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How the South outpaced North India
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Context
Recent analysis from the Economic Advisory Council to the Prime Minister highlights significant shifts in economic contributions among Indian states over the past six decades. This scrutiny reveals the decline of historically dominant states and the rise of southern and western states as economic leaders, raising concerns about fiscal equity and federal dynamics.
Decline of Traditional Powerhouses
- Diminishing Contributions of Key States: States like Uttar Pradesh, West Bengal, and Punjab have seen a marked decline in their contributions to India’s GDP. For instance, Uttar Pradesh’s share fell from 14.4% in 1960-61 to 12.6% in 1990-91, with further declines post-bifurcation.
- West Bengal’s Economic Regression: West Bengal’s GDP share plummeted from 10.5% to 5.6%, with its per capita income now falling below the national average. This represents a significant economic regression for a state once considered a leader.
- Punjab’s Post-Green Revolution Slump: Punjab, which previously benefitted from the Green Revolution, has seen its GDP contribution decline from 4.4% in 1970-71 to 2.4% in 2023-24, indicating a substantial loss of economic vitality.
Rise of Southern and Western States
- Emergence of Southern States: In contrast, the southern states have capitalized on economic reforms post-1991, contributing roughly 30% to India’s GDP in 2023-24, demonstrating their rise as economic powerhouses through robust manufacturing and services sectors.
- Declining Fiscal Share Despite Growth: Despite their economic performance, southern states have experienced a decline in their share of the divisible tax pool, from 21.1% (2000-2005) to 15.8% (2021-2026), creating tensions in Centre-state financial relations.
- Concerns Over Political Representation: The impending delimitation exercise raises fears among southern states of reduced representation in the Lok Sabha, potentially exacerbating existing challenges in federal relations and resource distribution.
Practice Question
Q. Analyze the economic transformations of Indian states over the past six decades, focusing on the decline of traditional powerhouses and the rise of southern and western states, while assessing the implications for federal dynamics and fiscal equity in India.
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