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JOURNAL OF RESEARCH IN NATIONAL DEVELOPMENT VOLUME 8 NO 1, JUNE, 2010


INTER-STATE IMBALANCES IN SOCIAL AND ECONOMIC DEVELOPMENT OF INDIA

Nishu Bala
Department of Economics, Baba Farid College, Deon, Bathinda (Punjab) India
E-mail: nthakur1981@gmail.com

 

Abstract
Process of economic and social development affects different states and regions in different ways. India is no exception. Some states of India are relatively much developed than the others in terms of literacy, per capita income, growth rates etc. It is in this context this paper has been written taking evidence from various Indian states. Economic development has been measured by per capita income and Gross State Domestic Product (GSDP) while for measuring social development, Human Development Index (HDI), Education Index, Health Index and Income Index have been used. It is found that glaring disparities exist among states. Therefore, it is recommended that government should make policies and plans in such a way as to reduce these disparities in socio-economic development. Otherwise, it can have very serious implications for India’s peace and internal balance.

Keywords: Economic, states, social, India, development


Introduction
The different regions of a country are often endowed with different natural resources and usually have different historical, sociological and political backgrounds. As a result of this, it is very seldom that the different regions of a country are all at the same level of economic development at any point of time. Further as a country develops economically, the different regions of the country may or may not share the benefits of this economic development equally. It is a matter of great interest to examine the manner in which inter-regional disparities in levels of development undergo change during the process of economic development. If these have a natural tendency to decline in the process of economic development, then there is no need to devise and rigorously implement the deliberate policy measures to mitigate these disparities. But on the contrary, if there is an automatic and built-in tendency on economic grounds for these to increase with economic development, policy measures to prevent such increases are definitely needed. It is in this context the paper has been written taking evidence from inter-state disparities in India.

 India is a large federal nation comprising various states and union territories and it is well known that there are wide spread imbalances in the levels of social and economic development between the different states of India. It is generally recognized that inter-state economic disparities increase, at least in initial stages of economic development. As a result, governments everywhere including India used to initiate deliberate policy measures to reduce these disparities. But with the reaffirmation of faith in market mechanism in the liberalized economic scenario the world over now, there is a tendency to withdraw these measures under the implicit assumption that the invisible hand will deliver the goods in this regard too. India has also adopted this economic policy. From a closed economic set-up having considerable faith in centralized planning and with commanding heights reserved for the public sector, India has now become a highly liberalized and globalized economy with great faith in the efficacy of market mechanism. Hence, it is a matter of considerable research interest to know the manner in which the inter-state disparities in levels of socio-economic development have changed in India over the time. As India is a multi-ethnic, multi-religious and multi-lingual country. These widespread inter-state disparities in the levels of socio-economic development can have serious economic, social and even political consequences particularly so if these imbalances have persisted over a long period of time. Therefore, a study examining the nature and extent of change of inter-state socio-economic disparities in India would hence be of considerable relevance to policy makers and planners in India particularly because the period covered by the study includes the period after the introduction of new economic reforms.

Review of earlier literature
Considerable economic literature has gone on to unravel the pattern of regional economic change in the process of economic development. Myrdal (1956) and Hirschman (1961) have identified in detail the forces that operate to bring about these relative changes. While Myrdal (1956) refers to the forces of convergence and divergence as spread and backwash effects, Hirschman (1961) describes these broadly as trickling-down and polarization effects respectively. Self-perpetuation hypothesis propounded by Hughes (1961) and found empirically valid by Booth (1964) for USA. According to this view, the forces of divergence dominate over those of convergence and as a result, inter-regional disparities in the levels of economic development keep on widening over time. 
 
