Explanation:

In the statements given, while the statement I discusses the present development status of Punjab, the statement II quotes examples of the development happened in the State.
Applying the elimination technique, let’s check the relevance of each of the options one by one.
Possibility 1.
In spite of some economic stagnation Punjab is noticeably more well off today than most of the rest of the country from a development perspective, the roads throughout the State are largely paved and smooth, even in the villages, and power cuts have basically become a thing of the past.
Though the connector ‘In spite of some economic stagnation’ goes well with the statement I yet statement II does not sound coherent and limits the flow. This eliminates options B, C and D straightaway.
Possibility 2.
The phrase/connector given as ‘b’ mentions the word ‘infrastructure’ and we have got examples of ‘infrastructure development’ in statement II. Let’s connect the phrase with statement II followed by statement I.
With instances of infrastructure building like the roads throughout the State are largely paved and smooth, even in the villages, and power cuts have basically become a thing of the past, Punjab is noticeably more well off today than most of the rest of the country from a development perspective.
Clearly, the above synthesis is both grammatically and contextually correct and keeps the flow intact.
Possibility 3
In addition to some economic stagnation Punjab is noticeably more well off today than most of the rest of the country from a development perspective, the roads throughout the State are largely paved and smooth, even in the villages, and power cuts have basically become a thing of the past.
Though the above synthesis is grammatically correct yet it does not frame a logical sentence and hence stays invalid.
Clearly, option A is the correct answer.