1

UNEVEN GROWTH PATTERN OF INDIAN

ECONOMY : SOME MISSING LINKS
SHYAM SUNDER SINGH CHAUHAN*
DEEPA RAWAT**
DEEPTI SHARMA***

With a billion plus population and an area of 3.29 million sq.

kilometer, India is a vast country spread in 28 States and 7 Union
Territories. Having much diversity in physiographic, climatic conditions,
availability of natural resources, cultural and socio-economic
conditions, India is a unique case of 'Unity in Diversity'. Since the
beginning of 21st century, Indian economy is growing very fast. This
makes her the second fastest growing economy of the world after
China. However, thousands of Indians continue to struggle in poverty,
illiteracy and ill health because of uneven growth of Indian economy
leading to vast disparities in the status of the people among various
states. While some states registered ever high growth rates during the
era of economic reforms, states like Bihar, Orissa, Madhya Pradesh,
Chhattisgarh, Uttar Pradesh etc. could not perform well and hence are
far behind the states of Gujarat, Maharashtra, Tamil Nadu, Punjab and
Haryana. India presents a motley blend of mystery, wonder and
despair, which leaves even the economists baffled. In a vast country
like India, striking regional disparities, inherited from colonial rule of
over two centuries, have increased during the plans because of faulty
unified and centralised planning, political structure and social
traditions. Physical expansion of the economy, as measured by per
capita income, does not necessarily mean that people are better off in
the larger sense of the term, especially with regard to health, freedom,
education and leisure time etc. Pervasive gender inequalities,
interacting with rural poverty and inequalities among and within states

*
Reader & Head, Department of Economics, Govt. Girls (P.G.) College, Sirsaganj, Firozabad (U.P.).
**
Reader & Head, Department of Economics, Agra College, Agra (U.P.)
***
Research Scholar, Department of Economics, Agra College, Agra (U.P.)
 2

are undermining the growth into human development (UNDP:HDR

1990).

Issues of inter-regional as well as intra regional distribution of

standard of living – as measured by per capita income, literary and
expectancy of life at birth, are extremely relevant in India's economic
development. The concept of relative inequalities among states is
equally important in view of the fact that the forces of regionalism and
secessionism originating from extreme inequality in the regional
income distribution continuously endanger the foundation of India's
federal economy (Barua and Chakraborty, 2005).

It is in this context, the present paper examines the level of

disparities in economic development among various states. Since the
Indian economy has become highly liberalised and globalised by
adopting market mechanism in place of centralised planning, various
policy measures have been adopted to give a boost to the economy
which has developed with 6.5 per cent plus growth rate during the last
18 years of economic reforms. In this regard it is high time to analyse
the pattern of economic development in relation to its distribution on
regional basis. It is a matter of considerable research interest to know
the manner in which inter regional disparities in the levels of economic
and social development have changed in India over time in the past
two decades. A detailed study pertaining to the nature, extent, possible
causes and manner of change of inter-state economic and social
disparities in India and drawing broad inferences regarding a balanced
development policy would definitely be of considerable relevance to
policy makers and planners in the country.

SECTION - I
PATTERN OF GROWTH DURING PLANS
Inter-state disparities in socio-economic fields have been a
common phenomenon right from attaining independence in August
 3

1947 till today. The pattern of growth shows that the so called
developed states, what so ever, at the time of independence,
maintained their position at least in economic terms i.e. higher growth
rate of state domestic product, rapid industrialization and finally the
development of service sector at a rapid pace (Maharashtra, Gujarat,
Tamil Nadu, NCR Delhi, West Bengal etc.). It is another thing that track-
record of some of these states on social parameter is at par with other
lesser developed states. In to this, newly created states like contrast
Punjab, Haryana, Himachal Pradesh, Uttranchal, Jharkhand and
Chhattisgarh are showing better results not only in economic terms but
also on social fronts.

There have been a number of studies on the regional disparities

like the ones by Cassen (2002), Malhotra (1998) and Planning
Commission (2002). Datta and Ravillion (2002) have tried to establish a
relationship between economic growth and poverty. A study by Kurian
(2000) concentrates on all major states, but relates only to the period
since the 1980's. Studies on the inter-regional disparities, elsewhere in
the world are based on three hypotheses, namely; (i) one propounded
by Hughes (1961) and found empirically valid by Booth (1966) for the
U.S.A. According to this view the forces of divergence dominate over
convergence and as a result, inter-regional disparities in socio-
economic fields keep on widening over time; (ii) Another hypothesis,
propounded and empirically proved by Hanna (1959), is based on
convergence and establishes that the rate of economic growth is
inversely related to per capita income. It shows that ultimately all the
regions develop at the same pace; (iii) The third hypothesis is a
combination of divergence and convergence hypothesis and says that
inter-regional disparities increase initially, but finally converge and the
famous Kuznestsian inverted U-shaped curve emerges over time in the
process of economic development (Williamson, 1965 and Nair, 2004).