A critical survey of studies related to economic development in India by Nair (1993) has clearly shown the paucity till 1990, of studies of the type being attempted here. Earlier work mainly consisted of examining issues related to the choice of regions for analysis, estimation of indicators of regional well-being, regional impact studies and studies testing the validity of the growth theories at the regional level. Barring few exceptions like the study by Nair (1982) dealing with the pre-80 period, the situation has remained more or less same till the 90’s. There have of course, been a number of meaningful studies about the indicators of regional well-being like the ones by Cassen (2002), Malhotra (1998) and the Planning Commission (2002). There have also been some attempts to find out the relationship between economic growth and poverty at the regional level like the one by Datt and Ravilion (2002). There were also efforts at linking regional development experience to regional policy. One of these by Nair (1993a) was a mere explanatory note and that too concerned with just one state- Orissa. The other was a much more detailed one by Kurian (2000) and dealt with the major Indian states, but it focused mainly on the period since the 80’s. Inter-state comparisons of the type being attempted here have however to be done with considerable caution on at least on two counts. Firstly the different states differ from each other to a great extent in terms of area and population. Secondly the borders of the different states have undergone great changes over time because of the carving out of many new states out of the old ones.                                                                             

The present paper has been written with an attempt to highlight the glaring disparities in socio-economic development of Indian states. In order to measure social development, Human Development Index (HDI) has been used which was introduced by United National Development Programme (UNDP) in 1990. HDI is a simple average of three dimension indices that measure average achievements in a country with regard to ‘a long and healthy life’, as measured by life expectancy at birth, ‘knowledge’ as measured by the adult literacy rate and the combined primary, secondary and tertiary gross enrolment ratio and ‘a decent standard of living’ as measured by earned income. These are the capabilities that enable a person to live a respectable life in the society. Therefore, it is safe to take HDI a proxy for social development of a society. For measurement of economic development of the states, we have taken growth rates of Gross State Domestic Product (GSDP) of different states over the period of time. To explain the disparities between states, the Coefficient of Variation (C.V) and the Gini Coefficient have been used.

Inter-state disparities in economic development
The Tenth Plan (2002-07) was the first plan that specified targets for the growth rates for each state, in consultation with state governments. Though the Eighth (1992-97)                and Ninth (1997-02) Plan periods, the rate of growth in the better-off states (i.e. the states with per capita income above the national average) had been generally higher than those of the states with a lower than average per capita income. This has led to gradually increasing differences in per capita income among the states. The Tenth Five Year Plan targeted a growth rate of 8% per annum for the country as a whole, however, the GSDP growth rate targets for different states adopted by Tenth Plan were both higher and lower
than the this average.

 The glaring disparities in economic development are evident from table 1 which shows GSDP growth rates for different plan periods. Also the latest figures available show the following growth rates as achieved by various states during the Tenth Plan period as compared to the target.

 Manipur ranks 1st with a growth rate of 11.6 percent followed by Jharkhand (11.1%) and Gujarat (10.6%). Madhya Pradesh has the lowest position with only 4.3 percent growth rate. However, many states have made an over-achievement in growth rates i.e. Manipur, Mizoram, Nagaland, Tripura, Uttranchal, Gujarat, Kerala, Maharashtra, Orissa, Chhattisgarh and Jharkhand. Position of Punjab and Jammu and Kashmir has remained somewhat constant. Assam, Nagaland, Orissa and Gujarat have improved tremendously from Eighth Plan to Tenth Plan. Among the poor performing states are Bihar, Punjab, Madhya Pradesh, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal and Arunachal Pradesh. The difference between the state at top i.e. Manipur (11.6%) and the state at lowest place i.e. Madhya Pradesh (4.3%) is 7.3 percentage points which is cause of concern for the government. In order to estimate the extent and trend of the inter-state imbalances in economic development, the ratio of minimum to maximum per capita GSDP, C.V and Gini-Coefficient have been used. It is very disappointing that the same state continues to be at the bottom i.e. Bihar and the same states i.e. Punjab and Maharashtra continue to be at the top positions. The ratio of minimum to maximum per capita GSDP is above 20 percent in all the years from 1993-94 to 2004-2005. It has increased from 21.56 percent in 2001-02 to 22.71 percent in 2003-04 and then decreased to 20.11 percent in 2004-05.  The coefficient of variation is above 34 percent in all the cases indicating that the economic development is not distributed uniformly and consistently across all the states. The Gini-Coefficient indicated in last column of table 2 reflects the income inequality across the states, which increases from 0.2078 in 2001-02 to 0.2409 in 2004-05. In other words, the income inequality across the states is increasing.

