The kingdom of Poland itself united with Lithuania in the 16th century. In the 18th century, Poland was carved up by Austria, Germany and Russia. It resurrected as a republic after World War I. In 1939, it was carved up by Russia and Germany. After World War II, it became a Soviet protectorate. It is now part of the European Union (EU).
Poland is typical. The world's political map, including, of course, the subcontinent, has been redrawn multiple times, usually with vast amounts of attendant bloodshed. Now, Telangana has sparked off agitations for Gorkhaland, Bodoland, reorganisation of various other states, and also for the autonomy of mega-cities.
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Political remapping reflects a desire for either merger or demerger, using the corporate terms. These diametrically opposed systems have pros and cons. There are points to ponder if we draw upon corporate history.
Corporate mergers or demergers succeed when they are more or less consensual. It may be similar with national and sub-national remapping. When conglomerates demerge, the constituent parts can generate greater value. But demergers are disastrous if the separated units aren't sustainable on their own. Mergers can create economies of scale, but mergers fail if there is internal resistance.
Evolutionary biology makes us more comfortable with smaller groups. Hominids cooperate within the tribe while competing against outsiders. Apes, and pre-technological humans, live in tribes of 30-100 and the average human can maintain a meaningful relationship only with a few hundred people. But we are members of much larger tribes. Thus, the ape in us finds it difficult to handle the emotional tensions of being part of large groups, even if we recognise rationally that this has its advantages.
Small businesses and nations can be hyper-efficient. Singapore, Taiwan and Monaco are well run. Everyone knows everyone's respective core competencies (and incompetencies). Decisions can be implemented quickly and people held accountable. On the other hand, there are examples like Haiti, Uganda and Zimbabwe.
When a large nation finds synergies, it can evolve into a Germany or a United States. Postal/telecom unions, currency unions and unified tax systems all aid in the promotion of trade. The EU has tried putting these things in place without national mergers. Asean and Nafta are similar attempts.
There may also be lower chances of people killing each other in industrial numbers if they are all citizens of the same nation, even given internal frictions. Think of Yugoslavia between 1945 and 1990, versus the successor states, for an example of a relatively peaceful nation breaking up in genocide. On the other hand, the Velvet Divorce separated the Czech and Slovak nations painlessly.
The larger a nation, the less easy it is to manage. Inefficiencies creep in as each layer of bosses delegates responsibility. Decisions slow down. When things go wrong, the buck is passed to some invisible authority like the "Centre".
Would India be more prosperous if it was split into smaller units? Tough call. It is more painful to move goods from Uttar Pradesh to Maharashtra than to move goods from Poland to the United Kingdom. This could get worse with more sales tax and octroi barriers. On the other hand, smaller states and autonomous mega-cities may see improved internal efficiencies. A better tax code could reduce friction on the trade front.
If there are more consensual demergers, greater local autonomy will create more pockets of good governance. It will also create more pockets of poor governance. Given free labour movement, citizens would move to the better-run pockets, leading to greater overall prosperity. But what are the chances that India will develop a better tax code and retain free labour movement? Especially since demergers are unlikely to be entirely consensual.