Source: The post Balanced growth requires targeted policies to reduce district inequality has been created, based on the article “Growth alone won’t fix inequality” published in “Businessline” on 28th June 2025
UPSC Syllabus Topic: GS Paper 3- Inclusive growth
Context: Despite India’s rising GDP and expanding cities, deep regional inequalities remain unresolved. A district-level analysis using GDP and HDI data questions the assumption that growth alone reduces inequality, challenging the traditional Kuznets curve theory and highlighting the need for more region-specific development policies.
Understanding Spatial Inequality in India
- Concentration of Economic Output: In several States, economic activity is highly concentrated. Bengaluru alone contributes nearly 38% of Karnataka’s GSDP, and Dehradun contributes over 31% of Uttarakhand’s GSDP, indicating skewed development in “superstar districts.”
- Empirical Trends and the Kuznets Curve: The study confirms that inequality tends to rise as development accelerates and later declines. Initially, opportunities are limited across regions. As urbanisation and industrialisation take hold, inequality spikes. Eventually, improvements in health, education, and infrastructure begin to reduce inequality.
- Kerala’s Balanced Development: Kerala demonstrates low spatial inequality due to long-term investments in human capital and decentralised governance. It exemplifies how development can become inclusive through public investment and balanced economic distribution.
Divergent Development Paths Across States
- Tamil Nadu’s Inclusive Industrial Strategy: Tamil Nadu has maintained balanced growth by decentralising industries across various districts like Tiruppur and Hosur. Welfare policies like universal school meals and public healthcare have broadened the reach of economic benefits.
- Karnataka’s Concentrated Tech Growth: In contrast, Karnataka’s growth is driven by the tech sector in Bengaluru, with limited spillover effects. The lack of economic diversification across districts has led to higher regional inequality, despite a similar HDI score as Tamil Nadu.
- Madhya Pradesh’s Manufacturing Focus: Madhya Pradesh’s SEZs focus on processing and manufacturing, sectors with limited employment spillover and weaker regional linkages. Only 7 out of 55 districts dominate its economic output, reflecting a different form of spatial concentration.
Key Findings and Policy Lessons
- Growth Alone Is Not Enough: While economic growth is essential, it does not automatically reduce inequality. Market forces alone tend to reinforce existing regional advantages unless guided by strategic interventions.
- Importance of Decentralised Governance: States like Kerala show how local planning, public services, and participatory governance can distribute growth more evenly, preventing dominance by a single district.
- Need for Better Data and Policy Design: District-level GDP and disaggregated HDI data must be systematically collected to monitor inequalities. This evidence should guide region-sensitive development strategies.
Reimagining India’s Development Approach
- Beyond One-Size-Fits-All Models: India needs district-specific strategies tailored to local strengths and needs. National development frameworks should move beyond focusing on State capitals and IT hubs.
- Encouraging Balanced State Policies: States should be incentivised to pursue inclusive growth, investing in backward regions and diversifying economic activity across districts to avoid deepening inequality.
Question for practice:
Examine how different state-level development strategies in India influence spatial inequality across districts.