As far as the Indian economy is concerned the forces of

convergence and divergence are working simultaneously. As the draft
 4

plan of Eleventh Five Year Plan states "a widespread perception all
over the country is that disparities among states, and regions within
the states, between urban and rural areas, and between various
sections of the community, have been steadily increasing in the past
few years and that the gains of rapid growth witnessed in this period
have not reached all parts of the country and all sections of the people
in an equitable manner" (GOI, 2008). This statement is more than
enough to prove that the forces of divergence have increased the inter-
state as well as intra-state disparities even in a better growth
environment in the Indian Economy. The Eleventh Plan document
further states that "there is some evidence to indicate a movement
towards convergence on human development indicators across the
states, one of the reasons for this convergence could also be that most
of the human development indicators have a value cap (GOI, 2008,
p.137).

Although, widening disparities among the states are a matter of

serious concern, but what is more serious is that the process of
widening disparities has in fact increased during the era of economic
reforms. Ahluwalia (2000) and Rao, Kalirajan and Shand (1999)
established in their studies that the divergence in growth performances
among states has increased, particularly since 1991, after market-
based reforms were introduced.

The pattern of growth is being analysed here in accordance of

availability and nature of data regarding states' domestic products.

(I) 1960-61 to 1969-70 :

In the nineteen sixties, the highest growth rate was recorded by
the most backward state Orissa (9.7%) because of the discrepancies in
the use of deflators. Actual growth rate was not so impressive states
that recorded higher growth rate in this period were Punjab (5.6%),
Haryana (5.5%) and Himachal Pradesh (5.6%), thanks to the green
revolution. Bihar was the slowest growing state with 0.7 per cent
growth rate; Madhya Pradesh (1.5%), Rajasthan (1.3%), Uttar Pradesh
 5

(1.6%) and Andhra Pradesh (1.5%) were other major states lagging
behind in growth process. These states recorded a negative growth
rate in per capita Net State Domestic Product (NSDP) in the same
period (Table 1).

II. 1970-71 to 1979-80 :

In the seventies, the pattern of growth changed slightly. Goa
emerged as highest growing state with 6.1 per cent growth rate
followed by Maharashtra (5.7%), Punjab (5.4%) and Haryana (4.8).
State likes Rajasthan (3.0%), Bihar (2.8) and Andhra Pradesh (3.2%)
did little better and got momentum. But Madhya Pradesh recorded
lowest growth rate (1.3%) in NSDP, Kerala (–0.2%) and Madhya
Pradesh (-1.0%) were the two states that recorded negative growth
rate in per capita NSDP terms, while the growth rate in real per capita
income in Assam, West Bengal, Bihar, Uttar Pradesh, Orissa, Rajasthan
and Himachal Pradesh was less than1.0 per cent (Table 1).

Table 1 : Growth rates of net state domestic product and per

capita net state domestic product at current prices
for selected states during sixties and seventies
(per cent)
States Net State Domestic Net State Domestic
Product (NSDP) Product (NSDP) per
capita
1960-61 1970-71 1960-61 to 1970-71
to 1969- to 1979- 1969-70 to 1979-
70 80 80
Goa Na 6.1 Na 3.6
Maharashtra 2.9 5.7 0.04 3.3
Punjab 5.6 5.4 3.5 3.2
Haryana 5.5 4.8 2.6 2.2
Gujarat 2.7 4.5 0.1 2.0
Karnataka 3.4 4.3 1.2 1.8
Delhi 5.1 6.2 0.7 1.7
Jammu & 3.2 4.4 0.5 1.6
Kashmir
Tamil Nadu 2.1 3.4 0.1 1.6
All India 3.0 3.6 0.8 1.2
Andhra Pradesh 1.5 3.2 -0.4 1.1
Assam 4.0 3.0 0.9 0.8
West Bengal 2.5 2.9 0.02 0.7
 6

Bihar 0.7 2.8 -1.3 0.6

Uttar Pradesh 1.6 2.6 -0.2 0.4
Orissa 9.7 2.3 7.3 0.3
Rajasthan 1.3 3.0 -1.1 0.2
Himachal 5.6 2.4 3.4 0.2
Pradesh
Kerala 3.8 1.7 1.4 -0.2
Madhya Pradesh 1.5 1.3 -1.1 -1.0
Note : Deflators used in estimation of NSDP for Orissa in this period
have discrepancies, as a result of which the States growth rates are
non-comparable.
Source : Central Statistical Organisation
Measures of disparity in growth amongst states/UTs show that
the growth pattern was highly diverged and as a result disparity
increased during this period.

(III) 1980-81 to 1990-91 :

The growth momentum accelerated during nineteen eighties with
an average growth rate of 5.6 per cent for the whole country and thus,
the country jumped out of 'Hindu Growth Rate' of 2-4 per cent to a
'Secular Growth Rate' of more than 5.0 per cent. Individual States
showed the greatest consistency in the growth record during this
decade as reflected in the decrease of measure of inter-state
disparities from 2.22 to 1.71 (GOI, 2002, p.34). The pattern of growth
during this decade is a bit convergent. Haryana (6.3%), Mahrashtra
(6.0%), Rajasthan (5.9%), Goa (5.5%), Tamil Nadu (5.4%) and Punjab
(5.4%) were the most rapidly growing states. Jammu and Kashmir was
the lowest (2.2%). The three poor big brothers i.e. Uttar Pradesh
(4.9%), Madhya Pradesh (4.0%) and Bihar (4.7%) along with Orissa
(5.0%) fared well during eighties (Table 2).

