Rajeev Khosla
SDuring November 2024, the Prime Minister’s Economic Advisory Committee released a study titled ‘Economic Performance of Indian States: 1960-61 to 2023-24’. It presents a comparative analysis of the economic performance of the Indian states during the last six and a half decades. It analyzes each state’s share in national GDP (domestic product) and per capita income to assess the economic status of the states.
The study highlights that there have been significant changes in the economic performance of states since 1991 when the policies of liberalization, privatization and globalization were introduced in India. Average performing states before 1991 such as Karnataka and Andhra Pradesh later emerged as top performers, although Maharashtra and Gujarat continued to outperform. The performance of Punjab and West Bengal declined substantially after 1991. A deeper analysis of this study reveals that the southern states of Karnataka, Andhra Pradesh (including Telangana), Kerala and Tamil Nadu, which did not contribute much to India’s GDP before liberalisation, will contribute significantly to India’s GDP in 2023-24 after liberalisation. Now 30% are contributing. Similarly, among the western states, Maharashtra and Gujarat have continued to perform well. In 2023-24, Maharashtra had the highest (13.3%) share in domestic production among all states in India. Similarly, Gujarat’s share in India’s GDP, which was 5.8% in 1960-61, has increased to 8.1% in 2023-24. Among the northern states, Delhi and Haryana have made a bet.
After 1991, the economy of Punjab recorded a continuous decline (Table). Punjab’s share in India’s GDP was 3.2% in 1960-61, which rose to 4.3% by 1990-91; It will continue to decline to 2.4% in 2023-24. If we leave out the smaller states of the North-East and Jammu and Kashmir, the performance of Punjab has been recorded as the lowest compared to other large states of India. Among the eastern states, West Bengal recorded the largest decline. West Bengal’s share of India’s GDP in 1960-61 was 10.5% (third largest economy) which declined to only 5.6% in 2023-24. The economies of states located in the center of India like Uttar Pradesh and Madhya Pradesh have also witnessed periodic ups and downs. These trends indicate that the policies of liberalization, privatization and globalization have had varying impacts on the states of India.
Even when it comes to per capita income, since 1991 the performance of the southern states of India has been far higher than the national average. These southern states were very backward in terms of per capita income in the pre-liberalisation period. The per capita income of Telangana, Karnataka, Tamil Nadu and Kerala in 2023-24 was about 1.5 to 2 times the India average per capita income. In the western states, Gujarat and Maharashtra have consistently lagged behind the average national per capita income since the 1960s. In 2023-24, Gujarat has also surpassed Maharashtra in per capita income. In contrast to the southern and western regions, the northern states of India present a dismal picture. Although the performance of Delhi and Haryana has been somewhat satisfactory, the per capita income of Punjab has weakened further since 1991 (Table). These facts are the result of lack of industrial development in Punjab, migration of existing industries out of Punjab, dependence of a large number of Punjabis on agriculture and continuously decreasing employment opportunities.
In eastern India, West Bengal and Bihar have performed poorly in terms of per capita income, although Jharkhand, which emerged from Bihar, has improved its performance since coming into existence. In eastern India, only Odisha has seen an increase in per capita income since 1990-91. Madhya Pradesh, located in the center of India, has performed well in per capita income since 2010, reversing its five-decade decline. This analysis shows that after the liberalization, privatization and globalization of 1991, Punjab and West Bengal have emerged as a concern on the economic front.
Broadly speaking, there is one similarity between the economic problems of Punjab and West Bengal and that is the declining trend towards industrialization which has destroyed the traditional industries of both the states. Basically, since the late 1970s, the growth brought about by the Green Revolution began to decline in Punjab mainly due to low investment in industrialization, long-term dependence on the agricultural sector developed by the Green Revolution, militancy of the 1980s and corruption Similarly, in the context of West Bengal, although Calcutta emerged as the main industrialization leader along with Mumbai and Madras after independence, West Bengal’s economic health has steadily declined over the past two decades.
High dependence on agriculture in Punjab and non-establishment of new industries in West Bengal as well as tensions between the Center and the states, weakening of trade unions, lack of construction of infrastructure by the government and rampant increase in debts also contributed to both of these. affected the economic performance of states. Experts believe that to get rid of this economic quagmire both the states should adopt proactive measures to revive their traditional industries, promote innovative industries and attract new investments.
In the context of Punjab, the development of industries should begin with agro-based industries. Experts believe that to save the falling economic level of Punjab, only agriculture-based industries are now being supported. Latent unemployment can be eliminated by employing educated and skilled youth from the agricultural sector of Punjab in agro-based industries, which will increase both production and income. With good yield, Punjab can become a hub for food and fruit based industries, dairy products and other agro based industries. By utilizing its agricultural potential in agro-based industries, Punjab can shift towards a dominant agro-based industry-economy. Thus, Punjab can be directed towards a bright economic future.
As far as West Bengal is concerned, the state government needs to invest in infrastructure development to modernize traditional industries as well as industrialization process, attract new investment and support industrial growth; For example, investment in information technology, biotechnology and solar energy sectors should be encouraged. There is a need for the government to encourage industrialists to work in favor of workers as well as streamline simple procedures for setting up businesses so as to attract more investment by encouraging entrepreneurship.
It is quite clear that there is no single formula for good economic performance of Indian states. The role of the state governments is very important for the good performance of the states, which should make their policies in such a way that development works can be carried out on a war footing in the states.
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