chapter: 4 inter-state analysis of economic...
TRANSCRIPT
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Chapter: 4
Inter-State Analysis of Economic Disparities
Reducing regional disparities in development has been a major
concern throughout the plan period. These disparities were largely
inherited from the pre-independence period partially because of the
regional diversity in natural endowments and also because of the
differences in land tenure systems, investment patterns and systems of
governance in different parts of the country which were basically
designed to serve the interest of colonial government and a large
number of princely states (Rao, 2010). Reform of land tenures and
development of infrastructure in the backward regions received a high
priority in the post-independence period. Programmes for the
development of drought prone areas, hill and tribal areas were also
launched from time to time. Federal financial transfers through the
successive Finance Commissions and Planning Commission have
distinctly favoured the less developed states over a period of time.
However, fiscal transfers in a democratic polity have its own limitations
and thus, inter-state disparities in the levels of development persisted
and even increased in some extent. There has been a marked increase
in inter-state disparities in the post-reform period.
Regional Disparities in Economic Growth:
The nexus in between and inequality has been debated
extensively by the scholars in terms of theory as well as empirical
investigators. For example, starting with the classical economists,
Ricardo‟s two sector model which mainly concentrated on growth and
distribution within agriculture and industry addressed the shares of rent
and profits and growth process eventually approaching the steady state
of zero growth due to diminishing returns in agriculture (Boyer, 1996).
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Karl Marx also believed that capitalist development would inherently
result in uneven distribution of wealth and capitalist have an incentive
for pushing wages to the subsistence level (Martin and Sunley-1998,
Dunford and Smith-2000). The neo-classical growth models for closed
economies [Solow (1956, 1957, 1970), Cass (1965), and Koopmans
(1965)] state that per capita growth rate tends to be inversely related to
the starting level of output/income per head and if economies are similar
in respect of preferences and technologies, then poor economies grow
faster than rich ones. The neo-classical, however, were more optimistic
about market forces and postulated that regional inequality is a passing
phase and that market forces would ensure that the returns to all factors
of production would approach their marginal products (Smith, 1975).
Neo-Keynesians such as Kalechi (1954), Steindl (1952), Kaldor (1955-
56, 60) and Pasinetti (1962) have explained the inter-relationship
between income distribution and economic growth. By and large, Neo-
Keynesian growth models have concluded that reduction in
concentration raises the real wage and provides a redistribution of
income which leads to higher capacity utilization and higher rate of
economic growth.
The link between inequality and average well-being for two sector
economy is known as Kuznets hypothesis (1955, 1963) which maintains
that given a two-sector economy with not too distinct degrees of
sectoral mean incomes, a perennial shift of population from one sector
to another will initially raise aggregate inequality and it will decrease at
later stage. This formulation has been labeled as the “Inverted U” (I-U)
hypothesis or Kuznets cycle (Branlke, 1983). Regional concentration/
diversification has also been examined through „convergence
hypothesis‟ which has primarily emerged due to seminal theoretical
contributions on endogenous growth models by Romer (1986, 1987,
1990, 1992, 1993) and Lucas (1988). The hypothesis asserts that
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differences in contemporaneous per capita income between any pair of
regions will be transitory so long as the two regions contain identical
technologies, preferences and population growth (Bernard and Durlauf,
1966). The bulk of the new theoretical literature on growth and
inequality has focused on models which generate divergence across
nations. The theoretical as well as empirical presentation by Barro,
Robert J. (1990, 1991, 1999), Borro, Robert J. and Jong-Wha Lee
(1994), Barro, Robert J., N. Gregory Mankiw, and Xavier Sala-i-Martin
(1991, 1992a, 1992b, 1992c, 1997, 2007), Baumol (1986), Cashin
(1995), Cashin and Sahay (1996), Delong (1988), Dowrick and Nguyen
(1989), Easterlin (1960a, 1960b), Quah (1993, 1995, 1996a, 1996b) etc.
deal with process of convergence/divergence at national as well as
international level (Gaur, 2010).
In India, inter-state/region inequality has been one of the major
concerns before policy makers and planners. There had been a huge
gap between active and vibrant region and the hinterland during the
pre-independence period in terms of availability of facilities and this
manifested itself in the form of unequal levels of development both in
terms of economic and human. After independence, reduction in inter-
state/region disparities has been emphasized during the successive five
year plans. Apart from that, the issue has been examined, in depth, by
the scholars like Chattopadhyaya, R.N. and M.N. Pal (1972), Rao, S.K.
(1973), Nair, K.R.G. (1973, 1982), Sampat, R.K. (1977), Mohapatra,
A.C. (1978), Mathur, Ashok (1983, 1987, 1992), Datt and Ravallion
(1993, 1998, 2002), Dreeze and Sen (1995), Dreeze and Srinivasan
(1996), Marie-AngeVeganzones (1998), Rao, M. Govinda, RicShand
and K.P. Kalirajan (1999), Ramiah (2002), Ahluwalia, M. (2002),
Ravindra H. Dholakia (2003), Majumdar, R. (2004), Shatakshee
Dhongde (2006), Dev, S.M. and Ravi, C. (2007), N.J. Kurian (2007),
GauravNayyar (2008), Yanrui Wu (2008), ChakrabortyAchin (2009). For
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example, according to Dreze and Sen (1995), enormous variations in
regional experiences and achievements coupled with the even sharper
contrasts in some fields of social development have resulted in
remarkable internal diversities in India. Furthermore, the long-term
progress in raising rural living standards has been diverse across Indian
states (Datt and Ravallion, 1998). Such disparities are responsible for
various states having different capacities for poverty reduction (Datt and
Ravallion, 2002). Similarly, Rajarshi Majumdar (2004) in his paper
entitled, “Human Development in India : Regional Pattern and Policy
Issues” has observed that states like Kerala, Maharashtra and
Himanchal Pradesh put up consistently good performance regarding
social and human development indicators, however, Kerala has not
been able to convert its social development into economic progress. On
the other hand, Gujarat, in spite of its having low Human Development
(HD) ranks, have consistently good ranking in per capita Net State
Domestic Product (PCNSDP).
The National Human Development Report-2001 for India reveals
considerable differences in human development among Indian states
during 1981-2001. The report notes that in the early eighties, states like
Bihar, U.P., M.P., Rajasthan and Orissa had HDI close to just half that
of Kerala‟s. The inter-state differences in human poverty are quite
striking and report notes that while there have been improvements in
the human development index and human poverty index during the
1980s, the inter-state disparities and the relative position of the states
has practically remained the same. Facts show that inter-state disparity
as measured in terms of standard deviation in human development
index stood 0.083 for 1981 which further increased and stood at 0.100
in 1991 [Tenth Five Year Plan (2002-2007), Vol. III]. The World Bank
(2006) in its report entitled, “India-Inclusive Growth and Service
delivery: Building on India‟s Success” has observed sharp differentiation
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across states since the early 1990s reflects acceleration of growth in
some states but deceleration in others. The report further adds that
more worryingly, growth failed to pick up in states such as Bihar, Orissa
and Uttar Pradesh that were initially poor to start with, with the result
that the gap in performance between India‟s rich and poor states
widened dramatically during the 1990s. An approach to the 11th
Five
Year Plan (Planning Commission, Government of India, 2006) has also
acknowledged regional backwardness as an issue of concern. The
differences across states have long been a cause of concern and
therefore, we cannot let large parts of the country be trapped in a prison
of discontent, injustice and frustration that will only breed extremism.
The World Bank (2008) in its recent release “The Growth Report
Strategies for Sustained Growth and Inclusive Development” has
mentioned that disparity in income distribution in India has risen during
1993-2005.
Causes for Regional Disparities:
It is actually difficult to find out the main cause of regional
disparities. It exist in all developed and under developed countries of
the world. Regional disparities are of two types, one is natural
endowment and other is man-made due to the negligence and
preference. On the other hand, regional disparities may be inter-
regional or intra-regional may be total or sectoral. As mentioned earlier
that regional disparities were largely inherited from the pre-
independence period. Investment in physical and human capital,
technical change and institutions, including those of governance are the
three key variables usually invoked for understanding the growth
performance. The decline in public investment on irrigation, power and
social sectors has been cause of concern. Within the states, the per
capita plan outlays of the poorer states have always been much lower
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than those of the better of states. These disparities have widened in the
post-reform period. Central assistance for the state plans (including
assistance for externally aided projects), which is a major component of
state plan resources, has been progressive in that the per capita
assistance for the poorer states has been higher than for the richer
states. The poorer states have been handicapped basically by their own
weaker resource positions. The per capita own plan resources of the
poorer states, including market borrowing, constituted around 40 per
cent of own per capita plan resources of some of the better of states.
