Jurnal Indikator Pembangunan Di India PDF

Widening Regional Disparities in India: Some Indicators Author(s): N. J. Kurian Source: Economic and Political Weekly, Vol.
35, No. 7 (Feb. 12-18, 2000), pp. 538-550 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4408933 . Accessed: 23/03/2013 23:23
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Special
articles
Widening Regional
Some
Disparities in
Indicators
India
Inter-stateeconomic and social disparities in India have been increasing in spite of various governmentalineasures to develop backward areas. This article assesses disparities in terms of demographic indicators,female literacy, state domestic product and poverty, developmnent and non-developmentexpenditureby state government,shares in plan outlay, investments, banking activities and infrastructuredevelopment.
N J KURIAN
Introduction
ndian economy has been experiencing an average annual rate of growth of around 6 per cent since the early 1980s. Though, moderate compared to the performance of several east Asian economies duringthe same period, this was quite impressive compared to the performance of Indian economy during the preceding three decades when the average growth logged 3.5 per cent per annum. In terms of per capita income, the improvement has been even more remarkable- around4 per cent per annum in the recent period as compared to less than 1.5 per cent in the earlier period. Further, during the recent period, there has been a steady acceleration in the growth performance over the years. The average compound growth per annum was 5.7 per cent during the Sixth Five-YearPlan(1980-85), 6 percent during the Seventh Plan (1985-90) and 6.6 per cent during the Eighth Plan (1992-97). While the growth rate dropped to 3.1 per cent during the two-year period 1990-92 in the wake of internationalpayment crisis and the introduction of major economic reforms, the growth process picked up in the subsequent years. Indeed, the growth averagedabout7.5 percent duringthe threeyear period ending 1996-97 which is impressive by any standards.The growth rate was somewhat lower in the subsequent two years. In contrastto stagnation or negative growth of most of the east Asian economies, India's performance is remarkable. As is to be expected, improvement in economic growth and per capita income translated,at least partly, into reduction in
the level of poverty in the country. Though there are differences in the estimates of the percentageof the poor by different sources, all agree that there has been a secular decline in the share of poor in the population since the late 1970s. The official estimates of population below poverty line released by the Planning Commission on the basis of the ExpertGroupmethodology indicates the latest trend. The percentage of population below poverty line fell from 51.3 in 1977-78 to 44.5 in 1983, 38.9 in 1987-88, 36 in 1993-94, and 29.2 in 1996-97. The period since 1980 has seen the introduction/expansionof several antipoverty programmes and public intervention policies in favour of the poor including public distribution of subsidised foodgrains. The reduction in poverty in the recent period is attributedto anti-poverty programmes by their protagonists and to accelerated economic growth by marketfriendly experts. Along with faster economic growth and reduction in poverty, there has been accelerated improvement in various indicators of human development since the early 1980s whether it is in the case of demographic characteristics or social development indicators. During the last two decades, the country has made major strides in health and education sectors. The economy got diversified significantly and the share of the service sector in employment and incomes improved considerably. While there is a broad consensus on the overall improvement of the economy and quality of life during the period under consideration, there are significantly differing perceptions about the distributional impacts of these gains.
Disparities in economic and social development across the regions and intraregional disparities among different segments of the society have been the major reasons for adopting planning in India since independence. Apart from massive investments in backward regions, various public policies directed at encouraging private investments in such regions have been pursuedduring the first three decades of planned development. While efforts to reduce regional disparities were not lacking, achievements were disproportionately low. Considerable level of regional disparities remained at the end of the 1970s. The accelerated economic growth since the early 1980s appearsto have aggravated regional disparities.The ongoing economic reforms since 199i with stabilisation and deregulationpolicies as theircentralthemes seem to have furtherwidened the regional disparities. The seriousness of the emerging acute regional imbalances has not yet received the public attention it deserves. The purpose of this study is to initiate a debate on the various issues involved with a view to explore effective corrective measures without any further delay. Most of the studies on inter-countryand inter-regional differences in levels of living and income are done within the theoretical framework of neoclassical growth models. These models, under plausible assumptions demonstrate convergence of incomes. Three notable recent studies,1 however, indicate that in the Indian context these convergence theories do not explain the ground realities. The scope of this study is restricted to a comparative analysis of the emerging trends in 15 major states in respect of a
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February 12, 2000
few key parameterswhich have an intrinsic bearingon social andeconomic development. The variables chosen for examination includethose which will have a bearing on gender and equity issues. The 15 states together account for 96 per cent of the population of India. The remaining 4 per cent of the population is spread in 10 smaller states and seven union territories (UTs) including the nationalcapital Delhi. Leaving out these states and UTs from detailed study is mainly due to non-availability of all relevantdata and also to keep the data sets analytically and logistically manageable. The 15 states taken up for the detailed study have been grouped into two - a forward group and a backward group. The forward group consists of Andhra Pradesh, Gujarat, Haryana, Karataka, Kerala, Maharashtra, Punjab and Tamil Nadu. The backward group comprises of Assam, Bihar, Madhya Pradesh,Orissa, Rajasthan, Uttar Pradesh and West Bengal. Geographically, the forward group of states fall in the western and southernparts of the country and are contiguous except for Punjab and Haryana which are separated by Rajasthan from the rest of the statesin this group.The group of backward states are in the eastern and northernparts of the country and are geographically contiguous. Another notable geographical feature is that while six out of eight states, except Haryana and Punjab, in the first group have vast sea coasts, only two out of the seven in the second group, viz, Orissa and West Bengal are littoral. While the forward group of states accounts for about 42 per cent of the national population, the backward group accounts for as much as 54 per cent of the population of the country.2In terms of naturalresources including mineral wealth, water resources and quality of soil, the latter has a definite edge over the former. A limitation of inter-regional analysis using states as units is the fact that this may not be able to capture the significant intra-state disparities in economic and social development which exist today. The larger states in both the groups have rewhich are vastly gions within thenrmeives different in terms of various indicators of development. Distinct regions at different stages of development are identifiable in several states. After discussing the interregional disparities in development, treating states as units, we will take up intrastate disparities for a brief analysis in the latter part of the present study.
II Indicators Development
A few majordemographic characteristics of the 15 states underconsideration are presentedin Table 1 along with corall-India responding figures. Demographic datarelating to thegroupof forward states are given in the upperpanel and those relatingto the groupof backwardstates are given in the lower panelTable 1. As per the 1991 Census,the totalpopulation of stateswas353.5million of thefirstgroup was457.9 whereas thatof thesecondgroup million;the latterbeingabout30 percent more than the former. It is noteworthy thatmost of the Indian states includedin our study are comparable to medium sized countriesof the world whetherin Europe,Africa, Latin Americaor Asia, in termsof population. Indeed,the populationof UttarPradesh which is projectedto have crossed 160 million by October1997, is comparable to the populationof the most populous of theworld.Onlyfive countries, countries viz, China,India,the US, Indonesiaand Brazilhavepopulations thanthatof larger UttarPradesh. The statewisesex ratiogiven in column 3 of Table1 is, perhaps, themostrevealing indexof gender thestates disparities among of theIndian union.The all-India sex ratio of 927 femalesper 1000 males itself is a reflection of theneglectof women'shealth duetorelatively lowereconomicandsocial value assignedto women, in general,in this country. Amongthe 15 statesconsid-