Inter-state disparities in social development
From table 3, we can observe that in 1996, Kerala had the highest score in the country achieving 0.747 on HDI. However, Kerala came down to 2nd position in 2006 with HDI score 0.775. Goa (0.728) is 2nd on HDI in 1996. But in 2006 it improved its performance with a HDI value of 0.775. The states with consistently low achievement on HDI are Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan and Orissa. The states that accomplish the largest gains on HDI over the decade are Uttarakhand and Jharkhand. Other states which increased their HDI scores by more than 0.063 points include Arunachal Pradesh, Bihar, Chhattisgarh, Haryana, Himachal Pradesh, Madhya Pradesh, Sikkim, Tamil Nadu and Tripura. None of the states have a HDI score less than 0.5 in 2006. Still, there are huge disparities among states in HDI scores. The difference between the highest HDI score 0.775 (Kerala) and the lowest score 0.552 (Bihar) is of 0.223 points.

 If we look at the components of HDI i.e. Health Index (HI), Education Development Index (Edi) and Income Index (YI), the trend has not changed drastically. But we come to another disappointing conclusion that all the states in 2006 have scored more in HI, but their achievement in Edi is lower than both YI and HI. It means the most of the people are engaged in that type of activity for earning their livelihood for which they don’t need higher education i.e. agriculture or any other type of manual work. Because these types of jobs are easy to find in absence of education. The performance in Edi is really a cause of concern. Nine states i.e. Andhra Pradesh, Bihar, Jammu & Kashmir, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, Chhattisgarh and Jharkhand have scored Edi less than 0.5. It forces Indian planners to review its various policies for expansion of education. However, there is a little hope that all the states have improved their performance in Edi over the decade i.e. from 1996 to 2006. Again, the difference between the highest Edi score 0.870 (Kerala) and the lowest Edi score 0.628 (Madhya Pradesh) is of 0.142 points. Therefore, we come to conclusion that not only in economic development but also in social development also, the glaring inter-state imbalances are present which is not a healthy sign for a developing country like India.

Concluding remarks
A simple conclusion can be drawn from the on going discussion is that in the past few decades the imbalances across different states have been steadily increasing the gains of rapid growth witnessed in this period have not reached all the states in an equitable manner. While differences in GSDP growth rates and absolute levels of per capita GSDP, are summary indicators of economic disparity, there are also wide variations between the states even on health, education and per capita earned income. In the current scenario where high growth rates have led to a spiral of commercial and service sector activity in the already developed states, the backward states continue to lack even basic amenties like education and health facilities. The objective of the Eleventh Plan is ‘faster and more inclusive growth’. However, we also need to reckon with the fact that the slower growing states cannot catch up with the faster growing states within a short period of five years. What this plan seeks to do is to target the slower growing states for higher levels of public investment that will enable the backlog in economic and social development to be addressed.

 The situation demands a whole-heartedly and serious efforts on the part of central as well as state governments. Public investments must be enhanced and private sector must be encouraged to invest in these backward states where returns are very low and even absent. This is the main reason why private sector shirks from investing in these states. So, the government should take the initiative and compensate the private sector to make investment in these areas. Only then the development in India will be development in real terms when it will be shared by all the member states equally.

 References
 Booth, E.J.R, (1964):  Inter-Regional Income Differences, Southern Economic Journal (SEJ), Vol.31, No.1, July pp 44-51

 Cassen, R.H, (2002):  Well-Being in the 1990s: Towards a Balance Sheet, Economic   Political Weekly (EPW), Vol.37, No.27, pp 2789-2794

 Datt, G and Ravallion, M.( 2000): Is India’s Economic Growth Leaving the Poor Behind? Mimeographed Paper at World Bank Workshop on Poverty Estimates, New Delhi, January.

Hirschman, A. O.(1961):  The Strategy of Economic Development,  New Haven.Yale University
Press.