The important factor responsible for the deterioration in the financial
position of the poorer states is the decline in the tax GDP ratio of the
Centre in the post-reform period and the consequent decline in the
transfers to the states through devolution as recommended by the
Finance Commissions. The decline in per capita transfers to the poorer
states was even greater because the formula for devolution by the
Finance Commission is quite progressive. The debt – GDP ratios of
poorer states are higher. Because of their lower credit worthiness, they
have not been able to access borrowings from the market to the same
extent as the richer states. The inability of the less developed states to
access sufficient resources for the development of infrastructure
through higher plan outlays has thus emerged as a critical constraint in
redressing regional imbalances in development. Private investment has
been flowing basically to the higher income states where per capita plan
outlays have been higher and where, therefore, infrastructure is well
developed. The developed states are characterized by progressive land
tenures whereas most of the less developed states were under the
exploitative tenures. Similarly, the developed states have good
governance which resulted in effective utilization of resources and
delivery of public services with improved infrastructure development.
However, in the backward states, the central transfers and external
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resources in terms of development projects could not yield the desired
results due to malpractices and prevailing high level of corruption.
Policy Measures for Addressing Regional Inequalities:
As the 11th Plan commenced, a wide spread perception all over
the country emerged that disparities among states and regions have
been steadily increasing in the past few years and the gains of rapid
growth witnessed have not been reached all parts of the country and all
sections of people in an equitable manner. The 11th Plan made
provisions for budgetary support for the new centrally sponsored
schemes and additional central assistance. The centrally sponsored
schemes included Backward Region Grant Fund, Hill Area
Development Programme, Border Area Development Programme, and
Special Initiative of Earmarking of 10% Funds for North-East Region,
Non-lapsable Central Pool of Resources and Setting up of Ministry of
Development of North-Eastern Region, North-Eastern Development
Council etc. The 11th and 12th Central Finance Commissions also
adopted progressive formulas for devolution of resources to the states.
The central assistance in terms of development projects and financing
of state plans has also increased for the poorer states. The government
also highlighted the imperative need for reforming tax system and
effective debt management. Central government also initiated mega
projects in mission mode for infrastructure development, improving
governance and public services however, the advantages of such
projects was again availed by the developed states. This shows that
government transfers and development initiatives have not been
successful in reducing in regional inequalities.
Economic Reforms and Regional Disparities:
The different regions of a nation are often endowed with different
natural resources and usually have different historical, sociological and
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political backgrounds. The assumption, in traditional economic theory,
of free and costless mobility of factors of production – labour, capital
and entrepreneurship – across the regions of any particular nation
hence seldom holds true in actual practice. As a result mainly of all this,
it is very seldom that the different regions of a nation are all at the same
level of economic development at any point of time. For less developed
national economies, the existence of backward regions can cause
considerable concern. Further as a nation develops economically, the
different regions of the nation may or may not share the benefits of this
economic development equally. It is hence a matter of great interest to
examine the manner in which inter-regional differences in the levels of
economic development undergo change during the process of national
economic development. If these have a natural tendency to decline in
the process of national economic development, and the time taken for
this decline is not the proverbial Keynesian long-run in which all of us
may be dead, there is no need to devise and rigorously implement
deliberate policy measures to mitigate these. But on the contrary, if
there is an automatic and built-in tendency on economic grounds for
these to increase with national economic development, policy measures
to prevent such increases are definitely called for (Nair, 2004).
Considerable economic, and, since 1990s, econometric research
has gone on to unravel the pattern of regional economic change in the
process of national economic development. Myrdal (1956) and
Hirschman (1961) have identified in detail the forces that operate to
bring about these relative regional changes. While Myrdal (1956) refers
to the forces of convergence and of divergence as spread and
backwash effects, Hirschman (1961) describes these broadly as
trickling-down and polarization effects respectively. Scanning regional
economic literature, one comes across at least three different
hypotheses in this regard and these differ on the emphasis given to the
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relative importance over time of the forces of convergence and of
divergence. One of these is the self-perpetuation hypothesis
propounded by Hughes (1961) and found empirically valid by Booth
(1964) for the USA. According to this view, the forces of divergence
dominate over those of convergence and as a result, inter-regional
differences in the levels of economic development keep on widening
over time. A diametrically opposite view is the convergence hypothesis
propounded and found empirically valid by Hanna (1959) and
substantiated these days also with the Solovian logic that the rate of
economic growth is inversely related to the level of per capita income
and hence given identical technologies, preferences and rates of
population growth, cotemporaneous differences in per capita incomes
between any two regions will be transitory.
Considerable evidence to support the hypothesis empirically has
been provided by Hanna (1959), Perloff et. al. (1960) and Sala-i-Martin
(1996). The third hypothesis, which in a sense is a happy combination
of these two diametrically opposite views is the concentration cycle
hypothesis propounded by Williamson (1965). The proponents of this
view, point out that inter-regional economic differentials diverge initially
to converge later on and thus trace out the famous Kuznets inverted U-
shaped curve over time in the process of national economic
development. Considerable empirical evidence in support of such a
view emerged as a result of a detailed international study of regional
development experiences by Williamson (1965). A new and valid point
being stressed in this regard by many including Nair (1982) is that the
pattern of regional change depends upon the indicator of development
being considered, with different indicators showing different patterns of
regional change.
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Growing Inter-State Inequalities:
Disparities of various kinds have been viewed as the price paid by
man for development gains. Problem of regional disparities in the levels
of economic development is almost universal. Its extent may differ in
different economies, but its existence can hardly be challenged
seriously in any nation of respectable size. While most experts generally
agree that inherent tendencies for increasing regional disparities exist in
the early stages of national economic development, sharp differences of
opinions and judgments, exist on the prediction of ultimate convergence
as the nation reaches matured stages of development and on the basic
determinants of regional growth different (Khare, 2011).
The early relevant work in regional growth was mainly restricted
to export base analysis or the inward looking theories developed mainly
by urban planners (Tiebout and North, Hillhorst, Clark-Fisher); Ohlin‟s
work on inter-regional trade (1933); study of urban-regional
relationships by Christaller (1933) and Losch (1943). However, none of
these directly dealt with the process of regional growth until the late
1950s, when Mydral (1957) and Kaldor (1970) felt that the basic forces
at work were disequalibrating in nature. Although Mydral (1957)
recognized that the spread effects usually become stronger as a nation
develops, he believed that the backwash effects were on an average
more powerful than the spread effects. Hirschman (1959) also felt that
the polarization effects were stronger than the trickling-down effects in
the earlier stages of development of a nation. Kaldor‟s Model (1970)
formalized by Richardson (1973) predicted divergence. But the
reformulation of the same model by Richardson (1978) later showed
that it was equally consistent with convergence.
Table 4.1 demonstrates the state relatives of per capita NSDP at
constant – 1993-94 prices for the post-reform period. The table shows
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that there are different tendencies towards regional divergence in the
post-reform period. 6 of the 9 states experienced negative changes.
The large negative changes were reported in Assam and negative
changes were also observed in the states of Bihar and Uttar Pradesh.
The significant changes were reported in the state of Gujarat, Tamil
Nadu and Karnataka. All this is reflected in the fact that the co-relation
co-efficient between the state relative in the initial year and its
percentage change during the post-reform period is positive and has a
value of 0.35 which is higher than the 1 in the pre-reform period.
Table: 4.1
State Relatives of Per Capita NSDP
State State Relatives in
1991-92 to 1993-94
1997-98 to 1999-2000
% change
Bihar 51.20 41.93 -18.11
Orissa 62.23 53.65 -13.78
Uttar Pradesh 69.30 56.78 -18.07
Assam 74.84 59.55 -20.42
Madhya Pradesh 81.33 75.85 -6.74
Rajasthan 85.01 89.03 4.73
West Bengal 86.34 90.58 4.92
Andhra Pradesh 94.01 91.50 -2.67
Kerala 97.19 98.50 1.34
Karnataka 100.14 105.88 5.73
Himachal Pradesh 101.52 103.29 1.74
Tamil Nadu 111.64 120.87 8.27
Gujarat 123.63 134.78 9.02
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Haryana 146.21 133.95 -8.38
Maharashtra 147.12 146.20 -0.63
Punjab 164.06 146.78 -10.54
Source: Calculated from Economic and Political Weekly Research Foundation.
Per capita income was reported significantly high in high income
states though these states account for only 1/4th of the population.
Similarly, per capita income was recorded low in low income states
which comprise 44.8 per cent population of the country. The share of
productivity was also recorded high in high income states followed by
north-east and special category states while it was found low in low
income states. The growth of productivity during 1983 to 2003 was also
recorded significantly high in high income states and low in north-east
and special category states (Table 4.2).
Table: 4.2
Per-capita Incomes and Productivity Levels by States
Regions Population 2001
(million)
Share of Population in India (%)
Income per Capita
(Rs. 1993~94 price),
average of 2000/01-
02/03
Productivity Levels, 1983-
2003 Normalized by Average India
Productivity Growth 1983-
2003 Normalized by Average India
LIS 464.1 44.8 7398.9 55.1 64.3
NESCS 37.7 3.6 7986.6 128.5 57.6
MIS 249.9 24.1 12157.4 78.2 122.6
HIS 258.4 24.9 17256.0 130.7 149.6
India 1036.6 100.0 11376.2 100 100
Source: World Bank States Data Base and NSS Surveys
Disparities among States have been steadily increasing
particularly since the initiation of economic reforms in the country. The
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Eleventh Five-Year Plan document expressed concern over the
widening income differentials between more developed and relatively
poorer States. In the post-reform period, private investment had gone
mostly to southern and western States because of proximity to ports,
better infrastructure and perceptions regarding better governance.
