Convergent growth

Source– The post is based on the article “Convergent growth” published in the Business Standard on 30th September 2022.

Syllabus: GS3- Indian Economy

Relevance– Challenges to growth of Indian economy

News– The article explains the historical reason for disparity in growth and development performance between Indian states. It also tells about the steps needed to be taken to remove this disparity.

The prime minister’s August 15 speech spoke of a united and integrated India as one of the five focuses for policy in the years ahead to the centenary of independence.

What are some facts related to disparity in growth and development performance of states?

Low growth states are in northern, eastern and central parts of the country.

High growth states are in the south, west and south-west parts of the country.

There is a widening gap between low growth and high growth states of the country

The ratio of per capita state product increased from 1.6 in 1990-91 to 2.6 in 2019-20.

What are the historical reasons for this disparity?

Colonial period- Madras and Bombay presidencies saw higher growth. It was shaped by domestic entrepreneurship driven by nationlist considerations.

Large princely states also experienced higher growth. There was significant government support for industry, education.

The low growth areas coincides with the old Bengal presidency. Although in some parts, there was significant development in industry and agriculture. But it was dominated by British companies.

After independence– There was substantial public investment in manufacturing and mining directed mainly at the eastern and central regions. But this heavy investment could not  generate opportunities for private enterprises. In west Bengal. Growth was further impacted by extreme leftism.

States in the south and west were benefited by private investment in chemical, engineering and consumer industries. There was also public investment in the petroleum and chemical sectors.

After liberalisation– There has been a substantial shift from public to private investment. There has been rapid growth of export-oriented hightech services like the IT sector.

Higher growth states are the main beneficiary due to their strong private sector, coastal location and global interactions.

What is the way forward?

The focus of convergent-growth policies must therefore be on the five northern and central states-Rajasthan, UP, Bihar, MP and Jharkhand. There is a need to focus upon West Bengal which has the presence of most growth factors.

There is a need to properly utilise the demographic dividend of these five northern and central states. These states will account for 91.6 per cent of the national increase in the working-age population between 2030 and 2050.

The northern states cannot be integrated easily with the global economy. There is a need to connect them with the higher-growth states through encouraging a national value chain in manufacturing.

Making the northern states part of a national manufacturing value chain will require serious investment in logistics and infrastructure for manufacturing, skill development, and organised support for local MSMEs. It can not be done without central government support.