Hughes, R.B.(1961): Inter-regional Income Differences: Self- Perpetuation, Southern Economic Journal, Vol.28, No.1, July, pp 41-45.

Kurian, N.J.( 2000): Widening Regional Disparities in India: Some Indicators, Economic Political Weekly (EPW), Vol.35, No.7, pp 538-55.

Malhotra, R. (1998):  An Interpretation of the Capability Approach for Constructing Developmental and Deprivational Indices- A Comparison of Alternatives Estimates at Regional Level for India (Mimeographed).

Nair, K.R.G. (1982): Regional Experience in a Developing Economy, New Delhi:Wiley- Eastern.

---------------- (1993): Regional Economics: A Survey Report, Indian Council of Social Science Research, New Delhi.
---------------( 1993a): The New Economic Policy and the Development of Backward Regions: A Note on
Orissa, Economic and Political Weekly (EPW), Vol.28, No.19, pp 939-941.

Planning Commission,( 2002): National Human Development Report 2001, New Delhi: Government of India.

Williamson, J.G. (1963): Regional Inequality and the Process of Economic Development, Economic Development and Cultural Change, Vol.13, No.4, Part 2, July.

Table 1: Growth Rates of  Gross State Domestic Product (GSDP) of Different States in Various Plans

S.No

State

8th Plan

9th Plan

10th  Plan (T)

Actuals

1. 

Andhra Pradesh

5.4

4.6

6.8

6.7

2.

Arunachal Pradesh

5.1

4.4

8.0

5.8

3.

Assam

2.8

2.1

6.2

6.1

4.

Bihar

2.2

4.0

6.2

4.7

5.

Chhattisgarh

NA

NA

NA

NA

6.

Goa

8.9

5.5

9.2

7.8

7.

Gujarat

12.4

4.0

10.2

10.6

8.

Haryana

5.2

4.1

7.9

7.6

9.

Himachal Pradesh

6.5

5.9

8.9

7.3

10.

Jammu & Kashmir

5.0

5.2

6.3

5.2

11.

Jharkhand

NA

NA

NA

NA

12.

Karnataka

6.2

7.2

10.1

7.0

13.

Kerala

6.5

5.7

6.5

7.2

14.

Madhya Pradesh

6.3

4.0

7.0

4.3

15.

Maharashtra

8.9

4.7

7.4

7.9

16.

Manipur

4.6

6.4

6.5

11.6

17.

Meghalaya

3.8

6.2

6.3

5.6

18.

Mizoram

NA

NA

5.3

5.9

19.

Nagaland

8.9

2.6

5.6

8.3

20.

Orissa

2.1

5.1

6.2

9.1

21.

Punjab

4.7

4.4

6.4

4.5

22.

Rajasthan

7.5

3.5

8.3

5.0

23.

Sikkim

5.3

8.3

7.9

7.7

24.

Tamil Nadu

7.0

6.3

8.0

6.6

25.

Tripura

6.6

7.4

7.3

8.7

26.

Uttar Pradesh

4.9

4.0

7.6

4.6

27.

Uttaranchal (now Uttarakhand)

NA

NA

6.8

8.8

28.

West Bengal

6.3

6.9

8.8

6.1

Source: Planning Comminssion Reports for Various Plan Periods

Note:  T stands for target while NA stands for not applicable.

Table 2: Disparity in per Capita GSDP Over Different Periods of Time


Year

State with lowest per capita GSDP

State with highest * per capita GSDP

Ratio of minimum to Maximum per capita GSDP (%)