Table 4.3 presents the trends in inter-State differentials in comparable
estimates of per capita Gross State Domestic Product (GSDP) over the
years.
Table: 4.3
Inter-State Disparities in Per Capita GSDP
Year State With the Lowest Per
Capita GSDP
State With the Highest Per
Capita GSDP
Ratio of Minimum to
Maximum Per Capita GSDP
1993-94 Bihar Punjab 30.53
1996-97 Bihar Maharashtra 27.59
1999-00 Bihar Maharashtra 28.90
2000-01 Bihar Punjab 21.56
2001-02 Bihar Punjab 21.61
2002-03 Bihar Punjab 22.70
2003-04 Bihar Maharashtra 20.10
2004-05 Bihar Maharashtra 20.10
2005-06 Bihar Haryana 20.75
2006-07 Bihar Haryana 19.27
Source: Planning Commission, Eleventh Five-Year Plan.
In 1993-94, the per capita GSDP of Bihar, the lowest Income
State was 30.53 per cent of the highest Income State of Punjab. By
2006-07, the per capita income of Bihar slipped to 19.27 per cent of the
highest Income State of Haryana. In the above Table, the per capita
income Goa, the highest Income State in the country has not been
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taken into account as it is an outlier. In 2006-07, the per capita income
of Goa was double that of Haryana, the next highest income State. If
Goa is included, the ratio between the per capita incomes of the highest
and the lowest State will be 10:1 in the year 2006-07, the latest year for
which the comparable estimates of per capita GSDP are available.
The Tenth Plan was the first Plan that specified targets for the
growth rate for each State, in consultation with the State Governments.
Through the Eighth and Ninth Plan periods, the rate of growth in the
better-off states (that is, 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 had led to gradually
increasing differences in per capita income among the States. The
Tenth Five Year Plan targeted a growth rate of 8 percent per annum for
the country as a whole; however, the Gross State Domestic Product
(GSDP) growth rate targets for different States adopted by the Tenth
Plan were both higher and lower than this average. The latest available
figures show the following growth rates as having been achieved by
various States during the Tenth Plan period as compared to the targets.
For obtaining a longer term perspective, growth rates achieved in the
Eighth and Ninth Plans are also given in Table 4.4.
Table: 4.4
Growth Rates in State Domestic Product in Different States
S.No. State/UT Eight Plan Ninth Plan Tenth Plan
Target Actual
Non Special Category States
1 Andhra Pradesh 5.4 4.6 6.8 6.7
2 Bihar 2.2 4.0 6.2 4.7
3 Goa 8.9 5.5 9.2 7.8
4 Gujarat 12.4 4.0 10.2 10.6
5 Haryana 5.2 4.1 7.9 7.6
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6 Karnataka 6.2 7.2 10.1 7.0
7 Kerala 6.5 5.7 6.5 7.2
8 Madhya Pradesh 6.3 4.0 7.0 4.3
9 Maharashtra 8.9 4.7 7.4 7.9
10 Orissa 2.1 5.1 6.2 9.1
11 Punjab 4.7 4.4 6.4 4.5
12 Rajasthan 7.5 3.5 8.3 5.0
13 Tamil Nadu 7.0 6.3 8.0 6.6
14 Uttar Pradesh 4.9 4.0 7.6 4.6
15 West Bengal 6.3 6.9 8.8 6.1
16 Chhattisgarh NA NA 6.1 9.2
17 Jharkhand NA NA 6.9 11.1
Special Category States
1 Arunachal Pradesh 5.1 4.4 8.0 5.8
2 Assam 2.8 2.1 6.2 6.1
3 Himachal Pradesh 6.5 5.9 8.9 7.3
4 Jammu & Kashmir 5.0 5.2 6.3 5.2
5 Manipur 4.6 6.4 6.5 11.6
6 Meghalaya 3.8 6.2 6.3 5.6
7 Mizoram NA NA 5.3 5.9
8 Nagaland 8.9 2.6 5.6 8.3
9 Sikkim 5.3 8.3 7.9 7.7
10 Tripura 6.6 7.4 7.3 8.7
11 Uttarakhand NA NA 6.8 8.8
Source: CSO, 2007.
Growth rate is the principal yardstick of economic performance
and development of states (Haseen, 2011). Table 4.5 presents growth
rates of Gross State Domestic Product and Per Capita Gross State
Domestic Product at current prices. It is clear from the table that some
states have achieved higher Gross State Domestic Product growth
rates while others trail behind the all India growth rate. In the 1960, the
highest growth rates were recorded by Punjab, Haryana and Himachal
Pradesh. Bihar was slowest growing state with less than 1 per cent
growth rate. During 1970s, there was a slight change in growth pattern.
Along with Punjab, Haryana and the state of Maharashtra, Gujarat,
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Karnataka and Tamil Nadu started registering high rate of growth. The
national average of economic growth increased from 3.6 per cent of the
previous decades to 5.6 per cent in 1980s. Andhra Pradesh, Assam,
Kerala and Madhya Pradesh have been less than the national average
during the 1980s. All the major states achieved over 5 per cent growth
during 1980s. Tamil Nadu, Karnataka, Haryana and Rajasthan
developed rapidly during the 1980s. However, during the 1990s,
Gujarat, Karnataka and Maharashtra witnessed growth rate of over 7
per cent per annum. West Bengal and Rajasthan also performed well
and achieved more than 7 per cent growth rates while the performance
of poor states like Bihar, Orissa, Assam and Uttar Pradesh could not
achieved the remarkable growth.
Table: 4.5
Growth Rate of GSDP and Per Capita GSDP at Current Prices
(Per cent)
States Gross States Domestic Product Gross States Domestic Product Per Capita
1980-81 to 1990-91
1993-94 to 1998-99
1990-200 to 2005-06
1980-81 to 1990-91
1993-94 to 1998-99
Karnataka 5.4 8.2 12.9 3.3 6.4
Gujarat 5.1 8.0 16.2 3.0 6.2
Tamil Nadu 5.4 6.8 11.0 3.9 5.8
Maharashtra 6.0 7.1 12.5 3.6 5.4
Rajasthan 5.9 7.7 8.3 3.8 5.3
West Bengal 4.8 6.8 12.4 2.6 5.0
Goa 5.5 8.3 15.9 3.9 4.5
Kerala 3.2 5.5 12.2 1.7 4.2
Himachal Pradesh 5.0 6.7 13.3 3.1 3.9
Haryana 6.2 5.8 17.9 3.9 3.6
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Andhra Pradesh 4.3 4.9 13.7 2.1 3.5
Punjab 5.4 5.0 10.4 3.5 3.0
Orissa 5.0 4.3 13.8 3.1 2.9
Bihar 4.7 4.2 9.7 2.5 2.6
Madhya Pradesh 4.0 4.4 7.5 2.1 2.3
Uttar Pradesh 4.9 4.5 9.9 2.5 2.3
Assam 3.6 2.7 10.8 1.4 1.0
All India 5.9 6.8 13.9 3.3 4.8
Source: Central Statistical Organization, Government of India.
Agriculture being the backbone of Indian economy, concerned
efforts has been made for its improvement in the post-independence
period. The Green Revolution has solved the food problem of the
country but has created the regional imbalances in agricultural
development (Saran & Goel, 2011). Agricultural development is a
complex process and has multidimensional structure depending upon
its resources in general and infrastructural facilities in particular. As for
the levels of agricultural productivity are concerned, the states like
Punjab, Haryana, West Bengal, Kerala, Andhra Pradesh, Uttar Pradesh,
Himachal Pradesh, Tamil Nadu and Jammu & Kashmir are placed
above the national average while the states like Gujarat, Karnataka,
Orissa, Bihar, Madhya Pradesh, Rajasthan and Maharashtra are below
the national average. There is an uneven growth in agricultural
productivity in the states. The performance in agricultural growth has
been reported significant in some of the states like Punjab and Haryana
while West Bengal, Himachal Pradesh, Andhra Pradesh, Uttar Pradesh
and Kerala performed above the national level. Madhya Pradesh,
Maharashtra and Rajasthan continued to remain the least developed
states so far as food grain production is concerned.
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The Eleventh Plan has continued the Tenth Plan initiative of
working out GSDP growth targets for States. Consistent with the
country‟s overall GDP growth target of 9 percent per annum for the
Eleventh Plan, the following growth targets for each State, broken up
into targets for each sector, have been worked out (Table 4.6). For the
agricultural sector, the State-wise projection has been made on the
basis of a rigorous panel data regression model. The growth target for
Industry and Services sector has been made by linearly projecting the
past contribution of each State to the overall growth performance of
these sectors at the national level.
