India, as the world’s fastest-growing major economy, may well be catching up with the richer economies in terms of absolute size. But economic convergence within the country remains a distant dream as poorer States continue to lag behind the richer ones in economic growth.

        A report from the rating agency Crisil found that the inter-State disparities have widened in recent years even as the larger economy grows in size and influence on the global stage.

Many low-income States have experienced isolated years of strong economic growth above the national average. But they have still failed to bridge their widening gap with the richer States since they have simply not been able to maintain a healthy growth rate over a sustained period of time. The various factors are responsible for these disparities are:

• Historical Factors:
  • Historically, regional imbalances in India started from its British regime.
  • The British rulers as well as industrialists started to develop only those regions of the country which as per their own interest were possessing rich potential for prosperous manufacturing and trading activities. Example: Bombay, Calcutta and Madras.
  • The absence of proper land reform measures and proper industrial policy, the country could not attain economic growth to a satisfactory level.
• Geographical Factors:
  • River plains, fertile areas, cool climate, arable lands, mines etc. are economically beneficial areas and are developed quickly. Example: Northern plains,
  • The difficult terrain surrounded by hills, rivers and dense forests leads to increase in the cost of administration, cost of developmental projects, besides making mobilisation of resources particularly difficult. Example: Himachal Pradesh, Northern Kashmir.
  • Adverse climatic conditions like regions prone to flood, drought are also responsible factors for poor rate of economic development of different regions of the country as reflected by low agricultural productivity and lack of industrialisation.
• Location Advantages:
  • While determining the location of iron and steel projects or refineries or any heavy industrial project, some technical factors included in the location advantage are getting special considerations.
  • Due to some location advantages, some regions are getting special favour in respect of site selections of various developmental projects. Example: Ports in the coastal areas.
• Economic Overheads:
  • Economic overheads like transport and communication facilities, power, technology, banking and insurance are considered very important for the development of a particular region. Example: Gujarat, Maharashtra
  • New investment in the private sector has a general tendency to concentrate much on those regions having basic infrastructural facilities.
• Policy & Governance Issues:
  • The poor policies also lead to imbalanced growth in regions.
  • The benefit of green revolution was very much restricted to the states like Punjab, Haryana and plain districts of Uttar Pradesh leaving the other states totally in the dark about the adoption of new agricultural strategy.
  • States like Maharashtra, Gujarat, Tamil Nadu have excelled due to industrial development policies, attraction of FDI from foreign investors, tax holidays, tax sops to industries attract them.
• Political Instability:
  • Unstable government, extremist violence, law and order problem have been obstructing the flow of investments into these backward regions besides making flight of capital from these backward states.

Way Forward:

• Goods and Service Tax is a game changer and provides a level-playing field for all states. This makes all states equally attractive to set up industries.
• Flagship projects like Bharatmala, Sagarmala concentrate on the hinterland development too thereby providing infrastructure to underdeveloped areas.
• Schemes like Aspirational Districts Program are curated to target the under-developed areas and bring on par with good socio-economic development.
• Bolstering the State-level institutions, as gauged by their ability to uphold the rule of law and create a free, competitive marketplace for businesses to thrive, and the quality of public spending could be crucial determinants of the long-run growth prospects of States.
• Bottom-up development, competitive and co-operative federalism should be implemented in true letter and spirit to reduce the regional disparities.

Conclusion:

        Reducing the regional disparity is imperative as the demographic potential of states are different. The states with poor developmental indices are the youngest ones and must be developed to reap the demographic dividend and a sustained development of India.