Table 2 : Growth Rates of GSDP and per capita GSDP at current

prices during Eighties and Nineties for selected states
(Per cent)
States Gross States Gross States
Domestic Product Domestic Product
per capita
1980-81 to 1993-94 1980-81 1993-94
1990-91 to 1998- to 1990- to 1998-
99 91 99
Karnataka 5.4 8.2 3.3 6.4
 7

Gujarat 5.1 8.0 3.0 6.2

Tamil Nadu 5.4 6.8 3.9 5.8
Maharashtra 6.0 7.1 3.6 5.4
Rajasthan 5.9 7.7 3.8 5.3
West Bengal 4.8 6.8 2.6 5.0
All India 5.9 6.8 3.3 4.8
Goa 5.5 8.3 3.9 4.5
Kerala 3.2 5.5 1.7 4.2
Himachal Pradesh 5.0 6.7 3.1 3.9
Haryana 6.2 5.8 3.9 3.6
Andhra Pradesh 4.3 4.9 2.1 3.5
Punjab 5.4 5.0 3.5 3.0
Orissa 5.0 4.3 3.1 2.9
Bihar 4.7 4.2 2.5 2.6
Madhya Pradesh 4.0 4.4 2.1 2.3
Uttar Pradesh 4.9 4.5 2.5 2.3
Jammu & Kashmir 2.2 4.7 -0.4 1.6
Delhi 7.6 6.7 3.2 1.6
Assam 3.6 2.7 1.4 1.0
Note : Name of States is arranged in order of rank in rates of growth of
per capita GSDP in 1993-94 to 1998-99.
Source : Central Statistical Organisation.

(IV) 1992-93 to 2005-06 :

The process of economic reforms, which started in 1991-92, got
further momentum in subsequent years. All the sectors of the economy
were liberated to make the economy market-based. Directional
planning was substituted by indicative planning. Eighth Plan (1992-97)
recorded a growth rate of 6.8 per cent, which was higher by 1.2
percentage point than its targeted growth rate of 5.6 per cent.
However, the Ninth Five Year plan could not perform in accordance
with its predecessor and growth rate during this plan declined to 5.3%
against the targeted rate of 6.5%. Net decline of 1.5 percentage points
between Ninth and Eighth Five Year Plan was because of sharp decline
in the growth rate of fastest growing states during Eighth plan. Growth
rate of Gujarat declined from 12.4 per cent during Eighth Plan to 4 per
cent in Ninth Plan. Likewise, the growth rate of Maharashtra came
down to 4.7% from 8.5% and that of Rajasthan declined to 3.5% from
7.5%. The growth rate of Tamil Nadu, Uttar Pradesh, Madhya Pradesh,
 8

Haryana also declined. Karnataka, Orissa, Manipur and Meghalaya were

the only states, whose growth rate showed an increase in the Ninth
plan compared to the Eighth plan.

A new series of GSDP data was released by CSO in the year 2000
and subsequently updated in November 2001. On the basis of new
data, the growth rate of GSDP has been calculated for 1993-94 to
1998-1999 and presented in Table-2. The growth record shows an
increase in the divergence of individual states. Standard deviation
increased from 1.19 in the 1980s to 1.60 in the 90's in terms of GSDP
broadly along the pattern that had come to be established during the
decade of the seventies with some notable differences. However, the
difference between the highest and the lowest value for GSDP growth
rate across states in the seventies was 4.8 percentage point which
increased to 5.5 percentage point during nineties, indicating widening
of the spread over the preceding decade (Difference between the
highest and lowest growth rates during eighties was only 1.8
percentage points). Another notable point during 90s was that Punjab
and Haryana which were recording consistently higher growth rate
since 1960s recorded a lower growth rate as compared to the national
average. In contrast to this Karnataka, Gujarat, Maharashtra,
Rajasthan, West Bengal and Tamil Nadu recorded much higher growth
rates.

Thus, the overall disparity in inter state growth of NSDP and per
capita NSDP of states increased considerably during the nineties, as
compared to the eighties and seventies.

Table 3 : Disparity in Growth Amongst States/UTs of India

Period Measure of Relative Meausre of
Disparity Disparitty in growth
(Standard between NSDP and per
Deviation) capita
 9

NSDP Per
capita
1960-61 to 2.14 2.05 4.01
1969-70
1970-71 to 2.22 1.81 3.67
1979-80
1980-81 to 1.71 1.02 0.71
1990-91
1993-94 to 3.13 2.40 5.29
1998-99
1999-00 to 2.82 2.43 3.97
2004-05
Source : GOI (2002); Tenth Five Year Plan, Vol. III, Planning
Commission, p.37 and Economic Survey 2007-08.