Table: 4.6
State-wise Growth Target for the Eleventh Five Year Plan
(Annual Average in %)
State/ UTs State-wise Growth Target
Agriculture Industry Services GSDP Growth
Non Special Category States
Andhra Pradesh 4.0 12.0 10.4 9.5
Bihar 7.0 8.0 8.0 7.6
Chhattisgarh 1.7 12.0 8.0 8.6
Goa 7.7 15.7 9.0 12.1
Gujarat 5.5 14.0 10.5 11.2
Haryana 5.3 14.0 12.0 11.0
Jharkhand 6.3 12.0 8.0 9.8
Karnataka 5.4 12.5 12.0 11.2
Kerala 0.3 9.0 11.0 9.5
Madhya Pradesh 4.4 8.0 7.0 6.7
Maharashtra 4.4 8.0 10.2 9.1
Orissa 3.0 12.0 9.6 8.8
125
Punjab 2.4 8.0 7.4 5.9
Rajasthan 3.5 8.0 8.9 7.4
Tamil Nadu 4.7 8.0 9.4 8.5
Uttar Pradesh 3.0 8.0 7.1 6.1
West Bengal 4.0 11.0 11.0 9.7
Special Category States
Arunachal Pradesh 2.8 8.0 7.2 6.4
Assam 2.0 8.0 8.0 6.5
Himachal Pradesh 3.0 14.5 7.5 9.5
Jammu & Kashmir 4.3 9.8 6.4 6.4
Manipur 1.2 8.0 7.0 5.9
Meghalaya 4.7 8.0 7.9 7.3
Mizoram 1.6 8.0 8.0 7.1
Nagaland 8.4 8.0 10.0 9.3
Sikkim 3.3 8.0 7.2 6.7
Tripura 1.4 8.0 8.0 6.9
Uttarakhand 3.0 12.0 11.0 9.9
Source: Planning Commission
The Eleventh Five Year Plan has attempted in a similar manner to
break down the monitorable targets at the national level into State-level
targets. These targets will help to focus attention on the extent to which
progress has been achieved in the relatively backward States and
districts. Table 4.7 presents summary indicators of disparity in per
capita income across States in India. This 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 percent in 2001-02 to
22.71 percent in 2003-04 and then decreased in 2004-05 to 20.11
percent. The weighted coefficient of variation also shows an increase
over the years. The Gini Coefficient indicated in column (6) of the Table
126
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 States is worsening.
Table: 4.7
Disparity in Per Capita GSDP
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 $
(in %) Weighted
1993-94 Bihar Punjab 30.527 34.549 0.1917
1996-97 Bihar Maharashtra 27.586 36.781 0.2071
1999-2000 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 0.2771
2003-04 Bihar Punjab 22.705 36.230 0.2290
2004-05 Bihar Maharashtra 20.105 38.440 0.2409
Source: TFC Report for the Year 1993-94, 1996-97 and 1999-2000.
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 time period of five years. What this Plan seeks to do is to target
the slower growing States and the backward areas within these States,
for higher levels of public investment that will enable the backlog in
physical and social infrastructure to be addressed. This would, in turn,
provide a platform for much more rapid growth in the Twelfth Plan
period.
While differences in GSDP growth rates, and absolute levels of
per capita GSDP, are summary economic indicators of disparities, there
are wide variations between the States even on other health, education
and infrastructure indicators. In the current scenario where high growth
127
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, leading to limited trade and services. People seeking
employment in low skill, low paying jobs is a common manifestation of
these constraints in many rural areas. Compounding these problems is
the lack of manpower to man essential services such as educational
institutions and health centers. A large part of the disparities are
probably due to historical reasons, differences in initial conditions and
natural resource endowments. However, there is no clear pattern that
seems to be applicable to all cases.
While the above is the situation as between States, very much the
same picture is seen among the different districts and regions within
States. Even in highly developed States, there are regions and districts
whose indicators are comparable to those of the poorest districts in the
most backward States. While some level of intra- State and inter-State
disparity is bound to exist even in the best possible situation, the effort
of the planning process must be to enable backward regions to
substantially overcome the disadvantages they labour under and to
provide at least a certain minimum standard of services for their
citizens.
The share of non-farm sector employment among the adult
population (15-60 years) as per NSS Rounds is shown in Table 4.8. The
share of non-farm sector employment in rural India was reported 22.3
per cent in 1983 which increased to 31.5 per cent in 2004. In the state
of Kerala, there has been sectoral shift of non-farm sector employment
as in 2004 non-farm sector employment constituted 77.4 per cent while
it was only 55.8 per cent in 1983. Similarly, the states who have
128
recorded significant growth in the share of non-farm sector employment
were reported to be Chhattisgarh, Jharkhand, West Bengal, Uttar
Pradesh, Tamil Nadu, Rajasthan, Punjab, Haryana, Maharashtra,
Karnataka, Himachal Pradesh, Gujarat and Bihar.
Table: 4.8
Share of Non-farm Sector Employment
State 1983 1987 1993 1999 2004
All India 22.3 25.2 25.2 27.3 31.5
Andhra Pradesh
23.1 25.4 24.0 24.1 30.3
Assam 26.7 32.2 33.8 41.6 34.7
Bihar 17.6 17.2 15.3 18.5 24.9
Gujarat 18.0 29.9 24.9 25.0 26.5
Haryana 28.3 28.4 39.2 40.7 47.4
HP 15.8 22.9 26.6 36.8 38.0
Karnataka 19.6 22.0 22.2 23.1 21.4
Kerala 55.8 60.0 66.3 71.5 77.4
MP 13.5 15.3 12.7 16.1 19.5
Maharashtra 16.8 19.6 19.8 20.6 22.3
Orissa 24.4 29.2 22.9 24.0 36.6
Punjab 26.3 32.9 33.9 38.5 48.5
Rajasthan 16.9 29.4 25.6 27.9 32.0
Tamil Nadu 29.1 32.2 32.5 35.8 37.6
Uttar Pradesh 21.0 20.0 23.0 27.8 33.4
West Bengal 32.4 33.3 39.4 38.2 41.2
Jharkhand 23.6 27.0 23.5 30.2 34.8
Chattisgarh 8.4 10.6 10.4 11.7 15.4
Uttarakhand 21.9 18.8 18.0 24.3 26.9
Source: Peter Lanjouw & R. Margai, 2008.
129
Industrial growth performance during 1980s and 1990s is shown
in Table 4.9. The rate of industrial growth in the state of Uttar Pradesh
was reported 7.7 per cent during 1980s which came down to just 3.6
per cent during 1990s. However, in the states like Gujarat and
Maharashtra, there has been significant increase in the percentage
points in industrial growth during the two periods. Similarly, the growth
in services sector and agriculture sector has slowed down in the state of
Uttar Pradesh while in other states, it has shown increasing trends.
Importantly, the share of industry in GSDP was reported 17 per cent in
1980s which has slightly increased to 19 per cent in 1990s in the state
of Uttar Pradesh.
Table: 4.9
Industrial Growth Performance during 1980s &1990s
(Percentage)
State Agriculture Industry Services GSDP
1980 1990 1980 1990 1980 1990 1980 1990
Gujarat -1 4 7.80 12 7.70 8.60 5.11 9.60
Karnataka 2.80 3.80 6.60 6.20 7.40 7.0 5.30 5.30
Maharashtra 3.10 3.50 5.90 8.20 6.90 9.10 6.0 8.0
Haryana 3.80 2.20 9.70 5.60 7.80 6.70 6.40 5.00
Punjab 5.00 2.90 7.0 8.0 5.30 5.20 5.30 4.70
Uttar Pradesh 2.5 2.1 7.7 3.6 6.4 4.2 4.8 3.2
All India 3.1 3.4 6.9 6.6 6.4 7.5 5.4 6.1
Share in GSDP
Gujarat 30 21 32 38 38 41 100 100
Karnataka 39 33 21 23 40 44 100 100
Maharashtra 23 18 34 33 43 49 100 100
Haryana 48 42 21 23 31 35 100 100
Punjab 49 46 19 22 32 32 100 100
Uttar Pradesh 46 40 17 19 36 41 100 100
All India 36 30 25 27 39 43 100 100
Source: Uttar Pradesh Development Report, 2007.
Index of Infrastructural Development during 1980s and 1990s is
shown in Table 4.10. There has been significant change in the index of
130
infrastructure development in post-reform period as compared pre-
reform period. Substantial increases took place in less developed states
like Madhya Pradesh, Orissa and Rajasthan. Andhra Pradesh,
Karnataka and Gujarat reported nominal change in the index
infrastructure development however; negative growth rate was reported
in the states of West Bengal, Haryana, Kerala, Punjab, Bihar and Uttar
Pradesh.
Table: 4.10
State Relatives in the Index of Infrastructural Development, in early and late 1990s
State State Relatives for
Early 1990's Late 1990's % Change
Madhya Pradesh 65.9 75.8 15.0
Rajasthan 70.5 75.9 7.7
Orissa 74.5 81.0 8.8
Himachal Pradesh 80.9 95.0 17.4
Assam 81.9 77.7 -5.2
Bihar 92.0 81.3 -11.6
Andhra Pradesh 99.2 103.3 4.1
Karnataka 101.2 104.9 3.6
Uttar Pradesh 111.8 101.2 -9.5
Maharashtra 121.7 112.8 -7.3
Gujarat 123.0 124.3 1.1
West Bengal 131.7 111.3 -15.5
Tamil Nadu 149.9 149.1 -0.5
Haryana 158.9 137.5 -13.4
Kerala 205.4 178.7 -13.0
Punjab 219.2 187.6 -14.4
Source: Tenth & Eleventh Finance Commission Reports.