ered in our study eight have sex ratios above the nationalaverageand seven below the national average. International experience indicates that as a society develops economically the sex ratio turns more favourable to women. Within India, however, this does not appear to hold good. Though only two out of the eight states in the forward group have sex ratios below national average, they happen to be two of the richest states (first and third) in the country in terms of per capita income. Further, their sex ratios happen to be the lowest (Haryana) and the third lowest (Punjab) in the country. Even the second and fourth richest states in the country, viz, Maharashtra and Gujarat have sex ratios only marginally higher than the national average. The highest sex ratio is that of Kerala. Indeed, Kerala is the only state in the countrywhich has a sex ratiofavourable to women. While a sex ratio favourable to women is considered the norm in the developed world and is quite logical in view of the biological advantage women have for longevity, in India, it is a rare occurrence. We shall come back to this issue again in the context of our discussion of social development issues. Annual compound rate of growth of population for the decade (1981-91) based on the two censuses for the different states is presented in column 4 of Table . There are three states in the upper panel and five states in the lower panel with annual compound growth rate higher than the allIndia figure of 2.14. The lowest growth rate is that of Kerala at 1.34 followed by
of Major Indian States YearWhenTotal Annual Rate CompoundRate Fertility of Growth of WillBe 2.1 - the Population Replacement Level(Estimate) (1981-91) (5) (4) 2.17 1.92 2.42 1.92 1.34 2.29 1.99 1.43 2.17 2.11 2.38 1.83 2.50 2.27 2.21 2002 2014 2025 2009 1988* 2008 2019 1993* 2015 2039 Beyond2060 2010 2048 Beyond2100 2009
Table 1: Demographic Characteristics State Population (Millions)
Numberof Females Per 1000 Males (3) 972 934 865 960 1036 934 882 974 923 911 931 971 910 879 917
(1) AndhraPradesh Gujarat Haryana Karnataka Kerala Maharashtra Punjab TamilNadu Assam Bihar MadhyaPradesh Orissa Rajasthan UttarPradesh West Bengal
(2) 66.5 41.3 16.5 45.0 29.1 78.9 20.3 55.9 22.4 86.4 66.2 31.7 44.0 139.1 68.1
AllIndia 2.14 846.3 927 2026 * Note: Keralaand Tami'Naduhave alreadyachieved the TFRof 2.1 in 1988 and 1993 respectively. Sources: Data in columns 2 to 4 are from 1991 Census Hand Book, and data in column 5 are from PopulationProjectionsforIndiaand States 1996-2016, RegistrarGeneralof India.
Economicand PoliticalWeekly February12, 2000
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TamilNaduat 1.43. The highestgrowth rateis thatof Rajasthan at 2.50 followed by Haryanaat 2.42. Since population growthis the net effect of natural growth frombirthsanddeaths)andnet (resulting reflect thesefigures migration, maynottruly transition a state thelevel of demographic has achieved.While migrationmay be fora smaller state,itis thenatural important whichcontributes growth mainlyto population growth in larger states. A lower population growthcould be a reflection eitherof high birthrate high death rate or low birthrate low death combination rate combination.A higher population in theIndian contextis a reflection growth of a state in early stage of demographic wheredeathratehascomedown transition but birthrate has not yet followed suit. 5 of Table 1 presents the likely Column year by which replacementlevel total rate(TFR)of 2.1 will be achieved fertility statesof the Indianunionand by different thenation itselfif therecent paceof decline in TFRsobserved during1981-93continues in the yearsahead.While Keralaand Tamil Nadu have already achieved the level of TFR, the remaining replacement six states in the first groupare expected level of TFRby to reachthe replacement 2025, one year in advanceof the attainlevel of TFRby the mentof replacement Incontrast, only threestates,viz, country. Assam, Orissaand West Bengal, in the secondgroup,are expected to reach the level of TFR by 2025. The replacement states four forwhichTFRis likelytoremain above replacement level well after 2025 and areBihar, Pradesh, Madhya Rajasthan Pradesh. WhileBiharandRajasthan Uttar are likely to reduceTFR below replacePradesh is not mentlevelby2050,Madhya this level before 2060 and to reach likely UttarPradeshis not likely to reach this level even by 2100. It is evidentthatthe battleof the countryin the demographic comingyearsis to be foughtin thesefour populousstates in the backwardgroup whichareknownby the genericacronym 'BIMARU'states.We shall now turnto of the social characteristics the important two groupsof stateswhich are presented in Table 2. in India The shareof urbanpopulation was 25.7 per cent in 1991. While all the in thefirstgrouphad states exceptHaryana all states shareof urban population, higher exceptWest Bengal in the second group had urbanpopulationshare below the Themosturbanised state national average. in the first groupis Maharashtra and the 540
least urbanisedone is Haryana.In the secondgroupthecorresponding statesare West BengalandAssam.While the most urbanised statein the firstgroupis a little more than 1.5 times urbanisedas comin the second paredto the leasturbanised, West Bengalis groupthe most urbanised to about2.5 timesurbanised as compared Assam.Indeed, WestBengalhasa number of characteristics of a forwardstate, the level of urbanisation being one of them. This is because of the historicalbackgroundof BengalandespeciallyCalcutta whichused to be the secondmost important city of the British empire.Another is the aspect of the level of urbanisation fact thatall those stateswith higherlevel of urbanisation have a metro-cityeach which accountsfor a considerable share of urban intherespective states. population Thelevelof literacy themost is, perhaps, importantindex of development of a is higher thanfemale society.Maleliteracy in a backward literacy society.Oftenthere maybe significant gendergap in literacy. Thetrueindexof development of a society is the level of female literacywhich can be considered as the bottomline as far as literacyis concerned.Statewisepercentfemalesabove7 yearsof age ageof literate as per 1991 Censusis given in column3 of Table2. All the statesin the firstgroup except AndhraPradeshhave female literacylevel abovethe nationalaverageof 39.3 percent.In contrast only Assamand West Bengal, in the second group,have femaleliteracy abovethenational average. The distinction of highestfemaleliteracy goes to Keralawhere86 out of every 100
State
females above 7 years are literate. Maharashtra and TamilNadu in the first group with 52 per cent and 51 per cent respectivelyoccupythe second and third andthe positions.ThegapbetweenKerala rest of the countryin female literacyis, is theleast indeed,phenomenal. Rajasthan literatestate where female literacyis as low as 20 percent, whichimpliesthatout of everyfive femalesin Rajasthan fourare illiterate.The female literacyratesin the otherthree'BIMARU'states,viz, Bihar, MadhyaPradeshand Uttar Pradeshare also below 30 per cent. The empirically bewell-established positiverelationship tween female illiteracyand TFR is quite evidentin thecaseof thesestates.Itis quite for evident that the criticalprecondition of Indian is to raise stabilisation population thefemaleliteracy inthe'BIMARU' states. Rather thanthe level of female literacy which it is thegender difference in literacy the stateof womenin a society. captures Female literacyas a percentage of male literacyis given in column4 of Table 2. As againstthe all-Indiaaverageof 52.8 female literacy as a percentageof male variesfrom91.6 percentin Kerala literacy In to a low of 24.4 per cent in Rajasthan. allthefour'BIMARU'states,thispercentbelow 40 indicating age remains varylow economic and social statusof women in these societies. While Assam and West Bengalfromthesecondgrouphaveabove all-India level ratios,Andhra and Pradesh fromthefirstgrouparebelowthe Haryana nationalaverage. An important indicator of the qualityof health careinasocietyis theinfant mortality
of Major Indian States
Table 2: Important Social Characteristics
(1) AndhraPradesh Gujarat Haryana Karnataka Kerala Maharashtra Punjab TamilNadu Assam Bihar MadhyaPradesh Orissa Rajasthan UttarPradesh West Bengal All-India
Percentage Percentage RuralFemale Projected ProjectedLevels of Share of of Literate to Male Levels of Infant Expectation of Urban Females for Lifeat Birth for Literacy Mortality (Per Cent) Females during Females during Population Above 7 Years 1996-2001 1996-2001 (1991) (2) (3) (4) (5) (6) 26.9 34.5 24.6 30.9 26.4 38.7 29.5 34.2 11.1 13.1 23.2 13.4 22.9 19.8 27.5 25.7 32.7 48.6 40.5 44.3 86.2 52.3 50.4 51.3 43.0 22.9 28.8 34.7 20.4 25.3 46.6 39.3 50.5 57.9 59.3 57.7 91.6 58.8 72.3 62.2 66.8 37.3 38.6 51.3 24.4 36.5 61.4 52.8 56 44 57 67 9 46 51 43 61 55 101 105 65 74 56 64 63.7 62.8 67.4 65.4 75.0 68.2 71.4 67.6 58.8 62.1 57.2 58.1 61.4 61.1 67.2 63.4
Sources. Data in columns2, 3 and 4 are from 1991 Census HandBookand data in columns5 and 6 are fromPopulation ProjectionsforIndiaand States 1996-2016, RegistrarGeneralof India.
