Introduction

India may well be catching up with the richer economies in terms of absolute sizez. 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. Recent research of per capita net domestic product from 1960 to 2014 of India’s 12 largest States, that accounted for 85 per cent of the total population, shows that economic disparity within India’s States is among the largest in the world.

Disparity dynamics

• In 1960, the average person in West Bengal earned Rs.390 per annum; the average person in Tamil Nadu earned Rs.330. But in 2014, the average Bengali earned Rs.80,000 while the average Tamilian earned Rs.1,36,000. Tamil Nadu went from being the fourth poorest among these 12 States in 1960 to the second richest in 2014.
• The southern States of Kerala, Tamil Nadu and Karnataka have climbed up rapidly while West Bengal and Rajasthan have dropped down the order of the richest large States. Most of these States started at roughly the same levels of per capita GDP in 1960. In five decades, some have outperformed the rest, leading to a dramatic reshuffle of their ranking.
• The more intriguing aspect is the levels and trends of disparity among them. In 1960, the top three States were 1.7 times richer than the bottom three. By 2014, this gap had almost doubled, with the top three States being 3 times richer than the bottom three.
• The richest (per capita GDP) State in 1960, Maharashtra, was twice as rich as the then poorest State, Bihar. In 2014, the richest state, Kerala, was four times richer than the still poorest state of Bihar. This gap of four times between the richest and the poorest large State in India is among the highest in the world. A similar ratio in other federal polities such as the U.S., European Union and China is between two and three times.

Factors responsible

It is clear that the economic outperformance of some of these States is a function of their politics and policies over decades or the “maturation of democracy” in these states. While it is tempting to attribute explanations for this outperformance, it is very difficult to prove any. At best, it can be attributed to a complex interplay of politics, leadership, policies, human capital, and the following;

• 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 o 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.

Steps taken by government

• 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.

Way forward

For sustained economic growth, it is necessary that fruits of development are showed by all sections of society and all states of the Union. When national income is not equitably distributed, people might not extend co-operation for the gigantic task of economic development. Cairncross has rightly observed, “Development is impossible, if it does not take place in the minds of men”.