Relative Economic Performance of Indian States

Syllabus: GS3/Economy

Context

• ‘Relative Economic Performance of Indian States: 1960-61 to 2023-24’ paper has been released by the Economic Advisory Council to the Prime Minister (EAC-PM).

About

• It  examines the relative economic performance of states over the past six and a half decades using two indicators- Share in India’s GDP and Relative per capita income. 
• The state’s share in India’s GDP is calculated by dividing the Gross State Domestic Product (GSDP) of the state by the sum of GSDP of all states. 
• Relative per capita income is calculated as the ratio of the per capita Net State Domestic Product (NSDP) of the state as a percentage of the all-India per capita Net National Product. 
• The data is taken from the Ministry of Statistics and Programme Implementation (MoSPI). 

Key Findings

• Southern states: Before 1991, southern states did not show expectational performance. However, since the economic liberalization of 1991, the southern states have emerged as the leading performers.
  • In 2023-24, Karnataka, Andhra Pradesh, Telangana, Kerala and Tamil Nadu together accounted for approximately 30 percent of India’s GDP. 
  • In addition, per capita income of all southern states became higher than the national average after 1991. 
• Western states: Maharashtra has maintained the highest share of India’s GDP for almost all of the period.
  • Gujarat’s share began to increase rapidly- from 6.4 percent in 2000-01 to 8.1 percent in 2022-23. 
  • Both Gujarat and Maharashtra have had per capita incomes exceeding the national average since the 1960s. 
  • Goa has excelled in per capita income terms, with its relative per capita income doubling since 1970-71. 
• Northern States:Delhi and Haryana have performed notably well, while Punjab’s economy has deteriorated after 1991. 
  • Delhi saw its share of India’s GDP increase from 1.4 percent to 3.6 percent during this period. 
  • Haryana’s share of India’s GDP now exceeds that of Punjab, and its relative per capita income has reached 176.8 percent, compared to Punjab’s 106.7 percent in 2023-24. 
• Eastern states: West Bengal, which held the third-largest share of national GDP at 10.5 percent in 1960-61, now accounts for only 5.6 percent in 2023-24. 
  • West Bengal’s per capita income has declined to 83.7 percent in 2023-24 from 127.5 percent.
  • The relative per capita income of undivided Bihar was 70.3 percent in 1960- 61, it declined to 31 percent in 2000-01 after the bifurcated state of Bihar. 
  • Odisha per capita income increased from 54.3 percent in 1990- 91 to 88.5 percent in 2023-24. 
• Central states: Uttar Pradesh had a share of 14.4 percent in India’s GDP in 1960-61. However, its share started to decline thereafter, which continued even after bifurcation.
  • Madhya Pradesh followed a five-decade period of decline (82.4 percent in 1960-61 to 60.1 percent in 2010-11). Its relative per capita income increased from 60.1 percent in 2010-11 to 77.4 percent in 2023-24. 
• North-eastern states: In 1980-81, Sikkim’s per capita income was below the national average. However, it’s per capita income surged from around 100 percent of the national average in 2000-01 to 320 percent in 2023-24. 
  • Assam, which initially had a per capita income slightly above the national average experienced a decline reaching 73.7 percent in 2023- 24.

Reasons for regional disparities among the states

• Unequal Resource Distribution: Natural resources like minerals, fertile land, and water are unevenly distributed, benefiting some states more than others.
• Infrastructure Gaps: States with better infrastructure (roads, electricity, ports) attract more investment and development, leading to growth disparities.
• Industrialization: Industrialized states experience faster economic growth, while states with limited industries remain underdeveloped.
• Governance and Policy Implementation: States with efficient governance and policies tend to grow faster compared to those with poor policy execution and governance issues.
• Human Capital and Education: States with better educational facilities and skilled labor force attract more businesses, leading to economic growth, while others lag behind due to lower human development indices.

Conclusion

• Overall, the western and southern regions of the country are outperforming others, with notable success also observed in parts of the north. 
• The eastern part of the country continues to be a concern. 
• The maritime states have clearly outperformed the other states, with the exception of West Bengal. 
• Even the coastal state of Odisha which was traditionally a laggard state has seen improved performance in the last two decades.

Source: IE