EVOLVING A COMPOSITE DEVELOPMENT INDEX OF STATES: A CRITIQUE

The Raghuram Rajan Committee was appointed by the Government of India to suggest methods for identifying backward States and to recommend the criteria for allocation of funds from the Central Government to the States. It is argued in this paper that the index of underdevelopment of states prepared by the Committee suffers from serious conceptual and methodological inadequacies. The choice of indicators and their specification used for preparing composite index of development by the Committee are quite flawed both on account of exclusion of some critical indicators and improper specification of individual sub-index. The methodology of combing the indicators into a composite index by giving equal weights to the indicators is questionable. Moreover, the allocation formula suggested by the Committee drastically upsets the present scheme of things and will not be politically acceptable to most of the states. The report of the Committee is, thus, likely to prove an exercise in futility.