The latest data on state-wise per capita income in India reveals a widening gap. Richer states are growing faster while poorer states fall further behind. Gujarat’s per capita income rose from 138% of the national average in 2011-12 to 180% in 2023-24. In contrast, Bihar’s share declined from 34% to 29.6%. This shows a stark divergence in economic fortunes across state of Indias.
Current Trends in Per Capita Income
The richer states mainly lie south of the Vindhyas and in western India. These include Karnataka, Tamil Nadu, Telangana, Kerala, Andhra Pradesh, Gujarat, and Maharashtra. Their per capita income growth rates exceed the national average of 4.75% annually between 2011-12 and 2024-25. Gujarat leads with 7%, followed by Karnataka (6.6%) and Tamil Nadu (5.9%). Bihar and other poorer states lag behind .
Data Limitations and Methodology
Per capita income is calculated using net state domestic product divided by population estimates from the 2011 Census. State-level population estimates do not fully capture migration and fertility changes. This may affect accuracy. Despite this, the broad trend of divergence is clear and consistent over the years.
Role of Manufacturing and Investment
The growth of richer states is fuelled by manufacturing expansion. Early industrialisation gave them an edge. They attract most foreign and domestic investments. This concentration of investment creates agglomeration benefits like skilled labour availability and supplier networks. Gujarat’s business-friendly environment has helped it overtake Maharashtra in manufacturing output and per capita income.
Competition Among Rich States
Despite their advantages, richer states compete fiercely for investments. Karnataka, Tamil Nadu, and Telangana have attracted major players like Foxconn. Andhra Pradesh offers policy alignment with the central government and aims to become a high-tech hub by 2047. It has signed agreements with global firms like Google for AI data centres.
Lessons from Richer States
Richer states succeed by attracting labour-intensive manufacturing. Tamil Nadu employs 40% of India’s factory-working women, benefiting from migrant labour. A business-friendly environment with good infrastructure and law and order is crucial. Poorer states struggle due to weaker institutions and infrastructure.
Emerging Growth in Odisha
Odisha is an example of a poorer state improving its economic performance. It has attracted large investments in steel by leveraging its mineral resources. This shows the potential for laggard states to catch up with appropriate policies and investments.
Policy Implications for Inclusive Growth
To reduce regional disparities, national policies must incentivise investment dispersal to poorer states. Improving infrastructure, governance, and labour markets in these areas is vital. Expansion of manufacturing and industrialisation remains the key to balanced growth.
Questions for UPSC:
- Critically analyse the factors behind regional economic disparities in India with examples from richer and poorer states.
- Comment on the role of manufacturing in accelerating economic growth and reducing poverty in state of Indias.
- Explain the concept of agglomeration economies and how it influences investment patterns in state of Indias.
- What are the challenges faced by poorer state of Indias in attracting investments? How can policy reforms address these issues?
