years. however, the national human development report ( nhdr ) has revealed wide disparities in the level of human development across the states. states like bihar, uttar pradesh, madhya pradesh, rajasthan and orissa had hdi close to just half of that of kerala in 1981 ( table 1 ). the situation has improved since then. besides kerala, among the major states, punjab, tamil nadu, maharashtra, and haryana have done well on hdi. in general, hdi is better in smaller states and union territories. in terms of the pace of development, tamil nadu, rajasthan, madhya pradesh, west bengal and bihar improved their hdi significantly in the 1980s. in the 1990s this momentum was maintained in rajasthan, madhya pradesh and uttar pradesh while it appeared to slow down in other less developed states. nevertheless, state - wise analysis in the nhdr indicated a decline in such regional disparity during the last two decades. further convergence can take place alongwith substantial improvement in the national human development index if efforts are focused on those states that have low levels of measured hdi. strengthened policy measures and improvement in health, education and other aspects of rural development in these states will contribute greatly to the overall improvement in human development in the country. it must be noted that inequalities across the states on hdi are less than the income inequalities in terms of per capita sdp ( graph 1 ). at a fundamental level, there is no conflict between economic growth and human development. economic growth implies an improvement in the material well being of the people including better health, education and sanitation. however, the effect of economic growth on human development may be muted if the growth is not well distributed across all sectors 2 / 7 and geographical areas. even in a particular sector, the distribution of benefits of growth amongst all stakeholders in a just way is also important. table 1 : human development index for india – combined 1981198119911991value rank value rank states andhra pradesh 0. 298 0. 377 2001value 2001rank 0. 416 assam 0. 272 0. 348 0. 386 bihar 0. 237 0. 308 0. 367 gujarat 0. 360 0. 431 0. 479 haryana 0. 360 0. 443 0. 509 karnataka 0. 346 0. 412 0. 478 kerala madhya pradesh 0. 500 0. 591 0. 638 0. 245 0. 328 0

connectivity, it is difficult to bring about the kind of improvements envisaged for human development. it is also important to note that following the recommendations of the twelfth finance commission ( tfc ), it has been decided by the government of india to provide specific grants for education and health to those states which are unable to spend adequately in these sectors because of deficiencies in fiscal capacity. tfc has recommended specific grants amounting to rs 10, 171 crore to eight states1 for education and rs 5, 887 crore to seven states2 for health over its award period of 2005 - 10. the grants for both the sectors are an additionality over and above the normal expenditure to be incurred by the states in these sectors. furthermore, it recommended specific grants to local bodies amounting rs. 25, 000 crore meant to improve basic amenities, viz., water supply, sanitation, solid waste management, etc. which are expected to improve the quality of life both in rural and urban areas. as regards states ’ initiatives, many states have embarked upon the path of fiscal correction and consolidation in the recent period. increase in the central transfers in the light of tfc recommendation has a comforting impact on state finances. with the debt relief benefits linked to enactment of the fiscal responsibility legislation ( frl ) by the tfc, there has been increasing incentive to observe fiscal discipline. as of now, while 15 states have already enacted frl, 2 states have introduced the bill and 2 more states have proposed to introduce frl bill in their respective budget for 2005 - 06. as all the states put into effect fiscal improvement measures, their ability to make focused expenditures on health, education, nutrition and rural infrastructure will increase substantially. policy options for sustained social sector development, it is important that the high growth rate of the economy is maintained over a sustained period. similarly, macroeconomic stability in terms of lower inflation is also critically important to protect the poor and vulnerable segment of the population. it is here that the role of the reserve bank and monetary policy becomes important. in addition, prudent fiscal management through expenditure prioritization and revenue augmentation is also essential. thus, the recent initiatives by the state governments to enact frl is a welcome move. as i have been emphasizing in many of my writings and speeches, widespread and bold imposition of user charges on all non - merit goods is very important for revenue augmentation of the states. the assam, bihar, jharkland, madhya pradesh