The gap within: on inter-State disparities

The gap within: on inter-State disparities

News: The article discusses the prevalence of inter-state economic disparity in India.

Facts:

• India is catching up with the richer economies in terms of absolute size but poorer States continue to lag behind the richer ones in economic growth.
• A report from the rating agency Crisil found that the inter-State disparities have widened in recent years.
• Richer States like Gujarat have been able to achieve sustained economic growthbut low income states have not been able to maintain a healthy growth rate over a sustained period of time.
• Between fiscal years 2013 and 2018, there has been a significant divergence rather than convergence in the economic fortunes of the poorer and richer States, though there was some convergence between 2008 and 2013.
• Greater government spending boosted GDP growth in the top-performing States, particularly in Bihar and Andhra Pradesh whose growth is coupled with high fiscal deficit in 2018.
• But many other big-spending States, however, have not managed to achieve growth above the national average.

Reasons for divergence:

• The size of public spending is not the reason behind divergence between richer States and poorer ones, but the quality of public spending is what makes the difference.
• Strength of State-level institutions, as gauged by their ability to uphold the rule of law and create a free, competitive marketplace for businesses to thrive is the crucial determinant of the long-run growth prospects of States.