Spending without results: Karnataka warned of widening regional inequality

Without decentralisation and accountability, more funding may fail to improve development outcomes

The findings of the Karnataka Regional Imbalances Redressal Committee, led by Professor Govinda Rao, are concerning, as they indicate that the over Rs 32,610 crore spent since 2007 on regional development has yielded limited results. However, there is no clue in the report about how this happened.

Based on the earlier Dr Nanjundappa Committee’s recommendations, three Boards were set up to reduce regional disparities. However, they have not achieved the expected results. The report by the Comptroller and Auditor General of India 2022 strongly criticised the performance of these Boards, which may have led to the formation of the current committee to re-examine the issue.

The new findings appear to support the CAG’s criticism and questions the government’s efforts over the past two decades. According to the data, the number of backward taluks has increased from 118 out of 175 (67 per cent) identified earlier to 177 out of 236 (75 per cent). This means nearly three-quarters of the state is now classified as backward taluks just by distributing 236 taluks into four groups mechanically.

Although the earlier committee had some flaws in its method, the current report also seems to have many shortcomings. Instead of simply identifying backward taluks again, as indicated in the summary report, the focus should have been on understanding why previous government efforts failed. Identifying these root causes could have helped design better, more targeted solutions.

Key question

The key question now is: will the new policy proposals finally solve the problem, or will regional backwardness persist due to deeper, long-standing structural issues? There is no mention about this in the summary.

The committee calculated the “Average Composite Outcome Scores” (or Index) to measure backwardness, following a method used by the UN Development Programme (UNDP), as outlined in the summary report. These scores are supposed to show the adequacy of the indicator used for underdevelopment. However, the committee’s calculations are questionable and warrant closer scrutiny.

They seem to have relied heavily on methods from the UNDP Human Development Index, which focus primarily on income per person, education, and health, even assigning arbitrary weights of 0.25 in the numerator and 1.10 in the denominator. But they seem to have overlooked an important original paper by well-known statisticians Prof N S Iyengar and P Sudarshan (published in the Economic and Political Weekly, 1982). Actually, that study provided a detailed method for assigning weights to different indicators and for combining them statistically. Consulting that work could have improved their approach. 

The Committee assigned weights to each sector instead of indicators, assuming their impact on development is uniform across intra-sectoral indicators. 

Regarding these weights, they state, “Thus, the primary sector is assigned a weight of seven per cent, secondary and tertiary sectors are assigned weights of 53 per cent, and both economic and social infrastructure are assigned 20 per cent each.” However, not all the indicators have the same effect; things like irrigated area, fertiliser use, mechanisation, share of commercial crops and market density influence development differently. 

Similarly, combining the secondary and tertiary sectors into a single 53% weight ignores the fact that individual indicators in these sectors have different impacts. The chosen weights also affect the calculation of the “Outcome Index of Income, Health, and Education.”

Additionally, the committee used per capita income estimates at the taluk level, which were based on only a few indicators. Hence, the index is likely to show a strong correlation with per capita income across taluks.

Second, the Committee mainly used the UNDP method to calculate the “Outcome Index of Income, Health, and Education” and to create specific indices for all 236 talukas. This approach is rather rudimentary and doesn’t employ more refined or rigorous methods, such as those used by the Nanjundappa Committee or by researchers such as Dandekar, Kelkar, Vidwans, Kundu, and Dadibhavi.

After calculating the outcome index, the committee simplistically divided the 236 taluks into four groups. The group with the lowest composite index, consisting of 59 taluks, is termed “Most Deficient”. The next 59 taluks are labelled “More Deficient”, followed by “Deficient” for the third quartile, and “Adequate” or “Developed” for the last 59 taluks in the highest quartile.  This method is very straightforward, and the committee notes that “Our classification of backwardness/development into quartile groups of taluks in terms of Most Backward, More Backward, Backward and Developed is in relative terms”.

A better approach would have been to first identify fully developed urban taluks and exclude them from the series, allowing a clearer focus on underdeveloped areas. Using a method based on normative standards and measuring the gap or backlog between what was needed and what is available — would have provided a deeper understanding of backwardness.

Third, the summary does not specify whether the data covers multiple years (a time series) or only a few years. Using data over several decades would have given a clearer, dynamic picture of backwardness.

Writing on regional inequalities in Maharashtra, S M Vidwans, the former director of the Directorate of Economics and Statistics of Maharashtra, pointed out that the approach should be based on growth, and the growth in indicators for the backward taluks should be driven by the level of investment aimed at achieving higher levels in a given period. Differences in growth rates could then help identify and correct disparities between regions.

Finally, the committee outlines six policy priorities. It recommends first focusing on social and physical infrastructure and then on building capacity and empowering communities. The committee highlights the need to increase capacity in sectors with a high multiplier effect on employment and income, while also considering available resources.

Given the country’s open economy, policies should aim to create wide-ranging benefits that boost overall economic activity. The government should encourage private sector growth and support key economic drivers.

The committee estimated a total expenditure of Rs 43,914 crore over five years. Healthcare was given the highest priority at 26.8 per cent, followed by irrigation at 22.8 per cent, teacher appointments at 17.85 per cent, and school education at 10.48 per cent.

The committee’s suggestion to eliminate most regional development boards highlights a serious administrative failure. This raises an important question: what alternative remains? Evidence suggests that these institutions have often acted more as political tools than as drivers of development — a systemic flaw at the heart of the problem.

If this structural weakness is not addressed, future funding risks being wasted through inefficiency, potentially worsening rather than reducing backwardness. The committee rightly cautioned that without decentralisation and accountability, even rising revenues can mask rather than address growing regional disparities.

(Prof R S Deshpande is Former Director, Institute for Social and Economic Change (ISEC), Dr Khalil Shaha is Faculty at ISEC)