India accounts for a meager 2.4 per cent of the world surface area yet it sustains a whooping 16.7 per cent of the world
population in many
states.The variation across these states and territories is enormous in regard to physical geography, culture, and
economic conditions. Some states have achieved rapid economic
growth in recent years, while others have languished. To address the question of regional performance, we narrow our focus to the 14 most populous states, which excludes the North-Eastern states, and the 6 Union Territories.
The included states have a combined population of 897 million, accounting for approximately 90 per cent of India's population, and 2.7 million sq kms, accounting for 83 per cent of India's total land area. The variation in economic performance is large. The per capita state product varies from the poorest state, Bihar, at Rs 1,010 per month and population of 82 million, to the richest, Maharashtra, at Rs 4,853 per month and population of 96 million. Are the poorest states (especially the so-called BIMARU states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) condemned to fall further behind the front-runners, at least in relative terms? In the planning period pre 1991, industrialisation was affected heavily by state
investment plans that mildly attempted to promote laggard regions. One great impetus to national growth came via the Green Revolution, which led to sharp increases in grain productivity in regions such as Punjab and Haryana.
After 1991,
market forces and international trade have played a larger role. Economic performance of the states Regional differences in growth reflect regional differences in the marginal productivity of investments by sub-
sector. Agriculture can occasionally be a leading sector in economic growth. In India, agricultural-productivity-led growth occurred in one major historical period, the Green Revolution. The epicenter of the Green Revolution was Punjab and Haryana, and to a lesser extent other states of the North Indian Plains and southward to Rajasthan, Gujarat, and Maharashtra.
Much of the reason for poverty in Bimaru states is a human failure rather than it being a result of natural factors as they are rich in mineral deposits and have climate favorable to agriculture. Then it has also been found that tribal areas are predominantly and distinctly poor. Tribal, thickly populated semi-arid areas and those that have been neglected historically, are poor. Parts of West Bengal have made strides in poverty alleviation. Medium level poverty persists in regions of western states; a few regions have made more progress than others, compared to the eastern ones where there is uniform poverty.
The manufacturing sector is a much more consistent engine of growth, and it is likely to play a growing role after 1991 with the opening of the economy. The most likely site for sustained manufacturing growth in India is along the coast, especially at the four large port cities of Mumbai, Kolkata , Chennai , and Kandla . Coastal, urban-based industry can serve both the internal market and the international market .The tourist sector can also be a source of export-led growth, but in a country the size of India, it is likely to play a secondary role except in some local niches. Rajasthan has been the major state with the most significant growth and scale of the tourist industry, based on the popularity of tourist visits to Jaipur and Udaipur and the proximity to Delhi. IT or financial services are reliant on a education network and an urban labor market. The most important state for service-sector activities is Maharashtra, as it combines the country's financial center with an important IT-based industry. Other key states include Tamil Nadu, Karnataka, Delhi and Andhra Pradesh.
Foreign investors have multiple motivations: to service the domestic market; to exploit site-specific natural resources (e.g. mining); and in low-wage countries to establish export platforms inabor-intensive goods, or labor-intensive stages of the production process, or in standardised technologies that are easily transferable to lower-wage settings.
A simple regression confirms that FDI flowed mainly to the urbanised states and to the states with large mining sectors as a per cent of GNP especially Orissa and to a lesser extent Madhya PradeshThere are major differences across states in the area of policy reform. A few of the Indian States have been more reform-oriented, such as Maharashtra, Tamil Nadu, Gujarat, Karnataka and Andhra Pradesh, but states, such as Haryana, Kerala, Orissa, Madhya Pradesh, Punjab, Rajasthan and West Bengal have wide ranging unfinished reform agendas to deal with. Bihar and Uttar Pradesh are even further behind.Interestingly enough, amongst the Southern states, both in Karnataka and Tamil Nadu, per capita incomes began to surge and exceed the national average since 1991-92. On the other hand, amongst the relatively poor reformers, Bihar, Madhya Pradesh, and Uttar Pradesh, and to a certain extent Orissa, have lagged behind.
With reforms in 1991, the role of private investment has acquired a great deal of significance. States are now in competition with one another to attract private investment, both domestic and foreign. Within states, the flow of investment has tended to be skewed in favour of the urban areas. The relatively fast moving reformers like Gujarat have tended to attract higher levels of foreign direct investment than Bimaru states.The writers are from Center for International Development, Harvard University