February 12, 2000
here rate(IMR).As in thecaseof literacy, also the bottomline is the female IMR. The projected statewiseIMRfor females for the period 1996-2001based on past in column5 of Table2. trendis presented The national averageis 64 which implies thatoutof every 1000femaleinfantsborn in the country, 64 will not survivetill the ThelowertheIMRthebetter firstbirthday. healthcare a stateenjoys. All the states in the forwardgroup except Karataka The haveIMRbelowthenational average. lowest IMRat 9 is that of Keralawhich is comparable tothelevel achieved byhigh incomedeveloped societies.Thenextbest IMRat43 is thatof TamilNadufollowed at 44 and Maharashtra at 46. by Gujarat In the groupof backward states,Assam, BiharandWest Bengal have IMRbelow the national average.The worstIMRfiguresarethatof Orissaat 105 followedby 101 in MadhyaPradesh.These figures meanthatin thesetwo states,out of every 10 newborn females,at least one will not live to see her first birthday. Life expectancyat birthor longevityis of the economicand an overallindicator socialwell-beingof a people.As a society of its people the life expectancy advances, Thehighestlife expectancy alsoincreases. fora nation so faris thatof Japan, reported whichis 80. Formostsocieties,especially ones, femalelife expectancyis developed thanmalelife expectancy. In India, higher however,female life expectancyat birth remained below male life expectancytill recentlymainly due to high infant and child mortalityamong females and subwith stantial loss of femalelife associated childbirth due to lack of healthcare.This trendhas been reversedin recentyears. The last columnof Table 2 providesthe levels of expectationof life at projected birthfor femalesduring1996-2001based on past trends. The all-India figure is projectedat 63.4 years. Among the forhave figures wardstates,all but Gujarat above the nationallevel. In the case of backward states,all except West Bengal, havefemale lifeexpectancy below national Thehighestlevel is for Keralaat average. 75 yearsandthelowestlevel is forMadhya Pradeshat 57.2 years. This implies that whilea femalechildbornin Keralatoday can, on the average,expect to live for 75 years,thecorresponding averagelife span of a femalechildbornin Madhya Pradesh todayis only 57.2 years.Obviously,there is a vast gap in the overallqualityof life forwomenbetweenthesetwo statesof the IndianUnion.
The most common indicator of the economic development of a society is the per capita annual income generated by it. An important structural change in the economy in the process of development is the decline of income generated in the agriculture sector and the increase in the income generated in the manufacturing sector. The level of poverty or the share of population which do not have minimum income to meet its basic requirements is an indicator of the level of economic development as well as the inequality in the income distribution. A few important indicatorsof statelevel income and poverty are presented in Table 3. The statewise net state domestic product (NSDP), given in column 2 indicates that all states in the forward group except Andhra Pradesh, Karnataka and Kerala have per capita income above the national average. In contrast, all the states in the backward group have per capita income below the national average. The highest percapita income is thatof Punjabwhich is almost five times that of Bihar which has the lowest per capita income. It is noteworthy that Kerala, which has made great stridesin social development,has the lowest percapitaincome among the forwardstates. It may, perhaps,convey an importantmessage that high level of social development is achievable even at relatively low levels of per capita incomes. Indeed, the case of Keralaalong with thatof SriLankahas been noted internationally for achieving high levels of human development at relatively low level of economic development. The percentage share of agriculture in NSDP for different states is given in column 3. Ten out of the 15 states conState NSDP Per Capita at Current Prices in 1996-97 (Rs) (2) 9867 13932 16199 10279 9066 17295 18213 11708 6663 3835 7445 6422 8481 6733 9441 10919
sideredin ourstudyhaveshareof agriculturehigherthanthe national level. Outof these ten states,fourareamongthe group of forwardstates and six are among the Thehighestshare of backward states. group is in Punjabat of NSDP from agriculture over 44 per cent which is followed by wherethe shareof agriculture is Haryana over38 percent.The shareof NSDPfrom is least in Maharashtra at 18.1 agriculture percent whichis followedby TamilNadu whereit is 18.3 percent. It may be noted thatall the statesin Indiahave sharesof agriculturefar above the level in the developedcountries.All the high income less economieshavea shareof agriculture than10 percent.Evenmost of the middle incomecountrieshave a shareof agriculand turebelow 20 per cent. Maharashtra TamilNaduarethe only two stateswhich have reducedthe shareof agriculture in theirNSDP to thatlevel. Two of the most prosperousstates, Punjaband Haryana, remainlargelyagrarian. The percentage shareof manufacturing in NSDP for differentstates is given in column 4 of Table 3. Four out of eight states in the forwardgrouphave a share of manufacturing above the national averageof 16.7 per cent and none of the statesin the backward grouphas a share of manufacturing above the national with 27.1 per cent share average.Gujarat of manufacturing in NSDPhasthehighest level followed by Maharashtra (24.1 per cent) and Tamil Nadu (23.7 per cent). Indeed,these states have emergedas the statesin thecountry, major manufacturing for about45 percent togetheraccounting In the of the NSDP from manufacturing. first group Keralahas the lowest manuPercentage Share of NSDP from Manufacturing 1996-97 (4) 13.6 27.1 19.2 15.7 11.6 24.1 13.4 23.7 9.6 10.0 16.5 9.0 10.5 14.3 14.1 16.7 Percentage Share of Poor in 1993-94 (5) 22.2 24.2 25.1 33.2 25.4 36.9 11.8 35.0 40.9 55.0 42.5 48.6 27.4 40.9 35.7 36.0
Table 3: The Structure and Magnitude of State Domestic Product and Level of Poverty Percentage Share of NSDP from Agriculture 1996-97 (3) 30.6 21.4 38.4 30.7 24.2 18.1 44.1 18.3 37.2 36.9 31.6 26.3 36.8 35.3 30.0 27.7
(1) Andhra Pradesh Gujarat Haryana Karnataka Kerala Maharashtra Punjab TamilNadu Assam Bihar Pradesh Madhya Orissa Rajasthan Uttar Pradesh West Bengal All-India
fordata in columns2, 3 and 4; Sources: NationalAccountsStatistics,CentralStatisticalOrganisation NinthFive-YearPlan (1997-2002), PlanningCommissionfordata in column5.
February 12, 2000
541
facturing share at 11.6 per cent followed by Punjab at 13.4 per cent. Among the group of backwardstates, MadhyaPradesh has the highest percentage share of manufacturing in the NSDP at 16.5 per cent and Orissa has the lowest at 9.0. An interesting point to be noted here is that the share of manufacturing in West Bengal's NSDP has been declining steadily over the years. It was as much as 24.4 per cent in 1980-81, which came down to 21.2 per cent in 198586, to 19.9 per cent in 1990-91 and further to 14.1 per cent in 1996-97. It is a clear sign of deindustrialisationof that state. At the same time it may be clarified thatlower share of manufacturingmay not necessarily imply that a state is getting more agrarian. It could very well be that while the share of manufacturing comes down the share of other non-agricultural activities including services go up. In other words a state could experience a decline in the share of agriculture and manufacturing simultaneously.3 In the last column of Table 3, the percentage share of the poor in different states are presented. The all-India average is 36 per cent. Only one state, viz, Maharashtra among the forward states has a percentage share of poor above the national average. In contrast, five out of the eight states in the backwardgroup have levels of poverty above the national average and a sixth state,viz, West Bengal has a level of poverty almost equal to the national average. Only one state in this group, viz, Rajasthan has poverty level significantly below national average. The highest poverty is recorded for Bihar where 55 per cent of the population is below the poverty line. This is close to five times the poverty level in Punjabwhere the share of poor population is the least among the states at 11.8 per cent. Since poverty is measured by the head count method here, the intensity of poverty in different states could not be captured. For example, the share of destituteswhose level of income/consumption is less than, say, 75 per cent of the poverty line, cannot be ascertained using the present data. Sen's index and other sophisticated measures of poverty can be used to capture such information which may be of relevance for policy purposes. An aspect of the data in Table 3 which needs special mention is the fact that Maharashtra's poverty level is above the national average even though the state enjoys very high level of per capita income and is high in the hierarchy in terms of most of the indices of development includ-
ing social development. Maharashtra is, indeed, an interesting case study of intrastate disparities. This aspect will be taken up for some detailed analysis in a subsequent section.
Ill StateGovernment Expenditure

