Stylized facts about regional disparities of growth in India

growth-2india-chart.gifThe latest IMF survey summarized the working paper ‘Mind the Gap - Is Economic Growth in India Leaving Some States Behind?’ in which the author examines how economic growth has varied across India's states. The following five are given as stylized facts about growth in India.

1. The gap between in income levels across states is widening.

2. Richer and faster-growing states are generally better at reducing poverty.

3. Poor and slower-growing states generated fewer private sector jobs.

4. Capital and labor flows do little to address imbalances in economic activity and
income across states.

5. Growth has been the most volatile in the poorest states.

Some more statistics;

-Between 2006 and 2051, about 60 percent of the projected 620 million increase in the Indian population is expected to occur in three of its poorest states (Bihar, Madhya Pradesh, and Uttar Pradesh)

- The ratio of average per capita income in India’s richest state, Punjab, to that in its poorest state, Bihar, rose to 4.5 percent in 2004, from 3.4 percent in 1970. The pace of growth in real per capita income in India’s fastest-growing states—just over 3 percent a year—has been more than twice as fast as that in the slower-growing poor states.

- On average, richer states have been about 50 percent more effective in reducing poverty, for each percentage point of growth, than poorer states. The pace of job creation in middle- and high-income states has far outstripped that in poorer states. India’s poorest and most populous states account for about 40 percent of the population but capture only one-fourth of jobs in the organized sector.

- About 55 percent of outstanding bank loans in India in FY2004/05 were to borrowers in the five richest states, whereas borrowers in the five poorest states accounted for a mere 15 percent. Moreover, over half of the foreign direct investment inflows into India in recent years have gone to five largely prosperous states.

- Only 6 percent of migration in rural areas and 20 percent of migration in urban areas in recent years has occurred across state borders.

- Take, for example, one of India’s richest and fastest-growing states, Maharashtra (which includes the financial capital of India, Mumbai). It was less successful in translating its growth into jobs and poverty reduction over the past three decades than Rajasthan, which grew much more slowly than the national average (see table).

- Using district-level data, Abhijit Banerjee and Lakshmi Iyer found that areas in which proprietary land rights were historically given to landlords had significantly lower agricultural investment and productivity after independence than areas in which these rights were given to cultivators.

For comment; Why is that female literary is not found to have a significant exogenous impact on states’ growth performance (coefficients are in fact negative)?

Related links;

Economic Growth in South Asia- a recent report from World Bank

Reports on India from Planning Commission

Indian States Database

Water in India; The cost of boom times in India is a surge in demand for everything - and top of the list is water. Industry, agriculture, households in middle class suburbs and global corporations all want as much as they can get. Is privatisation the answer when governments are struggling?

A Tale of Two Giants: India's and China's Experience with Reform and Growth. See also the panel discussion on the topic; China’s economy is three times larger than India’s and contributes significantly more to global economic growth.

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This page contains a single entry by Paul published on June 29, 2006 11:12 PM.

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