Developmental gaps between Indian states pose challenges and opportunities

Gujarat is a leading state in power supply, other infrastructure and industrial development, but it lags on social development.
Gujarat is a leading state in power supply, other infrastructure and industrial development, but it lags on social development.

Summary

  • In key areas like education, health and infrastructure, all states should aspire to catch up with the best. Beyond that, a state needs to prioritize reforms in areas where it is lagging.

The 1991 structural reforms, designed to transform India’s economic policy framework from a highly dirigiste system to a more liberalized, market-oriented system, mainly addressed the policy and regulatory framework at the national level. Much still remains to be done at that level. However, the next phase of reforms will have to be directed at reforms in the states. Structural reforms at this level have hardly been addressed, barring some piecemeal efforts in a few states.

It is important to note in this context that there are very large differences in levels of development across Indian states, in some ways larger differences than those among different countries of Europe. To illustrate, the per capita income in Goa is seven times higher than in Bihar. Even if we exclude small states like Goa and Delhi as ‘special cases’, huge gaps remain, Haryana’s per capita income is five times that of Bihar.

Per capita income by itself is an inadequate measure of development, but similar large differences are seen in levels of social development and infrastructure services as well. At 75 years, the life-expectancy in Kerala is ten years longer than 65 years in Uttar Pradesh (UP). In education, primary level enrolment rates are 90-100% in most states, but large differences appear at higher levels. Enrolment in higher education is over 51% in Tamil Nadu, compared to less than 15% in Bihar. Power consumption in Gujarat is seven times higher than in Bihar, while road density (state highways and district roads) is again seven times higher in Kerala than in Jharkhand.

These large inter-state differences in levels of social and economic development are both a challenge and an opportunity. They are a challenge because they point to the huge distance which some of these states have to travel, especially the so-called BIMARU states of Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Rajasthan, UP and Uttarakhand, for India to achieve its aspirational goal of becoming a developed country by 2050, i.e., within a hundred years after independence from colonial rule.

These large differences are also a challenge because the states are diverging, not converging. In particular, the southern and western states of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Telengana, Maharashtra and Gujarat are pulling away from the other states, especially the BIMARU cluster. However, BIMARU states remain demographically dominant. Their share of India’s population is well over 40% and rising. This translates politically into a very large share of Members of Parliament (MP) in the Lok Sabha. This growing geographic cleavage between economic power and political heft may worsen after the expected delimitation exercise. It is likely to make India’s politics even more fractious than it already is.

However, as stated, apart from challenges, these large inter-state differences also present opportunities. It is a long-established tradition in development economics, led by the pioneering work of Colin Clarke and Simon Kuznets, to test theories and identify robust regularities in development processes from inter-country comparisons. It was evocatively captured by the Japanese economist Akamatsu in his pre-World War II ‘flying geese’ paradigm, where the geese following in line learn lessons from the geese ahead in line, culminating in a single leading goose—which, of course, was Japan in his thinking. Multilateral development institutions often advise less developed countries on strengthening policies, processes and institutions based on the ’best practices’ observed in more developed countries.

The difficulty with this approach in the international context is that often there are large differences in historical legacy or the prevailing developmental ecosystems across countries which make lessons from such inter-country comparisons infructuous. Policies and processes that work well in one country may not work in another.

However, these legacy or ecosystem differences mostly disappear in inter-state comparisons within a country. States have a shared historical legacy, the same administrative and judicial system, the same tax system and a common market. These natural controls provide a much more robust basis for learning development lessons.

It must be emphasized that these lessons are to be learnt and reforms prioritized not in some overarching sense, but at the level of individual sectors or services. This is because a state which may be leading in some sectors or services may be lagging behind in others. Reform priorities will not be the same for all states. Thus, Gujarat is a leading state in power supply, other infrastructure and industrial development, but it lags on social development. Maharashtra, a leading state in life expectancy and road density, lags in power consumption and per capita government spending. A state needs to prioritize reforms in areas where it is lagging.

That said, no single state can aspire to excel in everything. In some key areas like education, health and infrastructure, all states should aspire to catch up with the best. Beyond that, the principal of comparative advantage should apply, and every state should leverage its relative strengths compared to others. Even states which are lagging behind in many fields will be lagging more in some fields than others. Those should point to their reform priorities, especially in education, health and infrastructure.

To conclude, large development differences across Indian states pose challenges as well as opportunities. The opportunities can be leveraged to overcome the challenges. But whether state-level political leaderships have the necessary vision and humility to learn reform lessons from other states is a key question.

These are the author’s personal views.

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