An important public policy instrument for economic and social development of a state is the level of government expenditure. In the Indian context public expenditure could be by the central or the state government. The present discussion is restrictedto an analysis of the expenditure of the state governments. The expenditure of the state government could be developmental or non-developmental in character. Expenditure on items like maintenance of the organs of the state, administrative services, pensions, interest payments, etc, are non-developmental in nature. Expenditure on education, health, various other social services and economic services are categorised as developmental in nature. Data on statewise per capita expenditure on development and nondevelopment for two periods, viz, 1980-81 and 1995-96 are presented in Table 4. In 1980-81, the average per capita development expenditure for all states was Rs 207.40. All states in the first group except Tamil Nadu had above average per capita development expenditure. In con-
trast only Orissa in the second group had above average per capita development expenditure. Indeed, the level of development expenditure in Orissa in 1980-81 was almost twice that of Bihar and higher than that of three states of the developed group. The per capita non-development expenditure in 1980-81 for different states may be seen in column 3 of Table 4. The per capita expenditure in all the states in the first group except in Andhra Pradesh is above the all states average of Rs 65. In contrast, the corresponding expenditure in all the states in the second group is below the all states average. The relative magnitude of development and non-development expenditure in 1980-81 is indicated in column 4 of Table 4 where the ratio of development expenditure to non-development expenditure is presented. The ratio varies from the highest level of 4.1 each for Madhya Pradesh and Orissa to the lowest level of 2.5 in Maharashtra.The all states average is 3.2 and there is hardly any quantitative differences in this ratio between the two groups of states. Moving over to the latest year for which actual expenditure figures are available, column 5 presents the statewise development expenditure for 1995-96. Since all figures areat 1980-81 prices, intertemporal comparison is also possible. The all states average of Rs 367 is more than 50 per cent higher than the corresponding figure for 1980-81. The highest per capita develop-
Table 4: Developmental and Non-developmental Revenue Expenditure of the State Governments (Rs at 1980-81prices) State 1995-96 1980-81 Develop- Non-Develop- Development Develop- Non-Develop- Development ment ment ment ment Expenditure Expenditure Expenditure Expenditure as a Multiple Expenditure Expenditure as a Multiple of Non-DevelopPer of Non-DevelopPer Per Per ment ment Capita Capita Capita Capita Expenditure Expenditure (2) (3) (4) (5) (7) (6) 54.8 80.1 79.0 74.3 66.0 104.8 94.1 67.7 54.3 43.5 47.3 54.8 63.8 46.5 56.6 64.9 3.8 3.2 4.0 2.8 3.7 2.5 3.0 2.8 3.1 2.9 4.1 4.1 3.0 3.3 2.9 3.2 392.0 483.4 522.5 423.5 386.5 491.2 445.5 407.0 313.5 160.5 275.8 295.3 403.3 206.2 253.1 367.3 141.0 164.5 396.1 155.7 212.1 178.9 391.3 165.9 139.2 100.1 109.5 134.6 204.2 152.6 123.8 177.2 2.8 2.9 1.3 2.7 1.8 2.7 1.1 2.5 2.3 1.6 2.5 2.2 2.0 1.4 2.0 2.1
(1)
AndhraPradesh 207.7 253.0 Gujarat 314.3 Haryana Karnataka 208.8 Kerala 246.1 Maharashtra 259.8 283.7 Punjab TamilNadu 188.7 Assam 166.9 Bihar 128.0 MadhyaPradesh 195.7 223.5 Orissa 194.1 Rajasthan UttarPradesh 152.2 West Bengal 163.7 Allstates 207.4
Source: NinthFive-YearPlan (1997-2002), PlanningCommission,Government of India.
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ment expenditure in 1995-96 is in where it is as much as Rs 491 Maharashtra, and the corresponding lowest per capita expenditure is in Bihar where it is as low as Rs 161. The per capita development expenditure in 1995-96 in all the states in the firstgroupis above the all states average while the corresponding expenditure in just one state in the second group, viz, Rajasthanis above the all states average. It is also noteworthy that three states, viz, Kamataka and Tamil Nadu in the first group and Rajasthan in the second have more thandoubled the per capita development expenditurein real terms in 1995-96 as compared to 1980-81. Per capita non-development expenditurein 1995-96at 1980-81 prices, statewise, is given in column 6 of Table 4. The all states average at Rs 177 is almost three times the figure for 1980-81. It is important to note that the real per capita nondevelopmentexpenditurehas grown much morefasterthanthe correspondingdevelopment expenditure which increased only 1.5 times over the last 15 years. Five out of the 15 states considered in our study have non-developmentexpenditure higher than the all states average, four of them in the group of forward states and the remaining one in the group of backward states.The highest percapita non-development expenditure in 1995-96 at Rs 396 was in Haryana which was followed by Punjab at Rs 391. Among the backward states the highest per capita non-development expenditure was in Rajasthan at Rs 204. The least expenditure per capita was in Biharat Rs 100 followedby Madhya Pradesh where it was Rs 110. The relative magnitude of development expenditurewith respect to non-development expenditure in 1995-96 is given in column 7 of Table 4. It is significant that the ratio of development expenditure to non-developmentexpenditurefor all states taken together has come down steeply to 2:1 in 1995-96 from 3.2 in 1980-81. Indeed, in the case of every state except Maharashtra,the ratio has come down during this period. The implication is obvious. In 1995-96 as compared to 1980-81, the relative importance of development expenditure vis-a-vis nondevelopment expenditure has come down as far as the state governments are concerned. While both development and nondevelopment expenditure have gone up in real terms in every state during this period, the growth in the latterwas faster in every state except Maharashtrawhere the rela-
tive share of non-development expendi- Andhra Pradesh achieved expenditure levels higher than the all-India average. ture was quite high in the base year. An analysis of the consolidated budget- Three out of the seven states in the second ary position of all the states taken together group also achieved expenditure level (not given in the table) reveals that there higher than the all-India average. The four was a steep decline in the shareof develop- states where the per capita expenditure ment in the total revenue expenditurefrom was below the national average are Bihar, 72 per cent in 1980-81 to 63 per cent in Madhya Pradesh, Uttar Pradesh and West 1995-96. Correspondingly the non- Bengal. Bihar has the least per capita plan development expenditure has gone up expenditure at Rs 592 which is just 30 per steeply from about 28 per cent to 37 per cent of the all-India average. The levels cent. The major reason for this increase of plan expenditure in West Bengal and in non-development expenditure has been Uttar Pradesh also have been quite low, the steep increase in the interest burden of 58 per cent and 70 per cent respectively the states during this period. Interest pay- of the all-India average. It may be of some ment which accounted for just 30 per cent interest to note that Andhra Pradesh is the of non-development expenditure of all only state in the forward group where the states taken together in 1980-81 has in- average plan expenditure was below the creased to 40.5 per cent in 1995-96. The all-India average. Indeed there is a specific steep increase in the interest liability has reason for this. During the first two years been partly due to increase in the quantum of the Eighth Plan, the per capita average of borrowings of the states and partly due expenditure in Andhra Pradesh was well to the considerable increase in the cost of above the all-India average. The two borrowings in the wake of financial sector populist measures, viz, 'two rupee rice' reforms as a result of which state govern- and 'total prohibition' introduced by the ments have to pay market interest rates. newly elected state government in early So far our concern in this Section was 1994 eroded the resource base of the state to examine the relative importance of considerably. As a result, there was a development andnon-development expen- perceptible decline in the per capita plan diture in the total revenue expenditure expenditure of Andhra Pradesh in the across the states and over time. Now we subsequent three years of the Eighth Plan. shall turn to a brief examination of the The very low plan expenditure in Bihar has level and structure of plan expenditure been due to a combination of very poor across the states.Table 5 gives the statewise resource mobilisation efforts on the one data on the statewise Eighth Plan expen- hand and steep increase in the non-plan ditureper capita and the share of important expenditure on the other. The lacklustre sectors in this expenditure. performance of West Bengal and Uttar The Eighth Plan average per capita Pradesh are also due to similar reasons. expenditure at currentprices was Rs 1,965. Percentage share of four importantsecAll the states in the first group except tors in the Eighth Plan outlay in different
Table 5: Eighth Plan Outlay and Its Sectoral Distribution State (1) AndhraPradesh Gujarat Haryana Karnataka Kerala Maharashtra Punjab TamilNadu Assam Bihar MadhyaPradesh Orissa Rajasthan UttarPradesh West Bengal All-India Per CapitaAnticipated Expenditure (Rs) (2) 1858 2700 2838 3138 2370 3101 2951 2427 2066 592 1742 2123 2548 1372 1144 1965 Percentage Share of Expenditure and Agriculture Energy Transport Social Services Irrigation (6) (3) (4) (5) 28.4 36.1 25.9 28.6 26.4 27.2 16.7 15.9 20.3 26.8 25.7 28.4 24.7 20.1 14.0 24.0 25.5 20.4 24.0 20.3 24.8 20.5 41.1 22.0 13.6 10.4 30.1 18.4 26.2 26.9 38.9 23.6 12.2 6.7 6.0 6.0 8.1 8.2 4.1 9.8 8.1 8.6 2.7 10.1 7.6 10.9 7.3 8.6 19.9 24.0 35.2 29.6 19.5 21.0 26.8 36.0 41.1 20.3 26.2 25.5 25.9 24.8 19.3 26.2
Note: Per capitaexpenditure figuresare at currentprices. Source: NonthFive YearPlan (1997-2000), PlanningCommission.
