Rajan defends report on states, says it will encourage growth

RBI Governor Raghuram Rajan today defended his development index for measuring backwardness of states, saying the aim is to "encourage development" and "everything over and above that is a political spin."
Last month, the Raghuram Rajan panel report made a case for ending the 'special category' criteria for providing additional assistance to poorer states. It ranked Goa and Kerala as the most advanced states and Odisha and Bihar the least.
"The whole point was we want to encourage development. If your development increases, then there will be bonus of more funds...Everything over and above that is a political spin," Rajan said after an RBI board meeting here.

"It does not mean that the higher 10 states are rich states and it also does not mean that the lower 10 states are very poor states. People are making a big deal about which pool they are in," he said.
Tamil Nadu Chief Minister J Jayalalithaa had rejected the Rajan Committee report for its "skewed" allocation formula and had said it was a "thinly disguised attempt to provide an intellectual justification to deliver resources to a potential political ally.
"The background to the constitution of the Committee was the repeated demand of the Government of Bihar to confer 'Special Category Status' on it to enable greater fund flow to the state to address its developmental deficit," she said in a letter to Prime Minister Manmohan Singh dated October 1.

Bihar Chief Minister Nitish Kumar, however, welcomed the recommendations, describing it as a "big victory" which would put Bihar on the path of development.