There are two approaches that have been mooted in recent times to sort out the developmental mess in these states. The approach advocated most vigorously by leaders in these states is that of demanding special packages. UP has demanded Rs.80,000 crore in the past. Bihar under Nitish Kumar has made similar demands more recently. The other option is to fix governance in these states and attract private investment, a process that will ultimately deliver growth and yield revenue to these governments for greater social sector spending.
Ultimately, the demand for special packages comes close to applying a concentrated dose of investment in these states. However, shorn of fixing governance in these states, that is unlikely to work. That is akin to a chicken and egg situation: if money is thrown to these states, it is most likely to be frittered away—as has been happening for many decades now—but unless investments are made in human capital, in education and healthcare for example, the ability of these states to fruitfully absorb investments will be weak. more
Ultimately, the demand for special packages comes close to applying a concentrated dose of investment in these states. However, shorn of fixing governance in these states, that is unlikely to work. That is akin to a chicken and egg situation: if money is thrown to these states, it is most likely to be frittered away—as has been happening for many decades now—but unless investments are made in human capital, in education and healthcare for example, the ability of these states to fruitfully absorb investments will be weak. more
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