There has been a growing realisation of the need to accelerate economic growth at the state level to take the Indian economy to a higher growth path. At NITI Aayog’s ninth meeting of the governing council on July 27, Narendra Modi observed that states could play an active role in achieving Viksit Bharat by 2047 .
Even earlier, at NITI Aayog’s governing council meeting on June 15, 2019, the PM had appealed to the states to recognise their core competence and work towards making India a $5-trillion economy.
Despite this repeated emphasis at the top on the states’ economic performance, public discourse on it has been limited. The critical questions of how states have performed over time and which states should be targeted for achieving overall economic goals beg answers. Here is an attempt to address these questions within the timeframe 2011-12 to 2021-22.
Size of the economy
In terms of the size of the economy measured through Gross State Domestic Product (GSDP) at constant (2011-12) prices, Maharashtra emerged as the largest state economy during 2011-12 to 2021-22 by contributing to 14.38 percent of the GSDP of all states, followed by Tamil Nadu (8.75 percent), Gujarat (8.30 percent), Uttar Pradesh (8.12 percent), Karnataka (7.69 percent), West Bengal (5.46 percent), Rajasthan (4.89 percent), Andhra Pradesh (4.47 percent), Telangana (4.27 percent), and Delhi (4.09 percent). Between them, these states accounted for 70.41 percent of the total.
The combined contribution of the next 10 states was 26.43 percent, with Kerala topping the list with a 3.99 percent share, followed by Madhya Pradesh (3.86 percent), Haryana (3.70 percent), Punjab (2.95 percent), Odisha (2.75 percent), and Bihar (2.72 percent). The top 20 states account for 97 percent of India’s GDP, indicating that much of India’s growth potential is concentrated here. Therefore, the focus of economic policy strategies should be majorly on these states.
Development status
Among the top 10 state economies in size, Delhi emerged as the most developed state, with an average per capita income (at constant 2011-12 prices) of Rs 2,29,697 during 2011-12 to 2021-22, followed by Gujarat (Rs 1,30,705), Karnataka (Rs 1,27,232), Maharashtra (Rs 1,24,736), Tamil Nadu (Rs 1,23,320), Telangana (Rs 1,22,324), and Andhra Pradesh (Rs 92,543). Except for Andhra Pradesh, the per capita income of all states is above the all-state average of Rs 1,00,762.
Uttar Pradesh, West Bengal and Rajasthan were the bottom performers in this category, with an average per capita income of Rs 38,334, Rs 60,556, and Rs 68,991, respectively.
Among the next 10 state economies, Haryana is the richest with an average of Rs 1,43,238, followed by Uttarakhand (Rs 1,30,963), Kerala (Rs 1,25,928) and Punjab (Rs 1,04,156). The least developed states in this category are Bihar (Rs 25,507), Jharkhand (Rs 49,403), Madhya Pradesh (Rs 50,771) and Assam (Rs 52,828).
These trends suggest that to realise our economic goals, more focused policy interventions are needed to increase the per capita income of laggard states, namely Bihar, Uttar Pradesh, Jharkhand, Madhya Pradesh, Assam, West Bengal, Odisha, Chhattisgarh, and Rajasthan.
Economic growth
Among the top 10 state economies in size, Gujarat is the fastest-growing state with a GSDP growth rate of 8.51 percent, followed by Karnataka (7.67 percent), Telangana (7.08 percent), Andhra Pradesh (6.96 percent), and Tamil Nadu (6.18 percent). The bottom growth performers here are Maharashtra (due to high base effect) and West Bengal, with a growth rate of 4.77 percent and 4.39 percent respectively.
Delhi (5.85 percent), Uttar Pradesh (5.38 percent), and Rajasthan (5.30 percent) emerged as the medium growth performers.
Among the next 10 economies, Haryana (6.88 percent), Assam (6.74 percent), Madhya Pradesh (6.72 percent), and Odisha (6.72 percent) are the fastest-growing. The medium performers in this category are Chhattisgarh, Uttarakhand, Bihar, and Punjab, with over a 5 percent growth rate. Jharkhand (4.82 percent) and Kerala (4.70 percent)were the bottom growth performers.
Northeastern states have emerged as a new economic growth powerhouse. Five of the eight states in this region have achieved impressive and above-all-state average (6.02 percent) economic growth rate. Mizoram recorded a GSDP growth rate of 10.13 percent from 2011-12 to 2021-22, the highest among all the states, followed by Tripura (7.73 percent), Sikkim (7.14 percent), Assam (6.74 percent) and Arunachal Pradesh (6.16 percent).
The growth performance of Northeastern states suggests the renewed emphasis on tapping their growth potential through ‘Act Northeast’ policies is working on the ground.
The growth performance of the states suggests that to achieve the 8 percent economic growth per annum required to reach the goal of a $5 trillion economy, concrete efforts must be made to utilise the growth potential of Delhi, Uttar Pradesh, Rajasthan, Chhattisgarh, Uttarakhand, Bihar, Punjab, West Bengal, Kerala, and Jharkhand.
At the eighth meeting of the NITI Aayog governing council on May 27, 2023, the PM emphasised that to realise Viksit Bharat, the Centre and states would have to work as ‘Team India’. It is high time this intent is put into practice, focusing on states identified in this assessment.
(Views are personal)
Sthanu R Nair
Professor of economics
Indian Institute of Management Kozhikode