Introduction

The Economic Advisory Council to the Prime Minister (EAC-PM) recently released a comprehensive report titled ‘Relative Economic Performance of Indian States: 1960-61 to 2023-24’. The report provides an in-depth analysis of the economic trajectory of Indian states over several decades, highlighting significant disparities in growth and development across regions.

The EAC-PM report brings to the forefront critical insights regarding the evolving economic landscape of Indian states. With Southern states emerging as dominant contributors to the nation’s GDP and others, like West Bengal, witnessing a decline, the report underscores the necessity for focused policy interventions to bridge regional disparities.

Key Findings of the EAC-PM Report:

1. Economic Performance:

• Southern States’ Growth: Southern states such as Karnataka, Andhra Pradesh, Telangana, Kerala, and Tamil Nadu have significantly advanced, contributing 30% to India’s GDP by March 2024. Their growth accelerated particularly after the economic liberalization of the 1990s, with substantial progress in technology, services, and industrial sectors.
• West Bengal’s Decline: Once a key economic player, West Bengal’s share of GDP has declined from 10.5% in 1960-61 to 5.6% in 2024. Its per capita income has also dipped to 83.7% of the national average, reflecting political instability, policy stagnation, and migration of skilled talent as primary reasons for its economic downturn.
• Maharashtra’s Dominance: Maharashtra continues to be India’s largest GDP contributor at 13.3%, although its share has reduced slightly from over 15% historically.
• The Central Region’s Struggles and Turnaround
  • Uttar Pradesh, the largest economic powerhouse in the 1960s, experienced a significant decline in its share of India’s GDP, from 14.4% in 1960-61 to 9.5% in 2023-24.
  • Similarly, Madhya Pradesh saw a prolonged period of decline before rebounding after 2010. By 2023-24, Madhya Pradesh’s per capita income had increased to 77.4% of the national average, showing a marked turnaround.
• North-Eastern Success Story: Sikkim’s Remarkable Growth
• Among the north-eastern states, Sikkim stands out for its incredible rise in per capita income.
• In 1980-81, Sikkim’s per capita income was below the national average, but by 2023-24, it had surged to 320% of the national average.
• This remarkable growth has positioned Sikkim as the top state in terms of per capita income, surpassing even traditionally affluent states.

2. Per Capita Income:

• High-income States: Delhi, Telangana, Karnataka, and Haryana have some of the highest relative per capita incomes. Delhi’s per capita income is at 250.8% of the national average.
• Notable Performers: Gujarat and Maharashtra have maintained consistently high per capita incomes since the 1960s, with figures of 160.7% and 150.7% of the national average, respectively.
• Rising Economies: Odisha has shown impressive improvement, with per capita income increasing from 55.8% in 2000-01 to 88.5% in 2023-24. Smaller states like Sikkim and Goa have also emerged as India’s richest in terms of per capita income.
• Punjab vs. Haryana: Punjab’s stagnation in economic growth has reduced its per capita income to 106% of the national average, while neighboring Haryana has surged to 176.8%.

3. Challenges for the Poorest States:

• States like Uttar Pradesh and Bihar continue to struggle economically. Despite marginal improvements in states like Odisha, Bihar’s development has been far slower, contributing only 4.3% to India’s GDP.

Reasons for Growth in Western and Southern States

1. Robust Industrial Base: Gujarat and Maharashtra have built a strong manufacturing base across diverse sectors such as textiles, chemicals, and engineering. Their investment-friendly environments have attracted substantial domestic and foreign investments.
2. Thriving Service Sector: Southern states, especially Karnataka and Tamil Nadu, have capitalized on rapid urbanization and improved infrastructure. With a focus on education and skill development, these states have become hubs for IT and services.
3. Agricultural Advancements: States like Maharashtra and Kerala have adopted sustainable agricultural practices such as organic farming and crop diversification, enhancing agricultural productivity and economic stability.
4. Strong Connectivity: Both Western and Southern regions boast well-developed transportation and logistics networks. Gujarat’s ports and Tamil Nadu’s highways have enabled these states to become central players in trade, which has fueled their economic growth.

 Measures to Enhance Economic Performance Across States

1. Decentralised Planning and Governance: Empowering local governments to create region-specific development plans can foster inclusivity and accelerate regional growth. This would involve integrating local communities into decision-making processes to ensure that regional challenges are effectively addressed.
2. Infrastructure Development: Investment in infrastructure—such as roads, railways, ports, and digital connectivity—through Public-Private Partnerships (PPP) can enhance trade, mobility, and overall economic performance. Ensuring efficient execution and resource allocation is crucial.
3. Sectoral Focus and Diversification: Agricultural productivity can be improved through the adoption of technology and better irrigation systems. At the same time, state-specific policies should promote manufacturing (e.g., textiles, electronics) and services (e.g., IT, tourism) based on regional strengths.
4. Skill Development and Human Capital: States must implement vocational training programs tailored to industry needs. Improving the quality of education, particularly in critical thinking and higher education access, will foster a more capable and productive workforce.
5. Innovation and Entrepreneurship: Promoting a culture of innovation through the support of startups and collaboration between academia, industry, and government will lead to technological advancements and economic growth.
6. Digital Transformation: Digital solutions can enhance governance, ensuring transparency and efficiency. Expanding digital literacy programs will also equip citizens with the necessary skills to participate in a digitally-driven economy.

Conclusion

The economic disparities between states in India highlight the need for more inclusive growth strategies. The success of Western and Southern states can be attributed to robust industrial bases, thriving service sectors, and well-implemented government policies. However, addressing regional disparities and fostering collaboration between states will be key to sustaining this momentum. By focusing on decentralization, skill development, and infrastructure enhancement, India can continue its journey towards becoming a USD 7 trillion economy by 2030.