- Regional inequalities, both between States and within States, present a serious development challenge to the Indian economy.
- Average resident of the richest state now has an income four times higher than that of the average resident of the poorest state.
Some of the factors responsible for such differences are enumerated below :
Geographical Factors
- Difficult terrain surrounded by hills, rivers, and dense forests leads to increase in the cost of administration, cost of developmental projects.
- Adverse climate and flood are also responsible factors for poor rate of economic development of different states of the country as reflected by low agricultural productivity and lack of industrialization.
- Regional imbalances arise due to locational advantages attached to some regions and the locational disadvantages attached to some other backward regions.
Inadequacy of Economic Overheads
- Economic overheads like transport and communication facilities, power, technology, banking and insurance are considered very important for the development of a particular region.
Limited access that the poor have to health, education and financial services, increases income disparity in the future.
Implications
- Migration of population from low income states to high income states.
- It results in low quality of life in the poorer states.
- Extremism – naxalism, problems of law and order which can spread across borders.
- High inequality can lead to less than optimal investment in important areas like education and health which impacts on long term growth.
- Higher inequality can reduce support for reforms that are critical for sustaining the pace of growth.
- Private sector investment tends to move to places where the enabling environment, that is, investment climate is better, hence not many companies are moving into already poor states.
- Quality of human capital gets affected, which in turn depends on the level of education and health of the population.
- Lower incomes lead to law, order and governance problems.
- States with weaker institutions and poorer infrastructure did worse in terms of industrial and Gross Domestic Product (GDP) growth.
Way ahead
- More financial and political devolution to backward states.
- There should be more infrastructure development in backward states. Government should provide more tax concessions and subsidies for setting up industrial units in backward states.
- Corruption in the implementation of schemes should be checked through strict measures.
- Efforts should be made to develop agriculture in backward states by providing quality-seeds and fertilizers at subsidized measures.
- Government should promote cottage and SSI in backward areas.
People centric and participatory approach for development should be adopted to formulate locally suited and acceptable reforms.