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in columns3 to 6 of statesarepresented Table 5. Thecombined shareof agriculture which includesagriculture andirrigation and andalliedsectorsas well as irrigation floodcontrolis 24 per cent of the totalat all-India level.There is considerable variationin thepercentage shareof planoutlay devolvedby differentstatesto this sector. Six statesin thefirstgroupandfourstates in the secondgrouphave a sharehigher thanthe nationalaverage.Low shareof inPunjab andTamilNadu planexpenditure can be explained by the fact thatboththe stateshave almostreachedthe saturation level as far as irrigation developmentis Theveryhighshareof Gujarat concerned. is on accountof the considerable outlay on Narmada Project. Theshareof stateplanoutlayon energy the EighthPlanworksout to 23.6 during level.Theprincipal percentattheall-India of this is the investment in the component The in sector. colfigures given power umn4 indicatethattherehasbeenconsiderable variation acrossstatesin theimportancegiven to energysector.The highest shareof 41 percentwas given by Punjab. ThiswasfollowedbyWestBengalatabout 40 percent. The otherstateswith considof Eighth Planoutlayinenergy erable share sectorareMadhyaPradesh (30 percent), Uttar Pradesh (27 percent)andRajasthan (26 per cent).The lowest shareto energy sectorwas in Biharwhere it was as low as 10.4percent. Considering the fact that Bihar'sEighthPlan outlayitself was the lowestin percapitatermsthefactthatonly 10 per cent of it is devoted to energy implies that very little investmentin energysectorhastakenplacein Biharduring the EighthPlanperiod.Biharalso has the lowest per capitaenergyconsumption in thecountry. Thestatewiseshareof Eighth Planoutlayin transport sectoris given in column5 of Table5. Theall-India average is 8.6 per cent. Considering the fact that sector includes those outlay in transport in state road network,minor ports and waterwaysas well as the various state to be services,this shareappears transport rather modest. The states which have share totransprovided significantly higher Pradesh(12.2 per portsectorareAndhra Pradesh cent),Uttar (10.9percent),Orissa (10.1 per cent) and Tamil Nadu (9.8 per sector cent).The lowestshareto transport was in Madhya Pradesh whereit wasjust 2.7 percent.Thiswasfollowedby Punjab with4.1 percent.SincePunjab hasa fairly road network and transwell-developed portsystem,a lower shareof plan outlay
in thissectoris understandable. Inthecase of MadhyaPradesh, however,in view of the relatively underdeveloped transport themeagre network share totransport sector is a matterof concern. The shareof EighthPlanexpenditure in social services is presentedstatewise,in thelastcolumnof Table5. Socialservices include education,health, water supply andsanitation, housingand variousother services.Social development and human resourcesdevelopmentcriticallydepend on the publicinvestment in social sector. Therefore,plan outlay in social services sectorhas an addedsignificance. The allIndia averageshareof social services in the Eighth Plan was 26.2 per cent. Six statesincludingfourfromthe first group and two from the second grouphad exsharemorethanor equalto the penditure all-Indiaaverage.The highestsharewas providedby Assam (41.1 per cent) followedbyTamil Nadu(36percent), Haryana Pradesh (35.2percent)andHimachal (34.9 per cent). Among the group of forward stateslow sharein Kerala(19.5 per cent) andMaharashtra (21 per cent) areunderstandable in view of the fairlywell developed social services,butthe low sharein Andhra Pradesh (19.9 percent)is difficult to comprehend in the light of comparativelylow level of existingsocialservices, education. especially elementary Similarly, statesvery amongthe groupof backward low sharefor socialserviceswasprovided in Bihar(20.3 percent) andWest Bengal (19.3percent)wheresignificant gapsexist in the provisionof social services. Resource Transfer from Centre to States Thereis an inbuiltimbalancebetween the expenditureresponsibilitiesand the revenuesourcesof the stategovernments. The foundingfathersof the IndianConstitutionwere awareof this fact and ensureda comprehensive scheme of devolutionof centraltax revenuesthrough the mechanism of financecommissions.The of personal incometaxandexcise sharing duties collected by the centre with the states is periodicallyreviewedby the finance commissionappointedevery five years.4The commissionalso decides the principlesand the formulaby which the allocable fundsaretobe distributed among the states. An important aspect of the devolution of central tax revenues under finance commissiondispensation is thatit has an
inbuiltbias in favourof fiscally weak states. Population and per capita income of the state get high weightage in the distribution formula. A state with larger population and lower per capita income gets a higher share in the central tax revenues. The gap between revenue receipts (other than the central tax revenues) and revenue expenditure is another parameterwhich decides the level of a state's share. As a result the central tax share constitutes a major revenue source for the backwardstates. While it constitutes about one-third of the total tax revenues of all the states taken together; it accounts for more than 50 per cent of the total tax revenues of less developed states like Bihar and Orissa; but its share is less than 20 per cent of the total tax revenues of more developed states like andPunjab. Gujarat,Haryana,Maharashtra A second channel of resources flow from the centre to the states is central assistance for state plans. The state plans are financed partly by states' own resources and the balance by central assistance. Central assistance is provided as a block assistance of which 30 per cent is grant and the remaining 70 per cent is a long-term loan. The rationale for this grant-loan proportion is embedded in the fact that about 30 per cent of the plan expenditure was of revenue nature and 70 per cent was of capital nature when this proportion was decided in the late 1960s. Since plan expenditure of revenue nature is not expected to yield any financial returns for servicing the loan, this share was provided as grantby the centre. In the case of fiscally weak states categorised as 'special category states' the grant component is, indeed, 90 per cent. The distributionof plan assistance to the states has been governed by 'Gadgil Formula' since the Fourth Five-Year Plan (1969-74). As in the case of finance commission devolution, 'Gadgil Formula' which is administered by the Planning Commission also has its inbuilt bias in favour of backward states. Population and per capita income together account for 85 per cent of the weight in the formula. The remaining 15 per cent weightage is equally divided between state performance in the achievement of certain priority national objectives and the special problems of the states. Centralassistance constituted about 45 per cent of the stateplans when all states aretakentogether.While the shareof central assistance constitutes less than 25 per cent of the plan finances of the more developed states, it accounted for the major share of
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plan finances of the backward states. crossed 50 per cent. As a result, the debt amount. Indeed, Gujaratand Maharashtra Indeed, the plans of the most backward servicing burden of the states has gone up received together 36.7 per cent of the investmentproposals which is significantly states,especially the specialcategorystates, significantly. more than the total investment proposals have been fully financed by central assisIV received by all the states in the second tance. EconomicIndicators In the wake of the foreign exchange group. While Gujaratwhich accounted for less than 5 per cent of the population of crisis, the centre has been encouraging Patternof PrivateInvestment the states to seek and absorb more and more country received about 19 per cent of In the wake of economic reforms initi- the private investment proposals, Bihar external aid for development projects. The external aid to the states is routed through ated in 1991, the role of private investment which accounts for more than 10 per cent central budget and devolved as additional has acquired a special significance in the of the population of the country received central assistance for state plan. From the context of economic development of vari- just little over 1 per cent of such proposals. early 1990s, there has been a substantial ous states of the Indian union. Indeed, This is a clear pointer to the direction of increase in aid flows to the states. How- there has been an element of competition private investment in the coming years. The cumulative share of financial assisever, the major share of such flows have among states for attractingprivate investbeen absorbedby a few developed states. ment, both domestic and foreign. Some of tance disbursed by all-India financial inAs a result, during the Eighth Plan period, the states have been offering various tax stitutions up to March end 1997, statewise, there has been an apparentincrease in the concessions and other special facilities to are given in column 3 of Table 6. The great central assistance to the more developed new investors on a competitive basis. In divide between forward and backward states.While 'Gadgil Formula'-based nor- Table 6, we present statewise data on states is clear. Maharashtraalone received mal central assistance continued to be investment proposals, assistance by all- almost as much financial assistance as all positively discriminating towards back- India financial institutions and assistance the states in the second group put together. It may, however, be noted that Mumbai ward states, additional central assistance by state financial corporations. The total investment proposals received being the headquartersof large number of for externally aided projects was skewed towards the better-off states. Indeed, ex- by all the states and UTS since the incep- private companies in the country, it is ternal aid accounted for 40 to 60 per cent tion of economic reforms in August 1991 possible that some of the financial assisof central plan assistance to some of the till the end of December, 1998 are worth tance accounted for as Maharashtra'smay be actually flowing into other states for developed states, while such assistance Rs 7,57,316 crore. The percentage share of different states actual investment. Here again, the share contributed less than 20 per cent of the central plan assistance to most of the in these investment proposals are given in of states like Assam, Bihar and Orissa are backward states.5 column 2 of Table 6. The disparities are far below their respective population As noted in the preceding paragraphs, obvious. The group of forward states shares. These figures give a clear indicaresource flows through the finance com- accountedfor abouttwo-thirdof the amount tion of where the resources mobilised mission andPlanningCommission account while the group of backward states ac- through the all-India financial institutions for a substantial share of state resources. counted for just about 28 per cent of the are flowing. Though their overall effects are highly Table 6: Investment Proposals and Disbursal of Financial Assistance for Investment beneficial to the fiscal health of the states, State Cumulative Share of Financial Financial Cumulative Percentage Share of there are certain adverse effects of such Assistance Disbursedby Investment Assistance Disbursedby Proposals flows on state finances. First, since the Corporation August1991-December AllIndiaFinancialInstitutions State Financial Finance Commission approachto revenue 1998 end 1997) (Upto Marchend 1997) (Upto March deficit is basically a gap-filling approach, (1) (2) (3) (4) this diminishes the incentive of the states AndhraPradesh 7.2 8.3 7.8 to raise revenue receipts and reduce rev- Gujarat 18.7 13.5 9.3 3.6 2.5 4.8 enue expenditure. In other words, there is Haryana 5.6 6.1 15.5 an implicit premium on fiscal profligacy. Karnataka 1.1 1.7 Kerala 4.4 Second, continuing expenditure on plan Maharashtra 18.0 21.0 11.5 schemes beyond the five year plans be- Punjab 3.4 2.4 3.6 7.2 9.0 10.6 come the committed expenditure of the TamilNadu Sub-total 65.9 63.4 67.5 states and add to their fiscal burden. Since Assam 0.7 0.5 0.5 there is a premium on plan expenditure, Bihar 1.2 1.4 2.0 7.4 5.1 3.2 state governments have a tendency to MadhyaPradesh 2.2 1.8 3.7 under-fund maintenance expenditure to Orissa 3.9 4.5 6.1 Rajasthan inflate the plan size. This results in poor UttarPradesh 9.4 11.1 7.9 maintenanceof public assets created in the West Bengal 3.3 3.9 2.5 28.1 25.1 29.1 past and poor quality of public services Sub-total 100.0 100.0 100.0 which are outside the plan. A furthercom- All-ndia (757316.0) (312502.0) (20896) plication is due to steep increase in the EnterprisesMemorandum (IEM)filed for items revenue component of plan expenditure Notes. (1) Investmentproposals include Industrial underdelicensed sectors and lettersof intentin respect of items underlicensed sector. over the years. While the grant-loan ratio financialinstitutions includeIDBI,IFCI,ICICI, and SIDBI. UTI,LIC,GIC,IRBI (2) All-India of central assistance is still 30:70, the Sources. (1) AnnualReport1998-99,Ministry of Industry, of India. Government and Finance 1997-98, Vol 1. revenue shareof state plan expenditurehas (2) RBI,Reporton Currency
