449
91.348
Nagaland
0.546
0.454
1.981
Andhra Pradesh
0.521
0.479
84.666
Jammu & Kashmir
0.504
0.496
12.549
Mizoram
0.495
0.505
1.091
Gujarat
0.491
0.509
60.384
Tripura
0.474
0.526
3.671
Karnataka
0.453
0.547
61.131
Sikkim
0.43
0.57
0.608
Himachal Pradesh
0.404
0.596
6.857
Relatively Developed States
Haryana
0.395
0.605
25.353
Uttarakhand
0.383
0.617
10.117
Maharashtra
0.352
0.648
112.373
Punjab
0.345
0.655
27.704
Tamil Nadu
0.341
0.659
72.139
Kerala
0.095
0.905
33.388
Goa
0.045
0.955
1.458
Total for 28 States
1,190.111
Seven UTs
20.082
Total for the country
1,210.193

Development Index
The scores that measure backwardness and hence lack of development in states can be converted into scores on development index that measure their distance from development status. Thus, an underdevelopment index of 0.798 for Odisha would become development index of 0.202 for the state and that of 0.045 for Goa, would be 0.955 for the state in terms of the development status.

Looking at the data from this angle along with state-wise population, we find that the 10 states categorised as ‘Least Developed’ are home to 58 crore persons, constituting around 49 per cent of the total population of 28 states, or 48 per cent of the country’s total population (including seven union territories).

Likewise, the 11 states classified as ‘Less Developed’ accounted for 27 per cent and the 7 ‘Relatively Developed’ states around 24 per cent of the total population of the 28 states. Maharashtra and Tamil Nadu are among the major states which figure in relatively developed states, together accounting for around two-third of the population in ‘Relatively Developed’ states.

As a whole, the country with a population composite weighted index of around 0.442 may be categorised as ‘Less Developed’.


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