131
State-wise number of registered factories in India is shown in
Table 4.11. Most of the registered factories are found located in Andhra
Pradesh, Kerala, Maharashtra, Punjab, Rajasthan and Pondicherry.
During 2000, a large number of industries were registered in Andhra
Pradesh, Maharashtra, Kerala, Rajasthan and Punjab.
Table: 4.11
State-wise Number of Registered Factories in India
Sta
te/U
Ts
On
Reg
iste
r a
t th
e
Be
gin
nin
g o
f th
e y
ear
Ne
wly
Re
gis
t-e
red
Du
rin
g
the y
ea
r
Re
mo
ve
d f
rom
th
e
Re
gis
ter
Du
rin
g t
he y
ea
r
On
Reg
iste
r a
t th
e e
nd
of
the y
ea
r
Wo
rkin
g o
n a
ny d
ay
du
rin
g t
he y
ear
Su
bm
itti
ng
Re
turn
s
Pe
rce
nta
ge
s R
esp
on
se
Andhra Pradesh
33212 2795 1347 34660 28924 13123 45.37
Assam 2308 99 1 2406 1574 432 27.45
Delhi 7038 222 41 7219 6641 1340 20.18
Kerala 18514 734 694 18554 18554 5792 31.22
Madhya Pradesh
11220 297 3644 7873 7869 952 12.1
Maharashtra 33701 1898 921 34678 29637 17286 58.33
Meghalaya 66 5 -- 71 71 59 83.1
Orissa 2513 149 48 2614 1900 866 45.58
Punjab 13731 298 113 13916 13596 2176 16
Rajasthan 8853 549 216 9186 9186 2254 24.54
Tripura 1331 34 16 1349 1349 196 14.53
Chandigarh 534 -- 5 529 529 217 41.02
Pondicherry 1627 189 42 1774 1774 424 23.9
Total 134648 7269 7088 134829 121604 45117 37.1
Source: Statistics of Factories, Ministry of Labour, Government of India.
132
State-wise unorganized manufacturing enterprises are shown in
Table 4.12 Most of unorganized manufacturing enterprises were
reported in Uttar Pradesh (17.34 per cent) followed by West Bengal
(13.16 per cent), Orissa (9.58 per cent), Bihar (9.25 per cent) and
Andhra Pradesh (8.57 per cent). Again, most of unorganized
manufacturing enterprises were found located in rural areas of these
states.
Table: 4.12
State-wise Unorganized Manufacturing Enterprises in India
States/UTs Number of Enterprises % Share
Rural Urban All
Uttar Pradesh 1835877 678884 2514761 17.34
West Bengal 1531183 377801 1908984 13.16
Orissa 1321784 68023 1389807 9.58
Bihar 1149347 192688 1342035 9.25
Andhra Pradesh 964579 277865 1242444 8.57
Tamil Nadu 643419 513284 1156703 7.98
Maharashtra 437030 427650 864680 5.96
Karnataka 604631 234677 839308 5.79
Madhya Pradesh 451549 200134 651683 4.49
Gujarat 238373 389677 628050 4.33
Rajasthan 303628 162416 466044 3.21
Assam 274842 32257 307099 2.12
Kerala 235320 59257 294577 2.03
Punjab 120447 129391 249838 1.72
Delhi 33198 143513 176711 1.22
Haryana 77113 64404 141517 0.98
Himachal Pradesh 87192 11242 98434 0.68
Other States & Union Territories
187572 43864 231436 1.59
India 10497084 4007027 14504111 100
Source: Economic Review 2001--02, Govt. of West Bengal.
133
Human development index during 1991 and 2001 of major states
is shown in Table 4.13. There has been significant negative change in
human development index in the states of Andhra Pradesh, Assam,
Gujarat, Kerala, Punjab, Tamil Nadu, Haryana and Karnataka. The
states of Rajasthan, Uttar Pradesh, Bihar, Orissa and West Bengal
reported negative change however; it was slightly low as compared to
other major states.
Table: 4.13
State Relatives in Human Development Index
State State Relative for
1991 2001 % Change
Bihar 80.84 77.75 -3.82
Uttar Pradesh 82.41 82.20 -0.26
Madhya Pradesh 86.09 83.47 -3.04
Orissa 90.55 85.59 -5.48
Rajasthan 91.08 89.83 -1.37
Assam 91.34 81.78 -10.47
Andhra Pradesh 98.95 88.14 -10.93
West Bengal 106.04 100.00 -5.69
Karnataka 108.14 101.27 -6.35
Gujarat 113.12 101.48 -10.29
Haryana 116.27 107.84 -7.25
Maharashtra 118.64 110.81 -6.60
Tamil Nadu 122.31 112.50 -8.02
Punjab 124.67 113.77 -8.74
Kerala 155.12 135.17 -12.86
Source: Human Development Report 2001, Planning Commission.
134
As per report of India Human Development, 2011, there has been
overall improvement in human development index; however, the value
of human development index varies depending upon the geographical
areas and states. Human development index during 2007-08 was
recorded high in Kerala, Delhi, Goa, Gujarat, Haryana, Maharashtra,
Punjab, Tamil Nadu, West Bengal, Himachal Pradesh, Jammu &
Kashmir and Uttarakhand while it was recorded low in Chhattisgarh,
Bihar, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar
Pradesh (Table 4.14).
Table: 4.14
Human Development Index and Its Components by States
Non-Special Category
States
Health Index 2008
Income Index 2007-08
Education Index 2007-08
HDI 2007-08
Andhra Pradesh
0.580 0.287 0.553 0.473
Assam 0.407 0.288 0.636 0.444
Bihar 0.563 0.127 0.409 0.367
Chhattisgarh 0.417 0.133 0.526 0.358
Delhi 0.763 0.678 0.809 0.750
Goa 0.650 0.443 0.758 0.617
Gujarat 0.633 0.371 0.577 0.527
Haryana 0.627 0.408 0.622 0.552
Jharkhand 0.500 0.142 0.485 0.376
Karnataka 0.627 0.326 0.605 0.519
Kerala 0.817 0.629 0.924 0.790
Madhya Pradesh
0.430 0.173 0.522 0.375
Maharashtra 0.650 0.351 0.715 0.572
Orissa 0.450 0.139 0.499 0.362
Punjab 0.667 0.495 0.654 0.605
Rajasthan 0.587 0.253 0.462 0.434
Tamil Nadu 0.637 0.355 0.719 0.570
135
Uttar Pradesh 0.473 0.175 0.492 0.380
West Bengal 0.650 0.252 0.575 0.492
Special Category States
Himachal Pradesh
0.717 0.491 0.747 0.652
Jammu & Kashmir
0.530 0.459 0.597 0.529
NE (Excluding Assam)
0.663 0.386 0.670 0.573
Uttarakhand 0.530 0.302 0.638 0.490
All India 0.563 0.271 0.568 0.467
Source: Authors’ Computation.
Per capita private consumer expenditure in the post-reform period
is shown in Table 4.15. There has been remarkable growth in the per
capita private consumer expenditure in the states of Karnataka, Tamil
Nadu, Himachal Pradesh, Kerala and Gujarat however, there has been
negative change in the states of Bihar, Orissa, Assam, Madhya
Pradesh, Uttar Pradesh, Andhra Pradesh, West Bengal, Rajasthan and
Punjab.
Table: 4.15
State Relative Per Capita Private Consumer Expenditure in the Post-reform Period
State State Relative for
1993-94 1999-2000 % change
Bihar 72.15 70.59 -2.16
Orissa 74.94 70.00 -6.59
Assam 85.45 80.11 -6.25
Madhya Pradesh 88.31 81.04 -8.24
Uttar Pradesh 90.69 87.48 -3.54
Karnataka 97.04 108.09 11.39
Andhra Pradesh 98.20 93.16 -5.14
136
West Bengal 101.58 96.73 -4.77
Tamil Nadu 104.91 115.29 9.89
Rajasthan 105.61 103.42 -2.08
Gujarat 108.74 114.77 5.54
Maharashtra 113.21 118.01 4.24
Himachal Pradesh 117.69 124.85 6.08
Haryana 124.22 129.94 4.60
Kerala 127.70 138.20 8.23
Punjab 139.13 134.03 -3.67
Source: Human Development Report 2001, Planning Commission.
Monthly per capita consumption expenditure has significantly
increased over the period of 1983 to 2004-05. Per capita monthly
consumer expenditure was recorded Rs. 125.13 in 1983 while it is
increased to Rs. 328.18 during 1993-94 and further increased to Rs.
700.33 in 2004-05. Per capita consumer expenditure also shows
significant regional variations over the period. Per capita consumer
expenditure during 2004-05 was recorded high in Nagaland, Goa, Delhi,
Kerala, Himachal Pradesh, Gujarat, Haryana, Punjab and Jammu &
Kashmir while it was recorded low in Bihar, Chhattisgarh, Jharkhand,
Orissa and Karnataka (Table 4.16).
Table: 4.16
Monthly Per Capita Consumption Expenditure
(In Rs.)