The pattern of growth across the states changed significantly

during the Tenth Five Year Plan which recorded ever highest growth
rate of 7.8 per cent, although wide variation in the growth rates are
seen from the Table 3. The difference between the highest and lowest
growth rates in GSDP during the X Plan is 7.3 percentage points which
is ever highest (Table 4). Manipur, Jharkhand and Gujarat recorded a
growth rate of above 10 per cent, while the growth rate of Punjab, was
well below the growth rate of Bihar. The story of Uttar Pradesh,
Madhya Pradesh, Rajasthan remained almost the same in the Tenth
Plan as compared to the Ninth Plan. These states could not improve
their pace of growth even after the liberalisation of the economy. The
newly created states of Jharkhand, Chhatisgarh and Uttaranchal have,
however, fared well and registered higher growth rate than the
national average. If one goes to measure, the disparity in terms of
standard deviation in GSDP amongst states, then one finds that overall
inter-state disparity increased during Eigth and Ninth Five Year Plan but
decreased slightly during the Tenth Plan.

Table 4 : Growth rates of state domestic products in various

states
(% per annum)
S.N State/UTs, VIII IX Plan X Plan Tenth
 10

o. Plan 1997- 2002- Plan

1992- 2002 07 Target
97
Non special category states
1. Andhra Pradesh 5.4 4.6 6.7 9.5
2. Bihar 2.2 4.0 4.7 7.6

3. Goa 8.9 5.5 7.8 12.1

4. Gujarat 12.4 4.0 10.6 12.2
5. Haryana 5.2 4.1 7.6 11.0
6. Karnataka 6.2 7.2 7.0 11.2
7. Kerala 6.5 5.7 7.2 9.5
8. Madhya Pradesh 6.3 4.0 4.3 6.1
9. Maharashtra 8.9 4.7 7.9 9.1
10. Orissa 2.1 5.1 9.1 8.8
11. Punjab 4.7 4.4 4.5 5.9
12. Rajasthan 7.5 3.5 5.0 7.4
13. Tamil Nadu 7.0 6.3 6.6 8.5
14. Uttar Pradesh 4.9 4.0 4.6 6.1
15. West Bengal 6.3 6.9 6.1 9.7
16. Chhattisgarh NA NA 9.2 8.6
17. Jharkhand NA NA 11.1 9.8
Special category states
18. Arunachal Pradesh 5.1 4.4 5.8 6.4
19. Assam 2.8 2.1 6.1 6.5
20. Himachal Pradesh 6.5 5.9 7.3 9.5
21. Jammu & Kashmir 5.0 5.2 5.2 6.4
22. Manipur 4.6 6.4 11.6 5.9
23. Meghalaya 3.8 6.2 5.6 7.3
24. Mizoram NA NA 5.9 7.1
25. Nagaland 8.9 2.6 8.3 9.3
26. Sikkim 5.3 8.3 7.7 6.7
27. Tripura 6.6 7.4 8.7 6.9
28 Uttranchal NA NA 8.8 9.9
All India 6.8 5.3 7.8 9.0
Note : Average of 2002-03 to 2005-06 for all states except J & K,
Mizogram, Nagaland (2003-03 to 2004-05) and Tripura (2002-03 to
2003-04).
Source : CSO (base 1999-2000 constant Price) on 31.8.2007.
 11

Table 5 : Disparities in per capita GSDP

Year State State Ratio of Coefficie Gini*
with with minimum nt of Coefficie
lowest highest to variation nt
per per maximu
capita capita m
GSDP GSDP PCGSDP
1993-94 Bihar Punjab 30.527 34.539 0.1917
1996-97 Bihar Maharasht 37.586 36.781 0.2071
ra
1999-00 Bihar Maharasth 28.899 37.417 0.2173
ra
2001-02 Bihar Punjab 21.556 35.610 0.2078
2002-03 Bihar Punjab 21.608 36.686 0.2771
2003-04 Bihar Punjab 22.705 36.230 0.2290
2004-05 Bihar Maharasht 20.105 38.440 0.2409
ra
Source: (i) Twelfth Finance Commission for 1993-04, 1996-97 & 1999-
2000.
(ii) CSO for 2001-02, 2002-03, 2003-04, 2004-05.
* 1993-94, 1996-97 and 1999-2000 as per TFC Report based on 1993-
94 prices; 2001-02 and onward with base year 1999-2000 current price
(excluding Goa); weighted by population, 1993-94, 1996-97 and 1999-
2000 relates to 14 states and 2001-02 to 2004-05 relates to 27 states
(excluding Goa).

Table 5 presents summary indicators of disparity in per capita

income across states in India. It does not consider the intra-state
distribution of income. The ratio of minimum to maximum per capita
GSDP increased for three years from 21.56 per cent in 2001-02 to
21.61 per cent in 2002-03 to 22.71 per cent in 2003-04. The weighted
coefficient of variation also shows an increase over the years. The
Ginni coefficient indicated in column 6 reflects the income inequality
across the states which increased from 0.2078 in 2001-02 to 0.2409 in
2004-05. In other words, the income inequality across states is
worsening (GOI, 2008, Vol. I, p.139).

The differential performance across states has begun to raise

important policy questions within India. To what extent are the
differences a manifestation of global economic forces acting upon
Indian economy, especially during the period of economic reforms and
 12

liberalistion of economy and to what extent do they reflect differences

in economic policies at the state level.