545
The last column of Table 6 gives the Bengal also somewhat. In this connection, given in column 6 of the Table is a comshare of cumulative financial assistance it may be of interest to note that all the bined index of physical, social and finanprovided by the state financial corpora- 15 states considered together which ac- cial infrastructureas developed by Centre tions during 1991-96. The pattern is not count for 96.5 per cent of the population forMonitoringof IndianEconomy (CMIE). Consumption of power per capita as any different from the other sources of of the country accounted for only around financing private investment as far as the 85 per cent of bank deposit and bank given in column 2 is an indicator of the statewise distributionis concerned. While credit. The fact that the remaining 15 per level of energy availability and energy over two-thirds of such assistance is pro- cent has gone to the minor states and UTs consumption in different states. It is notevided by the financial corporations in the may be somewhat surprising. This, how- worthy that the level of consumption of forward states, just 29.1 per cent is ac- ever, is because of NCT of Delhi account- power per capita in all the states in the first counted for by all the states in the back- ing for over 10 per cent of bank deposits group except Andhra Pradesh and Kerala, and bank credit. is well above the all-India average, while ward group. The last column of the Table gives the it is below the national average in all the The statewise details of banking operations in the country as on the last Friday credit-deposit ratios for different states. states in the second group except Madhya of March 1998 are presented in Table 7. Credit-deposit ratio captures the discre- Pradesh and Orissa.6 Further,the highest Column two gives the statewise distribu- pancy in credit absorption vis-a-vis de- power consumption per head in Punjab at tion of bank branches in the country. It is posit mobilisation.Exceptions apart,credit- 790 kWh is more than seven times the level obvious that, by and large, the bank deposit ratios are much more favourable in Assam at 108 kWh. While, to a large branches are fairly distributed across the to the group of forward states as compared extent, the consumption level of power in a state is an indicator of the level of states without any major bias towards the to the backward states. It need of forward states. economic may group activity and the level of prosLevel of Infrastructure mention that this could be attributedto the perity it may also reflect its availability and cost. The importantpoint, however, is the Development banking sector policies pursued after fact that there is substantial inter-state nationalisation of the major commercial banks in the country in 1969. Availability of adequate infrastructure variabilityin power consumptionpercapita. The total bank deposits and the share facilities is an importantpre-condition for Statewise vehicle density per 1000 perdifferent states as on last Friday of March sustainable economic and social develop- sons is given in column 3 of Table 8 which can be physi- is an indicator of the level of development 1998 are given in column 3 of Table 7. ment. Broadly, infrastructure The inter-stateand regional disparities are cal, social or financial in nature. Energy, of road transport across the states. This obvious from these data. The group of transport,irrigation,finance, communica- may be only a partialindicator of transport forwardstates account for over 54 per cent tions, education and health are some of the development as railways are not included. of the bank deposits while the group of more important infrastructuralfacilities. Similarly, road length per unit area or the backward states accounts for only about While private sector may provide some of quality of road may also be importantindithese facilities, market forces may not cators of transport development. Never31 per cent of the bank deposits. Maharashtraalone accounts for about 20 always ensure adequatesupply of a variety theless, the vehicle density is an important of infrastructurefacilities. Data on a few indicator of overall quality of transport per cent of bank deposits. The distributionof bank credit across the important infrastructure facilities in dif- service in a state.While the all-Indiaaverage states given in column 4 of Table 7 shows ferent states are presented in Table 8. The was 44 vehicles per 1000 persons in 1997, that bank credit distribution is even more relative infrastructuredevelopment index it varied from a low of 16 in Bihar to a skewed thanbankdeposit distribution.This Table 7: Bank Branches, Deposits and Bank Credit implies thata partof the deposits mobilised (As on last Fridayof March1998) in the backward states is getting transState BankBranches Share of BankDeposits Share of BankCredit Credit-Deposit Ratio ferred to the advanced states. While the (2) (1) (4) (5) (3) first group of states accounted for about 4956 5.3 72.1 6.9 65 per cent of the bank credit, the second AndhraPradesh 3562 5.1 48.2 5.9 Gujarat about states could receive of only group 2.1 42.9 1423 1.6 Haryana 21 per cent of the bank credit. Indeed, Karnataka 4572 5.4 68.2 6.6 4.6 3165 3.7 44.3 Maharashtra aloneaccountedfor morebank Kerala 6071 19.9 25.9 72.3 credit thanall the seven states in the second Maharashtra 2427 4.6 3.2 38.6 Punjab group put together. Similarly, all the states TamilNadu 6.6 4676 11.5 96.1 30861 54.4 64.5 in the second group, except Uttar Pradesh Sub-total (48.0) and West Bengal, put together received Assam 1241 32.8 1.0 0.6 less bank credit than Tamil Nadu. The Bihar 4981 2.1 27.5 4.3 4449 51.4 3.9 3.6 implications of such skewed distribution MadhyaPradesh 2170 1.5 1.2 45.2 of bank credit across the states on eco- Orissa 2.4 3259 2.8 47.4 nomic growth and income distribution in Rajasthan UttarPradesh 8810 9.9 5.1 28.6 the coming years areobvious. The fact that West Bengal 4352 7.5 6.2 46.1 Maharashtraand Tamil Nadu have major Sub-total 29262 30.9 21.2 (45.5) metros might have helped them to get All-India 64267 100.0 100.0 55.5 highershareof bankcredit.Having Calcutta and Finance, 1997-98,VolumeI. as the state capital might have helped West Source:RBI,Reporton Currency
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high of 103 in Punjab. While among the group of forward states, only Andhra Pradesh has a vehicle density lower than the national average, all states in the backward group except Madhya Pradesh had a vehicle density lower than or equal to the all-India average. Telecommunication lines per 100 persons is a universally used indicator of the level of development of communications. The statewise telecom density per 100 persons , as on March 31, 1999, is given in column 4 of Table 8. The all-India average of 2.55 telecom lines per 100 persons is very low by international standards; most of the east Asian countries have reached a level of 10 lines or more per 100 persons. The data indicate that thereis considerable difference among the states in terms of telecom density. While all statesexcept AndhraPradeshin the first group have telecom density above the national average, none of the states in the second group has telecom density above the national average. It is also noteworthy thatin recentyears considerable expansion of telecom facility has taken place in the country. As a result, the telecom density in the country increased from 0.90 per hundred persons in March 1994 to the present level of 2.55 per 100 persons over a five year period. The ongoing expansion programmes are likely to ensure a much highertelecom density in the coming years. Another point to be noted is that most of the existing telecom lines are in the major cities. Forexample,thehightelecom density of 4.93 for 100 persons in Maharashtra may very well imply a very high density of, say, 20 in Mumbai-Pune belt and a below 2.00 density in the rest of the state. The real task is to develop an efficient rural telecom system in the country. The share of irrigated area in gross cropped area is an important indicator of the level of agriculturaldevelopment of a region. Assured irrigation being a precondition for modem agricultural practices, the level of labour absorption and productivity will critically depend on the quality of irrigation. Statewise percentage of irrigatedarea in gross cropped area are given in column 5 of Table 8. As compared to all-India average of 36.5 per cent, six states have higher percentage shares and nine states have lower percentage shares. Punjab has the highest share of about 95 area,followed by Haryana percentirrigated (77.9 percent) andUttarPradesh (62.6 per cent). It is to be noted that some of the forwardstates like Gujarat,Karnatakaand
