Tarunabh Khaitan in Subsidiarity and State Formation links to several interesting articles related to the current discussions on Telangana and says "What is striking in all of these commentaries is that they ignore sub-nationalism as a possible basis for further state-formation. Instead, each of them analyses different aspects of democratic representation and efficiency---the twin pillars that underpin the principle of subsidiarity. The Telengana issue could well trigger the second wave of state formation in India: if this happens, subsidiarity should be a useful guide for the second states reorganisation commission. Of course, subsidiarity will also require far stronger local governments than we have at the moment--will our policy makers travel that far?"
The article about subsidiarity mentioned by Khaitan is behind a firewall. According to the Wikipedia article:
"Subsidiarity is an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. The Oxford English Dictionary defines subsidiarity as the idea that a central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level. The concept is applicable in the fields of government, political science, cybernetics, management, military (Mission Command) and, metaphorically, in the distribution of software module responsibilities in object-oriented programming (according to the Information expert design guideline). Subsidiarity is, ideally or in principle, one of the features of federalism, where it asserts the rights of the parts over the whole.
The word subsidiarity is derived from the Latin word subsidiarius and has its origins in Catholic social teaching (see Subsidiarity (Catholicism)). The concept or principle is found in several constitutions around the world (see for example the Tenth Amendment to the United States Constitution which asserts States rights.
It is presently best known as a fundamental principle of European Union law."
From the first of the articles mentioned From 27 to 45? by Bibek Debroi:
" First, India’s present organisation into states (and UTs) isn’t rational, if rationality is interpreted as delivering better governance. The word governance is much abused and different people mean different things when they use it. Governance is a process and it is also about delivering public goods and services (law and order, primary health, school education, roads, drinking and irrigation water, electricity). These are still areas characterised by some degree of market failure. In addition, there are anti-poverty programmes. In all these, trading off economies (of scale and scope) with diseconomies, there is an optimal level of administration at which these can be delivered. While there is a case for centralisation for defence and national security, there is a case for decentralisation for public goods. As a rough rule of the thumb, at least in India’s heartland, optimal governance requires population sizes smaller than 50 million (25 million is more like it) and geographical expanse less than 35,000 sq km.
Second, there is an empirical proposition. Across India’s 28 states and its UTs, work co-authored with Laveesh Bhandari shows smaller states perform better than larger states — on an average. Small states perform better than large states on physical infrastructure, social infrastructure, law and order and anti-poverty programmes. However, this is on an average and isn’t a finding specific to Chhattisgarh, Jharkhand or Uttarakhand. Nor is it the case that administrative restructuring alone solves all governance problems. For instance, the Northeast and Jammu and Kashmir have issues that administrative restructuring alone cannot solve. What of the three newly-formed states? A long enough data time-series doesn’t exist. Subject to that, the answer depends on indicators used. Across indicators, Uttarakhand performs better than UP. The Chhattisgarh-MP comparison is iffy, with Chhattisgarh performing better on some indicators and worse on others. For Bihar-Jharkhand, Bihar generally performs better than Jharkhand. If an argument about optimal administrative level is accepted, the question shouldn’t only be about carved-out states like Chhattisgarh, Jharkhand, Uttarakhand. Governance should also improve in what remains — MP, Bihar, UP. Since one cannot control for other variables, there is a post hoc ergo propter hoc danger. With this caveat, governance (however defined) has improved in MP, Bihar, UP....
In this controversy over Telangana, there is an impression that there is a great deal of controversy. However, if one thinks about it, there should be complete consensus on these seven propositions. Unfortunately, in its preference towards setting up commissions right, left and centre, the UPA didn’t set up the one it should have and the whirlwind is being reaped now.
Perhaps there is a moral there too. Governments are reluctant to delegate decision-making to commissions. Instead, there is a preference for arbitrary exercise of centralised power, exactly the opposite of what the Constitution intended."
Karthik Muralidharan in Too small to fail :
"As states get more involved in large-scale social protection programmes like the NREGA and RSBY, it may be desirable to increase investment in state capacity to deliver services effectively and one way of doing this may be to create new state administrations with more manageable jurisdictions. Smaller states can also experiment more easily with innovations in governance and service delivery, which can be replicated across states if found to be successful."
Pratap Bhanu Mehta in Sizeable matters :
"Two issues in particular need attention. The first is dealing with legitimate concerns over state size. Mayawati’s proposal for further dividing UP merits serious consideration for a number of reasons that have been reiterated on several occasions. But more than creating states, the focus should be on building states. The success of a state depends not on size, but on state capacity. This varies widely across India. But we understand little about the conditions under which different states are likely to acquire the requisite state capacity."