Table 6 : State wise parameters of Economic Growth

Development
S. State/UTs Exponenti Povert Literar IMR Per capita
No al Growth y Ratio y Rate 200 NSDP
. Rate of 2004- 2001 6 exponential
GSDP 05 Growth Rate
(1999- (URP) (1999-2006)
2006)
1. Andhra Pradesh 10.07 15.8 60.47 56 8.88
2. Arunachal Pradesh 10.54 17.6 54.34 40 9.06
3. Assam 9.19 19.7 63.25 68 7.29
4. Bihar 7.09 41.4 47.0 60 4.95
5. Jharkhand 11.02 40.3 53.56 49 9.08
6. Goa 12.07 13.8 82.01 15 9.56
7. Gujrat 13.41 16.8 69.14 54 11.43
8. Haryana 12.25 14.0 67.91 58 9.90
9. Himachan Pradesh 10.09 10.0 76.48 50 8.26
10. J & K 9.24 5.4 55.52 52 6.55*
11. Karnataka 9.82 25.0 66.64 48 8.40
12. Kerala 9.53 15.0 90.86 15 8.40
13. Madhya Pradesh 6.53 38.3 63.74 77 4.48
14. Chhatisgarh 12.77 40.9 64.66 61 10.78
15. Maharashtra 10.36 30.7 76.88 35 8.59
16. Manipur 10.46 17.3 70.53 11 8.23
17. Meghalaya 9.69 18.5 62.56 53 8.08
18. Mizoram 9.36 11.6 88.80 25 6.63
19. Nagaland 13.82 19.0 66.59 20 8.83
20. Orissa 11.09 46.4 63.08 73 9.81
21. Punjab 6.74 8.4 69.65 38 4.90
22. Rajasthan 7.92 22.1 60.41 69 10.19
23. Sikkim 12.23 20.1 68.81 33 10.19
24. Tamil Nadu 8.22 22.5 73.45 37 7.28
25. Tripura 10.68 18.9 73.19 36 9.47
26. Uttar Pradesh 8.12 32.8 56.27 71 5.95
27. Uttranchal 11.97 39.6 71.62 43 10.10
28. W est Bengal 9.40 24.7 68.64 38 9.24
29. A & N Island 10.09 22.6 81.30 31 6.52
30. Chandigarh 16.83 7.1 81.94 27 12.94
31. Delhi 11.27 14.7 81.67 37 7.81
32. Pondicheri 9.73 22.4 81.24 28 7.40
33. India 10.17 27.5 64.84 57 8.4
 13

*Related to 199-2000 to 2004-05.

Table 7 : Level of Disparity amongst States During 1999-2000

to 2005-06

Difference Standar Covarianc Covariance Covaria

between d e with with nce with
Highest and Deviatio growth growth Poverty
Low est n rate of rate of per Ratio
grwoth NSDP capita
NSDP
Exponential 16.89% 2.635 - 2.51 122.19
Growth Rate (Chandigarh)
of Net State –
Domestic 6.53%
Product at (Madhya
Cureent Price Pradesh)
(1999-2006) =10.36
percen- tage
point
Exponential 12.94% 1.960 2.51 - -481.93
Growth Rate (Chandigarh)
of per capita –
Net State 4.90%
Domestic (Punjab)
Product at = 8.04
Current Price percentage
(1999-2006) point
Poverty Ratio 46.4% 11.833 122.19 -481.93 -
(2004-05) (Orissa)
–
5.4% (J & K)
= 41.0%
percentage
point
Infant 77.0% 17.542 -11.178 -6.90 10.07
Mortality (Madhya
Rate (2006) Pradesh)
–
11.0%
(Manipur)
= 66.0%
Percentage
point
Adult Literary 90.86% 10.379 3.938 3.37 14.96
Rate (2001) (Kerala)
 14

–
47.00%
(Bihar)
= 43.86
percentage
point
Note :Calculated on the basis of data of Table-6.

SECTION II
SOCIAL AND DEMOGRAPHIC FACTORS IN CONVERGENCE AND DIVERGENCE
Besides difference in GSDP growth rates, and absolute levels of
per capita GSDP, there are wide variations between states even on
other indicators like health, education and infrastructure etc. In the
current scenario where high growth rates have led to a spiral of
commercial and service sector activity in the already developed
regions, the backward areas continue to lack even basic amenities
such as education, health, housing, rural roads, drinking water and
electricity. Livelihood options are also limited as agriculture does not
give adequate returns and industry is virtually absent in many areas
leading to limited trade and services.

A large part of the disparities are probably due to historical

reasons, differences in initial conditions and natural resource
endowments.

Social and demographic factors such as poverty ratio, infant

mortality rate, and literacy rate play an important role in the
development of standard of living. Higher the level of literacy lower the
infant mortality rate and lower the poverty ratio implies an
improvement in the well being of the people in general terms.

There are wide variations in all these three important indicators

of physical quality of life (Table 7). The percentage differential in
poverty ratio in 2004-05 amongst states is 41.0 percentage points
(46.4–5.4=41.0). Standard deviation, regarding poverty ratio in 2004-
05 amongst states is as high as 11.83 which shows high divergence. So
far as the adult literacy rate is concerned, the differential is 43.86
 15

percentage point (90.86 – 47.0 = 43.86). Along with this difference the
level of standard deviation being 10.37 also shows the high level of
divergence in Indian States. Infant mortality rate is another parameter
which not only decides the level of standard of living but also the
trends in birth rate.