Coefficient of variation

Gini Coefficient $

1993-94

Bihar

Punjab

30.527

34.549

0.1817

1996-97

Bihar

Maharashtra

27.586

36.781

0.2071

1999-00

Bihar

Maharashtra

28.899

37.417

0.2173

2001-02

Bihar

Punjab

21.556

35.610

0.2078

2002-03

Bihar

Punjab

21.608

36.686

0.2290

2003-04

Bihar

Punjab

22.705

36.230

0.2290

2004-05

Bihar

Maharashtra

20.105

38.440

0.2409

Source: (i) Twelfth Finance Commission (TFC) Report for the year 1993-94, 1996-97 and 1999-2000, Government of India, New Delhi

ii) Central Statistical Organization for years 2001-02, 2002-03, 2003-04 and 2004-05.
Note: 1993-94, 1996-97 and 1999-2000 as per the Twelfth Finance Commission Report based on 1993-94 series, 2001-02 onwards, Comparable GSDP 1999-2000 Series: Current Prices; excluding Goa, $ weighted by population; 1993-94, 1996-97 and 1999-2000 relates to 14 states (Assam and general category States excluding Goa) as per TFC; and 2001-02 to 2004-05 related to 25 states (excluding Goa).

Table 3: Dimension-wise HDI Scores For Indian States


S. No.

 

States/ UTs

HDI 1996

HDI 2006

HI 96

EdI 96

YI 96

HDI 96

HI 06

EdI 06

YI 06

HDI 06

1

Andhra Pradesh

0.673

0.363

0.668

0.568

0.715

0.434

0.733

0.627

2

Arunachal Pradesh

0.700

0.358

0.675

0.578

0.714

0.606

0.712

0.677

3

Assam

0.612

0.529

0.656

0.599

0.647

0.607

0.682

0.645

4

Bihar

0.641

0.317

0.494

0.484

0.678

0.403

0.575

0.552

5

Chhattisgarh

0.587

0.371

0.589

0.516

0.661

0.429

0.696

0.595

6

Goa

0.791

0.629

0.764

0.728

0.826

0.654

0.845

0.775

7

Gujarat

0.682

0.481

0.697

0.620

0.719

0.545

0.757

0.674

8

Haryana

0.685

0.455

0.724

0.621

0.733

0.533

0.792

0.686

9

Himachal Pradesh

0.709

0.516

0.689

0.638

0.747

0.598

0.771

0.705

 10

Jammu &Kashmir

0.674

0.434

0.661

0.590

0.718

0.483

0.686

0.629

  11

Jharkhand

0.647

0.317

0.494

0.486

0.705

0.447

0.683

0.611

12

Karnataka

0.714

0.417

0.662

0.598

0.741

0.504

0.730

0.658

13

Kerala

0.867

0.679

0.695

0.747

0.870

0.697

0.758

0.775

14

Madhya Pradesh

0.559

0.371

0.589

0.506

0.628

0.470

0.656

0.585

15

Maharashtra

0.739

0.531

0.725

0.665

0.778

0.596

0.773

0.716

16

Manipur

0.738

0.518

0.627

0.627

0.787

0.635

0.707

0.710

17

Meghalaya

0.677

0.566

0.648

0.631

0.682

0.612

0.713

0.669

18

Mizoram

0.675

0.634

0.656

0.655

0.752

0.642

0.682

0.692

19

Nagaland

0.715

0.628

0.692

0.678

0.764

0.647

0.734

0.715

20

Orissa

0.573

0.403

0.623

0.533

0.639

0.463

0.674

0.592

21

Punjab

0.752

0.486

0.739

0.659

0.765

0.561

0.777

0.701


22

Rajasthan

0.618

0.342

0.647

0.536

0.678

0.415

0.681

0.591

23

Sikkim

0.664

0.542

0.660

0.622

0.732

0.610

0.728

0.690

24

Tamil Nadu

0.710

0.482

0.695

0.629

0.766

0.566

0.750

0.694

25

Tripura

0.675

0.551

0.621

0.616

0.724

0.611

0.733

0.690

26

Uttar Pradesh

0.598

0.363

0.606

0.522

0.651

0.459

0.636

0.582

27

Uttarakhand

0.643

0.363

0.606

0.537

0.721

0.607

0.726

0.685

28

West Bengal

0.703

0.478

0.662

0.614

0.754

0.533

0.726

0.671

Source: Gendering HDI, Ministry of Women and Child Development Of India, 2009
Note: HI= Health Index, Edi= Education Development Index, YI= Income Index and HDI= Human Development Index.