EAC-PM paper

The recent report by the Economic Advisory Council to the Prime Minister (EAC-PM) evaluates the economic trajectories of various Indian states post-liberalization. It emphasizes the significant economic growth of southern states and contrasts their progress with the stagnation or decline seen in some other regions, particularly West Bengal and certain northern states.

Key Highlights of the Report

• Economic Surge in Southern States
  • Southern states, namely Karnataka, Andhra Pradesh, Telangana, Kerala, and Tamil Nadu, now collectively contribute to 30% of India’s GDP.
  • These states exhibit higher-than-average per capita incomes, indicating robust economic performance since liberalization.
    • Before 1991, southern states did not show expectational performance. However, since the economic liberalization of 1991, the southern states have emerged as the leading performers.
  • Decline of West Bengal
    • West Bengal has experienced a notable decline in its GDP contribution, from 10.5% in 1960-61 to just 5.6% currently.
    • The state’s per capita income has plummeted from 127.5% of the national average to 83.7%, now trailing behind states like Rajasthan and Odisha.
    • Despite historical advantages, West Bengal's policies may have hindered its growth, marking it as an exception among maritime states, which have generally prospered.
  • Performance of Other Regions
    • While Bihar’s economic position has stabilized, it still lags behind in growth compared to other states. Conversely, Odisha has shown significant improvements, shedding its previous reputation as a laggard.
    • Maharashtra continues to be India’s largest contributor to GDP, though its share has decreased from over 15% to 13.3%. Despite this, its per capita income remains high at 150.7% of the national average.
  • Regional Disparities
    • In the north, Haryana and Delhi have consistently performed well, with Delhi having one of the highest per capita incomes in the country.
    • A stark contrast is noted between Punjab and Haryana, where Punjab has seen a decline in per capita income post-2000, while Haryana has surged ahead.
    • Following the Green Revolution, both states experienced a boom in agriculture, leading to increases in their shares. Punjab’s share rose to 4.4 per cent and Haryana’s to 2.7 per cent by 1970-71.
      • However, Punjab’s share plateaued around 4.3-4.4 per cent over the next two decades. It began to decline from 1990-91 onwards and reached 2.4 per cent in 2023-24.
      • In contrast, Haryana’s share continued to rise, although it has remained relatively stable since 2010-11. Haryana’s share in India’s GDP was 3.6 per cent in 2023- 24. It is likely that the success of Gurugram accounts for some part of Haryana’s increasing share.
    • This raises an interesting question: Did Punjab’s focus on agriculture contribute to a form of ‘Dutch disease’, hindering its transition to industrialisation?” asked the paper.
      • In economics, ‘Dutch disease’ is the apparent causal relationship between the increase in the economic development of a specific sector and a decline in other sectors.