The differences in IMR are quite significant amongst states. The

standard deviation is 17.54 which show high level of divergence (Table
627). Generally, the 'southern states' have out performed 'northern
states, by a wide margin, and Kerala has out performed all the states in
the country, including its southern neighbours (except in case of
poverty Ratio, where Jammu and Kashmir is the best performer with
just 5.4 per cent population living below poverty line in 2004-05). J & K
has the unique distinction of being able to reduce its poverty incidence
from 40.83 per cent in 1973-74 to 5.4 per cent in 2004-05. Yet this
superior performance, while undoubtedly raising the standard of well
being of the people, has not translated during this period into
discernibly higher rates of economic growth at the state level.

Table 8 : Correlation between various parameters of growth

and development amongst states
S.N Value of correlation of Growth rate of Growth rate of
o. Net State per capita net
Domestic Domestic
product product (1999-
(1999-2006) 2006)
1 Growth rate of per capita + 0.501 –
net state domestic product
(1999-2006)
2 Poverty Ratio (2004-05) + 0.059 – 0.3178
3 Infant mortality rate (2006) – 0.249 – 0.207
4 Adult literacy rate (2001) + 0.148 + 0.171
Source : Based on data released by CSO and Ministry of Finance (Economic
Survey).

Simple correlations between growth rate and net state domestic

product and per capita net state domestic product with poverty ratio,
infant mortality rate and adult literacy rate have been presented in
Table-8. Simple correlation between growth and adult literacy rate is
 16

positive, and between growth and infant mortality rate is negative.

These are signs of positive impact of growth on these two vital
parameters of standard of living. However, higher growth rate amongst
states could not result into significant decline in poverty ratio, as the
correlation between growth rate of NSDP and poverty ratio is +0.059.
However, correlation between growth rate of per capita NSDP and
poverty ratio is (–) 0.3128 which shows that high growth rate of per
capita income will result in lower poverty ratio. This is so because of
low population growth rate in some states like Kerala, Tamil Nadu, Goa,
Andhra Pradesh and Punjab.
SECTION III
SOME MISSING LINKS OF GROWTH PERFORMANCE
The above analysis reveals that no definite growth path has
emerged during the last 40 years of planning in India. The pattern of
growth economic as well as social is full of divergence. There are some
missing which have made growth pattern more scattered.
Table 9 : Ranking of states during various period on the basis
of growth rate of NSDP/GSDP

1960-61 to 1970-71 to 1980-81 1992-93 to 1997-98 to 2002-01 to

1969-70 1979-80 to 1990- 1996-97 2001-02 2006-07
91
1.Orissa 1.Goa 1.Delhi 1.Gujrat 1.Sikkim 1.M anipur
2.Punjab 2.M aharas 2.Haryana 2.Goa 2.Tripura2.Jharkhan
htra d
3.Him achal 3. Punjab 3.M aharas 2.M aharas 3.Karnatak 3.Gujrat
Pradesh tra htra a
4.Haryana 4.Haryana 4.Rajasthan 3.Nagalan 4.W est 4.Chhattis
d Bengal garh
5.Delhi 5.Gujarat 5.Goa 3.Rajastha 5.M anipur 5.Orrisa
n
6.Assam 6.Karnatak 6.Punjab 4.Tamil 6.Tam il 6.Uttranch
a Nadu Nadu al
7.Kerala 7.Delhi 6.Tamil 5.Tripura 7.M eghalay 7.Tripura
Nadu a
8.Karnatak 8.J & K 6.Karnataka 6.Kerala 8.Him achal 8.Nagalan
a Pradesh d
9.J & K 9.Tamil 7.Gujarat 8.Madhya 9.Kerala 9.M aharas
Nadu Pradesh htra
10.Maharast 10.Andhra 8.Himachal 8.Himachal 10.Goa 10.Goa
ra Pd. Pradesh Pradesh
11.Gujrat 11.Assam 8.Orissa 9.W . Bengal 11.J & K 11.Haryana
 17

12.W .Bengal 12.W.Bengal 9.Uttar 10.Andhra 12.Orissa 12.Sikkim

Pradesh Pradesh
13.Tamil 13.Bihar 10.W . 11.Sikkim 13.Maharash 13.Himachal
Nadu Bengal tra Pradesh
14.Uttar 14.Uttar Pd. 11.Bihar 12.Haryana 14.Andhra 14.Kerala
Pradesh Pradesh
15.Andhra 15.Orissa 12.Andhra 13.Arunacha 15.Punjab 15.Karnatak
Pradesh Pradesh l Pradesh a
16.Madhya 16.Rajastha 13.Madhya 14.J & K 15.Arunacha 16.Andhra
Pradesh n Pradesh n Pradesh Pradesh
17. 17.Himachal 14. Assam 15.Uttar 16.Haryana 17.Tamil
Rajasthan Pradesh Pradesh Nadu
18.Bihar 18.Kerala 15.Kerana 16.Punjab 17.Gujrat 18.W est
Bengal
19.Madhya 16. J & K 17.Assam 17.Bihar 19.Assam
Pradesh
17.Nagalan 18.Bihar 17.Madhya 20.Mizoram
d Pradesh
19.Orissa 17.Uttar 21.Meghala
Pradesh ya
18.Rajasthan 22.Arunach
al Pradesh
23.J & K
24.Rajastha
n
25.Bihar
26.Uttar
Pradesh
27.Punjab
28.Madhya
Pradesh
Note : States in Reverse have higher growth rate than National growth
rate.