Maharashtra have lower levels of irriga- nationalaverage.Punjabhas the highest tion mainlybecauseof the comparatively level of infrastructure developmentwith lower irrigation potentialin these states. the index at 191.4, followed by Keralaat Similarly,though the irrigationlevel in 157.1andTamilNaduat 144.0.Thelowest is inMadhya TamilNaduis only about50 percent,the levelof infrastructure Pradesh state has almost exhaustedits irrigation withthe indexat 75.3 followedby Assam in AP is not much at78.9. BiharandRajasthan The situation alsohavelow potential. different. On the otherhand,in stateslike indices at about 81 and 83 respectively. in investment Assam,Bihar,OrissaandUP, muchmore It is clearthatconsiderable sectors in these states will potentialremainsunexploited. infrastructure irrigation inproductivity be essentialfor themto catchup with the Sincea significant increase in thesestatesis essentialfor forwardstateswherethe indicesareconof agriculture reduction of rural of poverty,the importance siderably higher.Of course,theranking of fully exploitingthe irrigation potential the states is influencedby the relative in these states need special mention.In- weightsassignedto differentitemsof indeed, removal of ruralpoverty in most frastructure.7 Indiacritically areasof eastern on depends the of V raising productivity agriculture, of rice from 1 especiallythe productivity Intra-State Disparities to 1.5 tonnesper hectareto 3 to 4 tonnes per hectare. This requiresconsiderable In the foregoingsections,we have exinvestment in irrigation. aminedthe variousdimensionsof interpublicandprivate The composite index of infrastructure state disparities.An important aspect of in which could constructed CMIE inIndia, regionaldisparities development by cludes the following items with theirre- not be covered by this approach,is the spective weights in brackets.Transport significant level of regional disparities facilities (26 per cent), energyconsump- which exist within different states. An causeof regional tensionswhich tion (24 per cent), irrigation facilities(20 important facilities(12 percent), lead to popularagitationsand at times percent), banking activitiesis suchregionaldispariinfrastructure communication (6 percent), militant educationalinstitutions(6 per cent) and ties in economic and social development healthfacilities(6 percent).The valueof which exist within some of the states. in at 100 for all-India. Indeed,some of the stateswerecreated index is normalised The statewiseindicesarepresented in the the wake of popularagitationsbased on last columnof Table8. Excepttwo states, perceived neglect of certain backward viz, AP and Karataka, all otherstatesin regionsin some of the biggerstates.The the firstgrouphavethe valueof the index best examplesof such cases are the creallthestates Pradesh andGujarat in the above100.However, insecond ationof Andhra of Punjab, and Haryana groupexcept UP have indices below the 1950sandcreation
Table 8: Level of Infrastructure Development State Telecom Lines Consumption Registered Percentage of of Power Per Vehicles Per Per 100 Persons Irrigated Areain Capita(kWh) 1,000 Persons as on March31, Gross Cropped in 1996-97 as on March 1999 Area as at 31, 1997 Endof 1994-95 (2) (3) (4) (5) 332 686 508 338 236 557 790 469 108 145 368 447 295 194 197 338 42.1 91.5 64.6 56.5 46.5 57.2 103.2 56.9 19.9 16.4 38.8 22.9 45.1 22.7 19.8 44.0 2.36 3.75 3.18 3.25 4.66 4.93 5.34 3.84 0.95 0.58 1.38 1.05 2.11 1.21 1.86 2.55 39.6 28.9 77.2 23.9 13.6 15.3 94.8 49.5 15.0 43.2 22.3 25.8 29.1 62.6 28.7 36.5 Relative Infrastructure Development Index (6) 96.1 122.4 141.3 96.9 157.1 107.0 191.4 144.0 78.9 81.1 75.3 97.0 83.0 103.3 94.2 100.00
(1) AndhraPradesh Gujarat Haryana Karnataka Kerala Maharashtra Punjab TamilNadu Assam Bihar MadhyaPradesh Orissa Rajasthan UttarPradesh West Bengal All-India
Sources. NinthFive-YearPlan (1997-2002), PlanningCommission; and CMIE,Profilesof States, March 1997
547
Himachal Pradesh in the 1960s. Past Travancore and Cochin regions of Kerala experience, by andlarge,is thatwhentwo can be traced back to the enlightened ormorestatesarecarvedoutof anexisting attitudeof the former rulersof the princely one ora newstateis created by combining states of Travancore and Cochin. On the frommorethanone stateon thebasis other hand, the poor social development parts of some homogeneitycriterionlike lan- of Telangana region of AP and certain the other parts of the Deccan could be traced guageorsomeothercommonheritage, newly createdstates develop faster than back to the absence of visionary rulers in states. the respective princely states. the pre-partition An importantquestion, however, is why A numberof states included in our regions after 50 years of planned development analysishave clearlyidentifiable whichare at differentstages of develop- efforts, such intra-statedisparitiesremain? to Often, the answer depends on whether it mentandwhichhavedistinctproblems tackle.Creationof new states, certainly, is given by people who are the victims of may not be a solution to such regional underdevelopment.The representativesof At the same time, it is impor- the backward regions often attribute the disparities. tantto recognisesuch intra-state regional backwardness to neglect by the rulers of disparities explicitly and tackle them the state, who are often from the developed through specialefforts.As we have noted regions. The ruling class may site factors is atypical which are beyond their control. Indeed, inanearlier Maharashtra section, exampleof a statewhereoveralldevelop- therearespecific institutionalarrangements mentis quitegood in termsof almostall for development of backward regions in but extremeregionaldispari- some of the states. Maharashtraand UP indicators, ties exist.8AP has threedistinctregions are two such examples. In Maharashtra, which are at different stages of socio- there are separate regional plans for the economic development, viz, Coastal backward regions. In UP, there is a sepaAndhra, Telangana and Rayalaseema. rate regional plan for the hill region which BiharandSouthBiharare is characterised as Uttarakhand. North Similarly, Besides the state-specific efforts for at differentstages of developmentwith UP hasatleast reducing intra-stateregional disparities, a different problems. entirely four regions with varyingproblemsand numberof centrallysponsoredprogrammes different levelsof socio-economic develop- have been in operation for the last two to ment.Other stateslikeGujarat, Karnataka, three decades for taking care of specific and aspects of backwardness of such regions. MadhyaPradesh,Orissa,Rajasthan West Bengal also have regionswith dis- The Tribal Development Programme, the Hill Area Development Programme, the of backwardness. tinct characteristics A closer examination of the natureof Western Ghat Development Programme, backward regionsin each statewill indi- the Drought Prone Area Programme and cate specific reasonsfor theirbackward- Desert Development Programme are exof amples of such ongoing efforts. The evalucauseof backwardness ness.The major inMaharashtra, ation studies of some of these programmes Vidharba andMarathwada Rayalaseemaand Telanganain Andhra have indicated clearly identifiable benefits is the of such programmes, though at the same Pradeshand NorthernKarnataka to lower of water due precipitation time criticised these programmes for their scarcity and lack of other perennialsources of cost-ineffectiveness due to various drawwater.On the otherhand,backwardness backs in their design, planning and impleof certain regions in Gujarat,Madhya mentation. Often they are conceived, planBiharand Orissacan be associ- ned and implemented by the bureaucracy Pradesh, atedwiththe distinctstyle of living of the withoutanyinvolvementofthe local people. More often, discontent and agitations on inhabitants of suchregionswhoaremostly tribalsandthe neglectof such regionsby the basis of perceived neglect of the backof a region ward regions by the rulers at the state level the rulingelite. Topography could also constrainthe developmentof and at the centre are led by local leaders a region;the hills of UP and the desert who demand some form of autonomy to areexamplesof such determine their own destiny. Even those regionof Rajasthan cases. Historicalfactorslike the attitude who demanda separatestatefor theirregion of rulers of the former princely states are often willing to settle for autonomous towards could have signifi- regions within the existing state with condevelopment of a re- siderable financial and administrative cantlyaffectedthe development gion. For example, the distinctlyhigher powers. The problem, however, is that the level of social development of the state level rulers are generally unwilling
to partwiththeirown powerof patronage. moreautonomy forthe Thosewhodemand statesfromthe centreareoften unwilling or to share power, either administrative financial,with the elected local bodies. Act of Indeed,with the 73rdAmendment the Constitution, the panchayat raj institutionsare expectedto functionas local with sufficientfinancesand governments functions to take care of most of the functions.If they are aldevelopmental lowed to function as responsible selfgoverning local governments,considerable groundcan be coveredto reducethe regionaldisparitieswithin the states. Beforeconcluding this section,we may afew successful mention caseswhereintrastate regional disparitieshave been reduced considerably throughpublic policies.First, in 1956whenKerala wasformed at the time of statere-organisation, there was substantialdisparity in the social of Malabar development regionvis-a-vis the Travancore-Cochin region. Over the last fourdecades,therehas been remarkable improvement in the social indicators of Malabarto catch up with the rest of Keralaas a result of appropriate public of the drought policies.The development pronedistrictsof Haryana through irrigation is anotherremarkable example of reductionin economic disparitiesacross regions within a state. Provisionof eduhealthandcommunication facilicational, ties even in the remotest villages of HimachalPradeshis a thirdexampleof successfulpublicpolicies in reduction of withina state.Overall, regional disparities Tamil Nadu could be consideredas one statewhichis mostsuccessfulin reducing in economicandsocial regional disparities developmenteven when there was substantialvariationin the naturalendowmentsin differentpartsof the state.This was achievedby a combination of public policies and privateinitiatives.In other states,especiallyin Maharashtra, Gujarat and Rajasthan,there are a number of successful casesof NGOswhichsucceeded in transforming into pocketsof destitution areasenjoyingvery high levels of socioeconomic development.
VI Discussion Concluding
Thedatapresented in theearlier sections andtheanalysisso farclearlyestablish that thereareconsiderable in sociodisparities economicdevelopment acrossthe Indian states.Effortsthroughthe planningproFebruary 12, 2000
548
