Composite Development Index

Raghuram Rajan panel, which submitted its report to the Centre in September 2013, calls for ending special category criteria to provide additional aid to poorer states. The Committee had made a case for ending the special category criteria for providing additional assistance to poorer states. The committee suggested a new methodology for devolving funds on states based on a ‘Multi Dimensional Index (MDI)’.

• The Panel has ranked Goa and Kerala as the most advanced state and Odisha and Bihar the least.
• The committee has suggested that the 28 states be split into three categories - least developed, less developed and relatively developed -depending upon their MDI scores.
• As regards the allocation of funds, the report suggested that each state should get a basic fixed allocation and an additional allocation depending on its development needs and development performance.
• The demand for funds and special attention of different States will be more than adequately met by the twin recommendations of the basic allocation of 0.3 per cent of overall funds to each State and the categorisation of States that scores 0.6 and above as least developed States.
• According to the Committee, these two recommendations, along with the allocation methodology, will effectively subsume what is now Special Category status.
• Based on the MDI scores, the 10 least developed states are Odisha, Bihar, Madhya Pradesh, Chhattisgarh, Jharkhand, Arunachal Pradesh, Assam, Meghalaya, Uttar Pradesh and Rajasthan.
• The seven most developed status are Goa, Kerala, Tamil Nadu, Punjab, Maharashtra, Uttrakhand and Haryana.
• The methodology developed by the Committee first allocates funds across states based on need, in line with recommendations of previous committees. Need is based on a simple index of (under) development. The index proposed here is an average of the following ten sub-components: (i) monthly per capita consumption expenditure, (ii) education, (iii) health, (iv) household amenities, (v) poverty rate, (vi) female literacy, (vii) percent of SC-ST population, (viii) urbanization rate, (viii) financial inclusion, and (x) connectivity. Less developed states rank higher on the index, and would get larger allocations based on the need criteria.