Table 10 : Human Development Index for India - Combined

1981 1991 2001

Ran State Valu Ran State Valu Ran State Valu
k e k e k e
1 Kerala 0.50 1 Kerala 0.59 1 Kerala 0.63
0 1 8
2 Punjab 0.41 2 Punjab 0.47 2 Punjab 0.53
1 5 7
3 Maharastr 0.36 3 Tamil Nadu 0.46 3 Tamil Nadu 0.53
a 3 6 1
4 Gujrat 0.36 4 Maharashtr 0.45 4 Maharashtr 0.53
0 a 2 a 1
5 Haryana 0.36 5 Haryana 0.44 5 Haryana 0.52
0 3 3
6 Karnataka 0.34 6 Gujarat 0.43 6 Gujrat 0.47
6 1 9
 18

7 Tamil 0.34 7 Karnataka 0.41 7 Karnataka 0.47

Nadu 3 2 8
8 W est 0.30 8 W est 0.40 8 W est 0.47
Bengal 5 Bengal 4 Bengal 2
9 Andhra 0.29 9 Andhra 0.37 9 Rajasthan 0.42
Pradesh 8 Pradesh 7 4
10 Assam 0.27 10 Assam 0.34 10 Andhra 0.41
2 8 Pradesh 6
11 Orissa 0.26 11 Rajasthan 0.34 11 Orissa 0.40
7 7 4
12 Rajasthan 0.25 12 Orissa 0.34 12 Madhya 0.39
6 5 Pradesh 4
13 Uttar 0.25 13 Madhya 0.32 13 Uttar 0.38
Pradesh 5 Pradesh 8 Pradesh 8
14 Madhya 0.24 14 Uttar 0.31 14 Assam 0.38
Pradesh 5 Pradesh 4 6
15 Bihar 0.23 15 Bihar 0.30 15 Bihar 0.36
7 8 7
Source : GOI (2004); National Human Development Report, p.25.

• BIMARU States could never improve their growth performance and

remained in the league of low growth rate states. However,
Rajasthan did fairly well during eighties and the Eighth five year
plan, but again joined the league of low growth rate states during
Ninth and Tenth Five Year Plan.

• Haryana and Punjab maintained their high performing status during

sixties, seventies and eighties, but failed to do so during the era of
economic reforms. However, they are still quite high in the ladder of
per capita NSDP.

• Despite a low growth rate of the economy during 1992-2006, Punjab

maintained its second position in Human Development Index.

• Kerala's growth rate remained below the national average except

during sixties and Ninth Five Year Plan, but it maintained it's first
rank in Human Development Index.

• Newly created states of Uttrakhand, Jharkahd and Chhattisgarh out

performed many developed states during 1999-2006. So is the case
with Orissa, a backward state till the commencement of economic
reforms.
 19

The BIMARU states have remained at the lowest rung of the

growth ladder due to a number of factors. Firstly, all these states have
traditionally been agricultural states with a fair agro-climate potential
(except part of western Rajasthan and western Madhya Pradesh and
southern Uttar Pradesh). The low level of GSDP in the BIMARU states is
more as a result of human failure rather than it being due to natural
factors. Another drawback of these states especially after the economic
reforms has been their inability to attract private investment. The
states which account for almost 50% of the entire population received
less than 26% of the total private investment proposals since 1991.
The manufacturing sector is a consistent engine of growth especially
after the reforms, the BIMARU states have failed to develop
manufacturing units in their regions. Further the BIMARU states lag
behind in social indicators, infrastructure and good governance -
essential elements for fast growth.

Punjab and Haryana were the two states that benefited the most
from the Green revolution and this led to a spurt in growth in these
states in the sixties up to the end of the green revolution in the
eighties. However, both Punjab and Haryana failed to maintain their
growth rate after the reforms mainly due to stagnation and subsequent
decline in agricultural productivity. Also the urban-rural ratio failed to
increase in both these states. However, despite a decline in the growth
rates of Punjab and Haryana, their overall position remains quite high
in per capita NSDP.

Kerala ranks very high in human development terms. However,

its per capita GSDP ranking is not as high except during the ninth plan.
The poor economic performance is a result of three important factors
(Sachs, Bajpai and Ananthi, 2000). Firstly, Kerala traditionally has had a
very low manufacturing base. In 1981, manufacturing as a percentage
of GSDP was 13.9 per cent, which has risen to a meager 15.5 per cent
by 1991. Although the economic structure has changed somewhat
since then there has not been a deepening of the industrial base.
 20

Secondly Kerela's private investment is very low-as a percentage of

GSDP. Investment in private projects in Kerala accounted for a mere
1.77 per cent making it one of the poorest states in this regard. Thirdly
Kerela receives very little FDI. However, it is one of the biggest
recipient state of remittances from Keralite workers abroad (mainly in
the Gulf countries). Since remittance income is counted as part of the
state's income but not its GSDP, Kerala may not be as poor a state as
its GSDP figures suggest.