Non-Special Category States 1983 1993-94 2004-05
Andhra Pradesh 126.27 322.28 704.49
Assam 117.87 280.42 613.67
Bihar 99.53 236.78 446.38
Chhattisgarh -- -- 545.15
137
Delhi 228.64 777.01 1047.54
Goa 187.2 501.4 1406.02
Gujarat 133.59 356.87 872.47
Haryana 157.03 407.67 970.59
Jharkhand -- -- 568.72
Karnataka 132.81 318.47 627.36
Kerala 152.13 419.08 1111.06
Madhya Pradesh 111.61 289.83 558.89
Maharashtra 138.57 371.54 724.16
Orissa 104.06 245.94 460.68
Punjab 174.26 456.59 921.91
Rajasthan 134.5 346.6 724.27
Tamil Nadu 129.43 344.31 659.23
Uttar Pradesh 110.45 297.62 726.02
West Bengal 122.03 333.36 712.19
Special Category States
Arunachal Pradesh -- 343.75 798.76
Himachal Pradesh 158.51 386.23 980.2
Jammu & Kashmir 134.02 406.84 821.62
Manipur 133.25 305.59 663.5
Meghalaya -- 390.00 795.57
Mizoram 142.73 472.59 862.78
Nagaland -- 454.48 1259.59
Sikkim -- 321.12 787.2
Tripura -- 367.43 734.79
Uttarakhand -- -- 706.07
All India 125.13 328.18 700.33
Source: NSS 38th, 50th and 61st Rounds.
Selected indicators of human development for major states are
shown in Table 4.17. The life expectancy was reported high in the
138
states of Kerala, Haryana, Karnataka, Maharashtra, Punjab, Tamil
Nadu, West Bengal, Andhra Pradesh and Gujarat however, it was
reported low in the states of Uttar Pradesh, Assam, Madhya Pradesh,
Orissa and Bihar. Similarly, infant mortality rate was reported high in the
states of Madhya Pradesh, Orissa, Uttar Pradesh, Assam and
Rajasthan. The birth rate was reported high in the states of Uttar
Pradesh, Rajasthan, Madhya Pradesh, Bihar and Haryana.
Table: 4.17
Selected Indicators of Human Development for Major States
Major States Life Expectancy at Birth (2002-2006)
Infant Mortality Rate (Per 1000 live Births(
(2008)
Birth Rate (Per
1000) (2008)
Death Rate (Per
1000) (2008) Male Female Total Male Female Total
Andhra Pradesh
62.9 65.5 64.4 51 54 52 18.4 7.5
Assam 58.6 59.3 58.9 62 65 64 23.9 8.6
Bihar 62.2 60.4 61.6 53 58 56 28.9 7.3
Gujarat 62.9 65.2 64.1 49 51 50 22.6 6.9
Haryana 65.9 66.3 66.2 51 57 54 23.0 6.9
Karnataka 63.6 67.1 65.3 44 46 45 19.8 7.4
Kerala 71.4 76.3 74 10 13 12 14.6 6.6
Madhya Pradesh
58.1 57.8 58 68 72 70 28.0 8.6
Maharashtra 66.0 68.4 67.2 33 33 33 17.9 6.6
Orissa 59.5 59.6 59.6 68 70 69 21.4 9
Punjab 68.4 70.4 69.4 39 43 41 17.3 7.2
Rajasthan 61.5 62.3 62 60 65 63 27.5 6.8
Tamil Nadu 65.0 67.4 66.2 30 33 31 16.0 7.4
Uttar Pradesh 60.3 59.5 60 64 70 67 29.1 8.4
West Bengal 64.1 65.8 64.9 34 37 35 17.5 6.2
India 62.6 64.2 63.5 52 55 53 22.8 7.4
Source: Sample Registration System, Office of the Registrar General, India, Ministry of Home Affairs.
More than 1/4th population of the country lives below the poverty
line. Thus, more than 300 million persons were reported living below
139
poverty line in India. Poverty is found concentrated in the backward
states like Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh,
Rajasthan, Uttar Pradesh, Uttarakhand and Orissa. There has been
higher level of poverty in rural India as compared to urban areas.
However, there has been significant declined in the number of poor and
poverty level in the rural areas over the period of time. About 81 million
persons in urban areas were reported living below poverty line during
2004-2005. Importantly, Uttar Pradesh, Maharashtra, Madhya Pradesh,
Andhra Pradesh and Bihar account for larger share in urban poor. The
percentage of urban poor was recorded highest in Orissa (44.3 per
cent), Madhya Pradesh (42.1 per cent), Uttar Pradesh (30.6 per cent),
Bihar (34.6 per cent) and Maharashtra (32.2 per cent). Indian poverty is
predominant in the rural areas where more than three quarters of all
poor people reside, though there is wide variation in poverty across
different states. Moreover, progress in reducing poverty is also very
uneven across different states of the country. The state-wise numbers
of urban poor are shown in Table 4.18. Largest numbers of urban poor
were reported in Maharashtra followed by Uttar Pradesh, Madhya
Pradesh, Tamil Nadu, Karnataka, Andhra Pradesh and Rajasthan.
Table: 4.18
Population below Poverty Line by States (2004-2005)
States/UT Rural Urban Combined
No. of persons (Lakh)
% of Persons
No. of persons (Lakh)
% of Persons
No. of persons (Lakh)
% of Persons
Andhra Pradesh 64.70 11.2 61.40 28.0 126.10 15.8
Arunachal Pradesh 1.94 22.3 0.09 3.3 2.03 17.6
Assam 54.50 22.3 1.28 3.3 55.77 19.7
Bihar 336.72 42.1 32.42 34.6 369.15 41.4
Chhattisgarhi 71.50 40.8 19.47 41.2 90.96 40.9
Delhi 0.63 6.9 22.30 15.2 22.93 14.7
140
Goa 0.36 5.4 1.64 21.3 2.01 13.8
Gujarat 63.49 19.1 27.19 13.0 90.69 16.8
Haryana 21.49 13.6 10.60 15.1 32.10 14.0
Himachal Pradesh 6.14 10.7 0.22 3.4 6.36 10.0
Jammu & Kashmir 3.66 4.6 2.19 7.9 5.85 5.4
Jharkhand 103.19 46.3 13.20 20.2 116.39 40.3
Karnataka 75.05 20.8 63.83 32.6 138.89 25.0
Kerala 32.43 13.2 17.17 20.2 49.60 15.0
Madhya Pradesh 175.65 36.9 74.03 42.1 249.68 38.3
Maharashtra 171.13 29.6 146.25 32.2 317.38 30.7
Manipur 3.76 22.3 0.20 3.3 3.95 17.3
Meghalaya 4.36 22.3 0.16 3.3 4.52 18.5
Mizoram 1.02 22.3 0.16 3.3 1.18 12.6
Nagaland 3.87 22.3 0.12 3.3 3.99 19.0
Orissa 151.75 46.8 26.74 44.3 178.49 46.4
Punjab 15.12 9.1 6.50 7.1 21.63 8.4
Rajasthan 87.38 18.7 47.51 32.9 134.89 22.1
Sikkim 1.12 22.3 0.02 3.3 1.14 20.1
Tamil Nadu 76.50 22.8 69.13 22.2 145.62 22.5
Tripura 6.18 22.3 0.20 3.3 6.38 18.9
Uttar Pradesh 473.00 33.4 117.03 30.6 590.03 32.8
Uttarakhand 27.11 40.8 8.85 36.5 35.96 39.6
West Bengal 173.22 28.6 35.14 14.8 208.36 24.7
A & N Islands 0.60 22.9 0.32 22.2 0.92 22.6
Chandigarh 0.08 7.1 0.67 7.1 0.74 7.1
D & Nagar Haveli 0.68 39.8 0.15 19.1 0.84 33.2
Daman & Diu 0.07 5.4 0.14 21.2 0.21 10.5
Lakshadweep 0.06 13.3 0.06 20.2 0.11 16.0
Pondicherry 0.78 22.9 1.59 22.2 2.37 22.4
All India 2209.24 28.3 807.96 25.7 3017.20 27.5
Source: Planning Commission, Govt. of India, 2007
Incidence of poverty during 1983, 1993-94 and 2004-05 in India is
shown in Table 4.19. Though, the incidence of poverty has drastically
141
declined from 44.5 per cent in 1983 to 36 per cent during 1993-94 and
further to 27.5 per cent during 2004-05. However, there are certain
states where poverty is still concentrating. The states where incidence
of poverty during 2004-05 was recorded high include Orissa, Bihar,
Jharkhand, Madhya Pradesh, Uttarakhand and Chhattisgarh. The
significant declined of poverty during the period of 1983 to 2004-05 was
recorded significantly high in Assam, Delhi, Andhra Pradesh, Gujarat,
Kerala, Punjab, Tamil Nadu, West Bengal, Jammu & Kashmir and
North-Eastern states.
