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Source: The post economic divide in India’s States has been created, based on the article “The geography of unequal growth” published in “Business standard” on 15th January 2024.
UPSC Syllabus Topic: GS paper3 -Economic- growth, development and employment; Inclusive growth and issues arising from it.
News: The article discusses the growing economic gap between India’s states over the last 30 years.
What is the current economic divide in India’s States?
Wealthier states are mainly south, west, and northwest, while poorer states are in the north, center, and east.
The economic divide is marked by a 2.5 times higher per capita SDP in wealthier states compared to poorer ones in 2019-20, growing from a 1.7 times difference in 1990-91.
What are the reasons for economic divide in India’s States?
Sectoral Growth Gap in Manufacturing: The gap in manufacturing between higher- and lower-income states grew significantly, with the former’s per capita SDP being 3.6 times higher in 2019-20, up from 2.4 times in 1990-91.
Service Sector and IT Boom: In services, the gap also widened, with a rise in the SDP ratio from 2.0 to 2.9 during the same period. Post-liberalization, the growth in services, particularly IT companies, has been significant, contributing to the economic disparity.
Infrastructure vs. Power Availability: Despite having comparable road and rail infrastructure, lower-income states, particularly in the Gangetic and eastern regions, lag in per capita power availability.
Shift in Investment: There’s been a shift from public to private sector investment. The public sector’s share in gross fixed capital formation dropped from 40% to 23% between 1990-91 and 2019-20, while the private sector’s share rose from 18% to 38%, leading to a concentration of investment in wealthier states.
Labor Availability Variations: Lower-income states (especially in the north and central regions), have lower urban labor force participation rates and fewer workers with regular wage/salary income, affecting their industrial growth.
Entrepreneurship Concentration: The higher-income states accounted for around 75% of organized-sector factories in 2019-20. Additionally, out of 91 richest Indians residing in India, 87 live in these high-growth states.
Education and Skill Disparity: About 70% of engineering seats in India are in higher-income states, indicating a major imbalance in access to higher education and consequently, a disparity in attracting high-tech industries.
Way forward
To bridge India’s economic divide, it’s essential to boost entrepreneurship and skill development in the poorer states, upgrade power infrastructure in regions like the Gangetic and eastern areas and expand access to technical education. Additionally, forming interconnected national value chains that link the resources of wealthier states with the potential of poorer ones can foster balanced economic growth.
Question for practice:
Evaluate the factors contributing to the economic divide between India’s states and suggest potential strategies to address this disparity.