An important feature of the growth disparities of various states

has been the high growth rates of the newly created states of
Chhattisgarh, Jharkhand and Uttarakhand during the economic reform
period. This can be attributed to the aggressive industrial policies
followed by these states in order to attract private and foreign direct
investment. Also the central assistance received by these states in the
form of tax concessions and subsidies has helped them to perform
better. Efficient governance has also contributed to their better
performance.

Another highlight of the post reform period has been the fast
growth of Orissa as compared to the pre-reform period. Orissa became
an innovator in economic reforms especially in the power sector and
set out a strong industrial policy. Also it introduced new agricultural
and tourism policies. In the post reform period, Orissa ranks sixth in
foreign investment. Due to its abundant natural resources, the
investors both foreign and domestic have been attracted towards
Orissa. However, despite its resource wealth, Orissa is still
predominantly an agricultural state and thus for its future income
growth, the poor performance of the primary sector has to be dealt
with.

These and many other regional discrepancies in the growth

pattern of Indian states have made the overall growth of the country
uneven and irregular. It is high time that the government realises the
 21

pitfall of uneven growth and takes concrete steps to remove

disparities.

SECTION IV
STRATEGY FOR REDUCING DISPARITIES

In order to reduce the existing inter-state disparities certain

specific strategy has to be evolved by the government both at the
centre and state level. Each state and also regions within the state
have their own historical, geographical, cultural, social, backgrounds
which affect their socio-economic performance. The various measures
that can be taken to reduce the inter-state disparities, thereby bring
the backward states at par with the developed state are :

1. Increase greater share in central finances through the transfer

formulae used by the planning commission and the Finance
Commission.

2. Creation of new states from the large backward states, past

experience shows that when two or more states are carved out
from an existing one, the newly created states develop faster
than the pre-partition states.

3. Increase social and economic infrastructure endowments by

ensuring higher levels of investment in social services and
infrastructure. The 'Bharat Nirman' announced by the Finance
Minister in his budget speech in 2005-06 is a more in this
direction and encompasses six area namely irrigation, roads,
water supply, housing, rural electrification and telecom
connectivity (rural).

4. In the early plans, capital flows – whether public or private, were

largely regulated in. nature However, in the post-reform era
capital flows have become more market-oriented. Thus there is a
need to create suitable market conditions in the backward states,
so that capital flows are directed towards them.
 22

5. Poverty reduction is an important measure to reduce regional

disparity. Poverty does not merely mean lack of income; it
includes vulnerability, powerlessness and social exclusion. It is
seen that the backward states have a high poverty ratio as such
it is important for these states to pursue policies that break the
vicious circle of poverty.

6. Women Empowerment is another criterion by which regional

disparities can be reduced. Women empowerment requires
raising the level of literacy, opening of new job opportunities,
improving the maternal and child health facilities and a more
equitable and inclusive society.

7. Good governance is by far the most important strategy for

reducing regional disparities. Good governance especially at the
state level involves (a) devolving responsibilities and resources
at the state and local levels and enhancing accountability of
economic policies at the central level, (b) Creating an enabling
environment for transparency, competition and private sector
participation in infrastructure sectors, (c) establishing a
predictable policy, legal and regulatory framework for the
financial sector and capital markets.

8. Promote FDI movement in the backward regions is another

measure that will help these states to develop at a fast pace.

SECTION V
CONCLUSION
The findings of the study carried out in the paper reveal that
although there are claims that inequality has decreased in the post-
liberalisation period, these views are mostly unsubstantiated. Analysis
of data shows that on almost all socio-economic indicators, inequality
has in fact increased in varying degrees. The intra and inter state
disparities in India are a result of historical events before independence
as well as faulty unified and centralised planning after independence. It
 23

was only in the Tenth Plan that the government realised the need for
different growth targets and strategies for different states. Accordingly,
it advocated a multi-pronged approach to reduce the regional
disparities. The eleventh plan has continued the process started in the
Tenth Plan and by the end of the plan, we hope to achieve some
positive results.

The backward states are characterised by lower level of social

and economic development, lower per capita incomes and slow GSDP
growth rates, higher level of poverty, lower level of revenue receipts
and lower state government planned expenditure, lower per capita
resource flows and private investment and underdeveloped
infrastructural facilities.

On the other hand, the developed states are characterised by

better economic and social development, higher per capita incomes
and more developed economic resources, lower level of poverty, higher
level of revenue receipts and state government planned expenditure,
higher per capita resource flows and a higher level of private
investment and better infrastructural facilities. In order to reduce the
disparities amongst states and to make the backward states grow
faster, certain changes have to be made in public policy both at the
centre and state level. Also, the governments of these states have to
take decisive steps towards reducing poverty, unemployment, infant
mortality rate illiteracy etc. Thus, it is imperative that the present trend
of disparity is arrested and preferably reverted. This will require
concerted efforts on the part of the concerned state governments and
the centre. The political will of the leaders at the state level and the
determination of the people at large are of prime importance. Also
meaningful decentralisation of decision making and financial powers
with appropriate accountability at all levels will facilitate faster socio-
economic development of the backward regions, where people will
eagerly take-up considerable share of the developmental
responsibilities.
 24

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 25

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