cess during the first three decades of the those states. Availability of assured power Indian Republic had only partially suc- supply, developed transport system and ceeded in reducing regional disparities. modern telecommunication facilities are The accelerated economic growth since importantfactors to attractprivate investthe early 1980s with increased participa- ments into these states. Similarly, develtion by the private sector appears to have opment of the irrigationpotential fully will aggravatedregional disparities. The ongo- go a long way in improving the producing economic reforms since 1991 with tivity of agriculture and fully engaging stabilisation and deregulation policies underemployed rural labour productively as their prime instruments and a very which in turn will improve rural incomes significant role for the private sector seem substantially and reduce rural poverty to have further aggravated the inter-state significantly. A major problem, however, is the lower user charges for power, transdisparities. A marked dicotomy between the for- port and irrigation which lead to heavy ward and backward groups of states has losses to the state exchequer. Further,the been emerging. The forward states are state electricity boards (SEBs), state transcharacterised by better demographic and port corporations and state irrigation desocial development, higher per capita partmentsare starvedof essential funds for incomes and more developed economies, even proper maintenance of their existing lower levels of poverty, higher levels of facilities. Competitive populism practised revenue receipts and plan and non-plan by state governments often leads to this expenditure, higher per capita resource situation. Because of the very poor fiscal flows and private investment and signifi- health of SEBs, private power producers are also reluctant to invest in those states cantly better infrastructuralfacilities. The pressing requirement of the back- because they have to face insolvent SEBs ward states is more investment in their as monopoly power purchasers. The recent trends in investments, both social and infrastructuralsectors. To imthe level of social massive services, prove public and private, indicate that if left investment in primary education and pri- unaltered by effective public intervention maryhealth services is required.Improve- inter-state disparities are likely to aggramentin literacy,especially female literacy, vate. There is a greater need for higher and health indicators like infant mortality levels of investment in social services and and expectation of life at birth will bring infrastructurein backward states as comdown the rate of growth of population. pared to forward states. The governments Stabilisation of population, especially in of backward states are fiscally weak and the 'BIMARU' states is an importantpre- as such they are unable to find enough resourcesto meet these investment requirecondition for the sustained economic growth of that region. The experience of ments. Forwardstates arefiscally betteroff Kerala and to a considerable extent that to improvetheircomparativelybettersocial of Tamil Nadu clearly indicate that even and economic infrastructurefurther. The at comparativelylower levels of economic better-off states are able to attractconsiddevelopment measured in terms of per erable amount of private investment, both capita income, a state can enjoy compara- domestic and foreign, to further improve tively higher level of social development. their development potential because of the Again, one of the major reasons for the existing favourable investment climate fast economic growth of east Asian econo- including bettersocio-economic infrastrucmies in the recent decades has been their ture. The backward states are unable to higher level of investment in human capi- attract private investments because of tal development in the preceding decades. unfavourable investment climate includFurther,it is argued that equitable sharing ing poor infrastructure. They are unable to of the gains of economic growth in the east improve the investment climate by imAsian societies has been facilitated by the proving the existing poor infrastructural universal literacy and better health stan- facilities due to lack of resources. Their dards attained by all the citizens in those lack of resources is linked to their poor countries. development. Thus, they are truly in a Improvement in basic infrastructural vicious circle. The solution lies in breaking facilities like power, irrigation, transport this vicious circle. and telecommunication in the backward In the past, especially during the first states is a pre-condition to improve the three decades of planned development, a quality of life of the people and to usher major catalyst for development of backin sustainable economic development in ward regions was the massive central
investment in key sectors. Though such investments might not have invariably triggered regional development, such central interventions had tremendous positive impact in transforming the face of a number of backward regions in various states. Since the early 1980s, the scope and role of such central investment have been steadily coming down. The liberalisation process and the various reforms in financial and industrial sectors have further reduced the scope of such central investments. Further, the centre has a severe budget constraintwhich will not allow any sizeable investments in backwardregions. The centre is hardpressed even to take care of critical infrastructuraland social sector investments. While resource flows to the states via finance commission awards and Planning Commission dispensation will continue and are likely to remain positively discriminating in favour of backward states, direct public sector investments by the centre in the states are likely to dry up gradually. An important factor which influences the speed of socio-economic progress of a state is the quality of governance. It is not a coincidence that, by and large, the states which are in the forward group are better administered as compared to the states in the backward group. A better administered state is more efficient in raising revenues and putting the revenues to better use. Such states are quick in responding to opportunities which enable them to attract more private investment both from domestic and foreign investments. Again, such states are often able to prepareviable projects and successfully bid for central assistance or for external funding. Surveys carried out among private investors clearly indicate that it is efficiency of administration and availafacilities which are bility of infrastructure! more attractive to them rather than the various tax concessions and incentives offered by the state governments. In the backward states, things move slowly. Private sector is willing to deal with political and bureaucratic corruption as long as things move faster. In the backward states, corruption and inefficiency coexist and this is a combination private investors avoid. To conclude, if the existing trends in differential rate of socio-economic development continues, regional disparities in India are bound to accentuate. Therefore, it is imperative that the present trendsarearrestedandpreferablyreversed.
February 12, 2000
549
This will require concerted efforts on the part of the concerned state governments and the centre. Resources may be a major constraint, but not necessarily the only or not even the most important one. The determinationon the partof the state government, the ruling elite and the people at large is even more important.The centre's helping hand in the form of focused investment, especially in social sectors and key infrastructuralsectors will facilitate the task of the concerned states. Meaningof decision-making and ful decentralisation financialpowers with appropriateaccountability at all levels will facilitate faster socio-economic development of the backward regions where people are likely to take up considerable share of the developmental responsibilities. [S3
Notes
[The views expressed in this paper are those of the author.The author is grateful to the participants of the seminars at Delhi School of Economics, Institute of Social Studies and NationalCouncilof Applied Economic Research, where some of the main findings have been presentedand significant suggestions have been received.]
1 These are (i) 'Convergenceof Incomes across accepted the alternate formula, in principle, the requiredconstitutionalamendmentis yet Indians States: A Divergent View' by M G to be carried out. Rao, R T Shandand K P Kalirajan; (ii) 'Trends in Inter-StateInequalitiesof Income in India' 5 Of the total external aid absorbed by the states during the Eighth Plan period, more by NirupamBajpai and Jeffery D Sachs; and than 70 per cent was accounted for by EconomicandSocial (iii) WideningInter-State just five states of which four were in the Disparities in India' by FahrettinYagci. The first study was published in EPW, March27, developed group. UttarPradeshwas the only ina seminar 1999.Theothertwo werepresented exception. organisedjointly by WorldBank and Institute 6 The Orissafigureis somewhatout of tune with the ground realities of that state. Apparently of Social and Economic Change at Bangalore the per capitaaveragepower consumptiongot in May 1999. inflatedon accountof inclusionof high tension 2 These percentage shares are based on 1991 industrialusers like the aluminumindustryin Census. Indeed, the subsequentstate-specific that state. growth of populationmight have resulted in a reductionof the share of the forwardgroup 7 For example, it is apparentthat the index for Uttar Pradesh got somewhat inflated by a to about 40 per cent and an increase in the share of the backwardgroup to about 56 per relatively high level of irrigation and a substantial weight attached to irrigation. In cent. 3 Indeed, in the case of West Bengal the share comparison,the index is very low for Madhya Pradesh on account of very low level of in NSDP has gone up somewhat of agriculture over the last two decades. This is mainly on irrigation. The reality is that the irrigation accountof the impressivegrowthperformance potential in Madhya Pradesh is significantly lower than that of Uttar Pradesh. in thatstatesince the late 1970s. of agriculture The productionof paddy, the principalcrop 8 An importantcharacteristicof Maharashtra's Most of the state, more than doubled during this developmentis its regionalconcentration. of the high income activities are concentrated period. a substantial in Mumbai-Pune 4 TheTenthFinanceCommissionrecommended region. Further, share of income accrues to migrants who an alternateformulafor devolutionof a fixed transferpart of their earnings to their places shareof the pooled tax revenuesfromall major of origin.These factorsmay partlyexplain the taxes including customs duty and corporation tax. This was to be made effective from April paradox of high per capita NSDP and high share of population below poverty line in 1996 which required an amendment to the Maharashtra. Constitution. Though the government has
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Widening Regional Disparities in India: Some Indicators Author(s): N. J. Kurian Source: Economic and Political Weekly, Vol.

Economic and Political Weekly

February 12, 2000

Table 1: Demographic Characteristics State Population (Millions)

Economicand PoliticalWeekly February12, 2000

Table 2: Important Social Characteristics

Economic and Political Weekly

February 12, 2000

fordata in columns2, 3 and 4; Sources: NationalAccountsStatistics,CentralStatisticalOrganisation NinthFive-YearPlan (1997-2002), PlanningCommissionfordata in column5.

Economic and Political Weekly

February 12, 2000

Ill StateGovernment Expenditure

Source: NinthFive-YearPlan (1997-2002), PlanningCommission,Government of India.

Economic and Political Weekly

February 12, 2000

Economic and Political Weekly

February 12, 2000

Economic and Political Weekly

February 12, 2000

Economicand PoliticalWeekly February12, 2000

Economic and Political Weekly

February 12, 2000

Sources. NinthFive-YearPlan (1997-2002), PlanningCommission; and CMIE,Profilesof States, March 1997

Economicand PoliticalWeekly February12, 2000

Economic and Political Weekly

Economic and Political Weekly

February 12, 2000

FORTHCOMING SERIESFROM ORIENT LONGMAN

Economic and Political Weekly

February 12, 2000

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