Table: 4.19
Incidence of Poverty in India
(In Per cent)
Non-Special Category States
1983 1993-94 2004-05
Andhra Pradesh 28.9 22.2 15.8
Assam 40.5 40.9 19.7
Bihar 62.2 55.0 41.4
Chhattisgarh -- -- 40.9
Delhi 26.2 14.7 14.7
Goa 18.9 14.9 13.8
Gujarat 32.8 24.2 16.8
Haryana 21.4 25.1 14.0
Jharkhand -- -- 40.3
Karnataka 38.2 33.2 25.0
Kerala 40.4 25.4 15.0
Madhya Pradesh 49.8 42.5 38.3
Maharashtra 43.4 36.9 30.7
Orissa 65.3 48.6 46.4
Punjab 16.2 11.8 4.4
142
Rajasthan 34.5 27.4 22.1
Tamil Nadu 51.7 35.0 22.5
Uttar Pradesh 47.1 40.9 32.8
West Bengal 54.9 35.7 24.7
Special Category States
Arunachal Pradesh 40.9 39.4 17.6
Himachal Pradesh 16.4 28.4 10.0
Jammu & Kashmir 24.2 25.2 5.4
Manipur 37.0 33.8 17.3
Meghalaya 38.8 37.9 18.5
Mizoram 36.0 25.7 12.6
Nagaland 39.3 37.9 19.0
Sikkim 39.7 41.4 20.1
Tripura 40.0 39.0 18.9
Uttarakhand -- -- 39.6
All India 44.5 36.0 27.5
Source: Planning Commission, Government of India.
The 11th Plan has visualized the inclusive growth with spatial
development of India. The plan outlines a comprehensive programme
for development infrastructure especially in rural areas and in the
remote and backward regions of country consistent with the
requirements of inclusive growth at 9 per cent per annum. The plan has
also made budgetary provisions for infrastructure development of
backward regions through Backward Regions Grant Fund, especial plan
for Bihar and Action Plan for the undivided KBK (Kalahandi – Bolangir –
Koraput districts of Orissa) which have only been protected at the 10th
Plan level. In view of the steep declined in public investment, Planning
Commission suggested that states should focus on providing the
necessary policy framework and supporting environment to attract
143
private sector investment (Planning Commission, 2008). Most of the
flagship programmes address the backwardness in terms of the
particular sector. The overwhelming shares of the relatively backward
States clearly show that the flagship programmes are a major
instrument to direct funds to areas which lack infrastructure.
The development of backward regions has been a major concern
of planners in India. However, prior to the Tenth Plan, the issue of
development of backward areas was approached as primarily one of
development of States through the formula for distribution of Central
Assistance which was weighted in favour of less developed States and
through Special Area Programmes such as Hill Area Development
Programme, Border Area Development Programme, Drought Prone
Area Programme, Tribal Sub-Plan and so on. The emphasis was on
backwardness in terms of economic performance, though the impact of
historical and social factors in economic matters was also recognized. It
was also observed that special development schemes should not be
mere palliatives but the potential for growth present in most backward
areas needs to be tapped if these schemes are to have an impact. It
has been decided to provide Rs. 5820 crore per annum during the
Eleventh Five Year Plan for the two components, that is, the Districts
Component and the Special Plans for Bihar and the Kalahandi-Bolangir-
Koraput (KBK) districts of Orissa. The total provision for BRGF during
the Eleventh Plan would be Rs. 29100 crore. Presently, 250 districts
from 27 states share covered under the scheme.
There is imperative need to reduce inter-state and intra-state
disparities in development. Major initiatives from the Planning
Commission are called for bridging the infrastructural gaps by mobilizing
massive public and private investments for the less developed areas;
restructuring the institutions for the management of infrastructure and
initiating reforms in governance. However, our experience with regard to
144
development planning in India shows that regional planning has failed to
ensure adequate development of backward regions within the
geographical regions and also within the larger states. In view of the
regional disparity, massive investment dose has been provided by
Planning Commission and also through fiscal transfers to the states.
Inter–State Analysis of FDI Inflows:
There are several factors which influence FDI flows in India. The
important factors are related to investment climate, economic
infrastructure and politico–legal environment. These factors have
influenced FDI attraction in several states of the country. There has
been comparatively more foreign investment in the states like Gujarat,
Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu and nominal
investment has been reported in the states where the problems related
to regular supply of electricity, communication and connectivity,
security, and investment climate are prevailing.
During 1991 to 2002, Uttar Pradesh attracted the FDI inflows in
the tune of Rs. 47,964 million which constitutes 1.69 per cent of total
FDI inflows in India. Out of total FDI approvals, Uttar Pradesh attracted
only 713 FDI approvals during the period which accounted for 4.85 per
cent. State–wise FDI investment is shown in Table 4.20.
Table: 4.20
State-wise Foreign Direct Investment
State Amount (Rs. Million) (Aug.1991 –
September 2002)
No. of Approvals (August 1991–
September 2002)
Percent of Total FDI Approved
Amount Number
Maharashtra 490797 3570 17.35 24.32
Delhi 338740 1674 11.96 11.40
Tamil Nadu 235443 1962 8.32 13.36
Karnataka 225632 1746 7.97 11.89
Gujarat 184623 1010 6.52 6.88
Andhra Pradesh 131049 901 4.63 6.13
145
Madhya Pradesh 92347 219 3.26 1.49
West Bengal 89068 561 3.14 3.84
Orissa 82292 136 2.91 0.92
Uttar Pradesh 47964 713 1.69 4.85
Haryana 35198 739 1.24 5.03
Rajasthan 30052 310 1.06 2.11
Punjab 19684 174 0.69 1.18
Kerala 15290 236 0.54 1.60
Pondicherry 12423 105 0.43 0.71
Himachal Pradesh 11739 93 0.41 0.63
Goa 9707 163 0.34 1.11
Bihar 7397 48 0.26 0.32
Chhattisgarh 6328 44 0.22 0.29
Chandigarh 1653 - 0.05 -
Jharkhand 1438 - 0.05 -
Uttaranchal 1257 - 0.04 -
Dadar Nagar Haveli 1240 - 0.04 -
Others 756392 273 26.74 1.86
Total 2827753 14677 100.00 100.00
Source: Ministry of Commerce & Industry, Government of India, Delhi, 2003
Maharashtra (17.35 per cent), Delhi (11.96 per cent), Tamil Nadu
(8.32 per cent), Karnataka (7.97 per cent) and Gujarat (6.52 per cent)
are the major states where more than half the FDI was invested. Uttar
Pradesh has almost negligible share in total FDI investment in India.
There is marked variance in the amount of FDI investment in various
states. Foreign investment in the state of Uttar Pradesh has been
reviewed over the period in view of the fact that the state is one of the
largest populated states, industrially backward and has favourable
government policy towards foreign direct investment, and a number of
NRIs living in various corners of the globe which may invest in the state.
Moreover, the researcher is also NRI of the state, therefore, it is felt that
foreign direct investment in the state of Uttar Pradesh is justified and is
called for. The liberalization of foreign direct investment policy and the
steady growth of the Indian economy contributed to a large increase in
FDI inflows during the Tenth Plan as seen in Table 4.21. There has
146
been phenomenal growth in FDI inflows during the Tenth Plan. During
2006-07, total FDI inflows reported to be $19531 million in India. As a
result of various rationalization measures, the FDI policy has become
progressively more liberal, transparent and investor friendly. A liberal
and transparent FDI policy has been put in place for industry, services
and infrastructure sectors under which FDI upto 100 per cent is
permitted in more sectors on the automatic route.
Table: 4.21
Foreign Investment Flows during Tenth Plan Period
(Value: US$ million)
Financial Year
(April-March)
Equity Reinvested earnings
Other capital
Total FDI
Inflows
%age growth
over previous FIPB Route/
RBI's Automatic
Equity capital of unincorporated
bodies
2002-03 2574 190 1833 438 5035 () 18
2003-04 2197 32 1460 633 4322 () 14
2004-05 3250 528 1904 369 6051 (+) 40
2005-05 5540 280 1676 226 7722 (+) 28
2006-07 15585 480 2936 530 19531 (+) 153
Source: DGCI&S.
Industrial investment during 1991 to 2007 was reported highest in
high income states (52.01 per cent) while only 17.47 per cent industrial
investment was reported in low income states. Interestingly, investment
per unit was recorded low in high income states and high in medium
income states. Employment per unit was also reported significantly high
in low income states as compared to high income states. Capital labour
ratio was found high in middle income states and low in low income
states. Thus, there are a few states where industrial investment in terms
of foreign direct investment is found concentrated due to conducive
investment climate and policy regime (Table 4.22).
147
Table: 4.22
Industrial Investment Flows in India During 1991-2007
Sh
are
Of
Inv
es
tmen
t (%
)
Inv
es
tme
nt
Pe
r U
nit
(M
illi
on
Ru
pe
es
Pe
r U
nit
)
Em
plo
ym
en
t P
er
Un
it (
No
)
Ca
pit
al
La
bo
r R
ati
o (
Milli
on
Or
Te
n L
ak
h R
up
ee
s P
er
Em
plo
yee
)
Inv
es
tme
nt
Pe
r U
nit
(R
ela
tive
To
All
In
dia
Av
era
ge
10
0)
Em
plo
ym
en
t P
er
Un
it (
Re
lati
ve
To
All
In
dia
Av
era
ge
)
Ca
pit
al
La
bo
r R
ati
o (
Re
lati
ve
To
All
In
dia
Av
era
ge
(10
0))
Chhattisgarh 0.46 190.72 128.67 1.48 65.7 60.0 109.5
Orissa 4.42 1425.33 312.14 4.57 491.1 145.6 337.4
Uttar Pradesh
7.95 271.45 280.54 0.97 93.5 130.8 71.5
Jharkhand 0.29 210.41 123.31 1.71 72.5 57.5 126.1
Madhya Pradesh
2.58 220.23 210.03 1.05 75.9 97.9 77.5
Rajasthan 1.33 167.83 158.50 1.06 57.8 73.9 78.2
Bihar 1.19 431.71 402.08 1.07 148.8 187.5 79.3
Low Income
States (LIS)
17.47 311.05 247.37 1.26 107.2 115.4 92.9
Himachal Pradesh
0.40 145.11 184.96 0.78 50.0 86.3 58.0
Assam 1.98 1915.49 364.56 5.25 660.0 170.0 388.2
Meghalaya 0.01 29.02 42.89 0.68 10.0 20.0 50.0
NESCS 1.99 533.57 211.15 2.53 183.8 98.5 186.7
Andhra Pradesh
11.24 283.66 178.08 1.59 97.7 83.0 117.7
Karnataka 8.41 393.68 286.73 1.37 135.6 133.7 101.4
West Bengal 3.38 408.74 203.72 2.01 140.8 95.0 148.2
Kerala 2.33 397.78 204.35 1.95 137.1 95.3 143.8
MIS 25.36 337.62 213.85 1.58 116.3 99.7 116.7
Gujarat 17.36 466.51 162.22 2.88 160.7 75.6 212.5
Maharashtra 15.18 319.25 226.72 1.41 110.0 105.7 104.0
Tamil Nadu 10.43 156.84 176.56 0.89 54.0 82.3 65.6
Punjab 5.35 267.71 312.42 0.86 92.2 145.7 63.3
Haryana 3.55 180.76 265.61 0.68 62.3 123.9 50.3
Goa 0.14 45.15 92.93 0.49 15.6 43.3 35.9
HIS 52.01 268.11 207.78 1.29 92.4 96.9 95.3
Union Territories
1.55 146.56 152.26 0.96 50.5 71.0 71.1
All India 100.00 290.23 214.44 1.35 100.0 100.0 100.0
Source: BIA, EPW, July 28, 2007
148
Industrial investment is still concentrated in a few districts where
investment climate is more conducive. A comparison of top industrial
districts and their investment shares in pre-and post-reform period is
shown in Table 4.23. However, in the post-reform period, the share of
investment in top 10 districts as well as top 25 districts has slightly
saturated.
Table: 4.23
Top Industrial Districts and Their Investment Shares All Industry
Pre-Reform Post-Reform
1 Greater Bombay MAH 8.23 Bharuch GUJ 4.29
2 Vadodara GUJ 3.9 Surat GUJ 4.28
3 Lucknow UP 3.71 Jamnagar GUJ 3.55
4 Vishakhapatnam AP 2.93 Chengaianna TN 3.45
5 Barddhaman WB 2.74 Raigarh MAH 2.82
6 Madras TN 2.48 Greater Bombay MAH 2.75
7 Pune MAH 2.34 DakshinKannad KAR 2.57
8 Hyderabad AP 2.31 Vishakhapatnam AP 2.06
9 PurbiSinghbhum BIH 2.26 South Arcot TN 2
10 Patiala PUN 1.81 Ratnagiri MAH 1.8
Top 10 Total 32.71 Top 10 Total 29.58
11 Raigarh MAH 1.8 Ghaziabad UP 1.75
12 Bangalore KAR 1.79 Bhatinda PUN 1.68
13 Jabalpur MP 1.67 Pune MAH 1.61
14 Surat GUJ 1.66 Thane MAH 1.61
15 Chengaianna TN 1.52 Barddhaman WB 1.52
16 Sundargarh ORI 1.5 Bellary KAR 1.39
17 N. 24 Parganas WB 1.5 Ganjam ORI 1.36
18 Dhanbad BIH 1.44 Medinipur WB 1.35
19 Sonbhadra UP 1.38 Vadodara GUJ 1.34
20 Dhenkanal ORI 1.36 Sagar MP 1.15
21 Thane MAH 1.33 Cuttack ORI 1.11
22 Bharuch GUJ 1.2 Dibrugarh ASS 1.04
23 Jaipur RAJ 1.17 PurbiSinghbhum BIH 1.04
24 Durg MP 1.02 Raipur MP 1.03
25 Ahmadabad GUJ 0.9 Koraput ORI 0.98
Top 25 Total 53.95 Top 25 Total 49.53
Source: Chakravorty (2003)
149
Foreign investment comprising foreign direct investment and
portfolio investment on net basis was 14.8 billion dollar in 2006-07 and
45.0 billion dollar in 2007-08. As a proportion of total capital flows, net
foreign investment stood at 41.6 per cent in 2007-08. However, its
share declined to 26.4 per cent during 2008-09 on account of foreign
investment outflows as a result of global financial crisis. As per
UNCTAD report, 2008, India achieved a growth of 85.1 per cent in FDI
inflows which was the highest at the global level. The total flows
increased from $25.1 billion in 2007 to $46.1 billion in 2008. This is
despite 14.5 per cent decline in global FDI inflows. India also ranked 9th
in the global FDI inflows during 2008 (Table 4.24).
Table: 4.24
Comparative Status of Foreign Direct Investment (US$ Billions)
Rank in 2008 Countries 2007 2008 Growth Rate (%)
1 USA 232.8 320.9 37.8
2 France 158.0 126.1 -20.2
3 UK 196.4 96.8 -50.7
4 Belgium 70.0 94.2 34.6
5 China 83.5 92.4 10.6
6 Russia 52.5 70.3 34.0
7 Spain 68.8 65.5 -4.8
8 Hong Kong China
59.9 63.0 5.2
9 India 25.1 46.5 85.1
10 Brazil 34.6 45.1 30.3
11 Sweden 22.1 40.4 83.1
World 1940.9 1658.5 -14.5
Source: World Investment Report, 2008.
150
Sector-wise FDI inflows are shown in Table 4.25. The sectoral
shares of FDI inflows have fluctuated significantly in the recent years.
Apart from financial and non-financial services, telecommunications,
housing and real estate, and construction have emerged as the most
significant recipients. The shares of petroleum and natural gas and
power sector have been on the increase while that of metallurgical
industries came down sharply. The services sector has emerged with
the lion's share in FDI inflows (40 per cent) while manufacturing sector
constituted 35 per cent share in FDI inflows. Infrastructure sector
constitute about 18 per cent share in FDI inflows.
Table: 4.25
Sectors Attracting Highest FDI Flows
(Rs. Crore)
Sector 2007-08 2008-09 Change (per cent) in 2008-09
Services 26589.3 28410.7 6.9
Housing & real estate 8749.3 12621.2 44.3
Telecommunications 5102.6 11726.9 129.8
Construction 6989.3 8791.9 25.8
Computer Software & Hardware 5623.3 7328.5 30.3
Automobiles 2697.0 5211.7 93.2
Power 3877.5 4381.8 13.0
Metallurgical industries 4686.0 4156.7 -11.3
Information & Broadcasting 1290.3 3492.4 170.7
Chemicals (except fertilizers) 917.6 3427.1 273.5
Grand Total all FDI equity flows 98664 122919 24.6
Source: Department of Industrial Policy and Promotion.
In spite of the fact that India is a strategic location with access to
a vast domestic and South Asian market, its share in world‟s total flow
of direct investment to developing countries is a meager 1.5 per cent.
151
This calls for further liberalization of norms for investment by present
and prospective foreign entrepreneurs. Attracting foreign capital
requires an investor–friendly environment. It underlines the need for
efficient and adequate infrastructural facilities, availability of skilled and
semi–skilled labour force, business–friendly public administration and
moderate rate of taxation. A disquieting trend has been noticed in
recent years that a sizeable amount of FDI is used for acquiring Indian
companies rather than creating new productive assets. This has
involved only a change of ownership of the existing assets without
adding to the productive capacity of the economy. This tendency needs
to be discouraged. FDI becomes meaningful only when new capacities
are created in the economy or the existing capacities are made more
efficient and competitive. Though economic reforms welcoming foreign
capital were introduced in the 1990s, it does not seem so far to be really
evident in our overall attitude. There is a lingering perception abroad
that foreign investors are still looked at with some suspicion. The made
in India level is not being conceived by the world as synonymous with
quality. The biggest barrier for India is at the first, screening stage itself
in the action cycle. Often India loses out at the screening stage itself.
This is primarily because we do not get across effectively to the
decision making board room levels of corporate entities where a final
decision is taken. Our promotional effort is quite often a general nature
and not corporate specific. India is a multi–cultural society and a large
number of multinational companies do not understand the diversity and
the multiplural nature of the society and the different stake holders in
this country. On the other hand, China is viewed a more business
oriented, its decision–making is faster and has more FDI friendly
policies.