Diversity – thy name surely is India!

The dangers of regional inequalities not getting rapidly bridged in India are all too apparent.

 www.bodhibooster.com

Diversity – thy name surely is India!



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India is a union of states. Prosperity of India demands prosperity of States. If some do too well, and others consistently do badly, then we have an unsustainable situation for India as a whole. At a time when we are talking about Competitive Federalism, economic disparities among Indian states have been widening over time instead of narrowing. Read our Bodhi on Cooperative Federalism The Economic Survey 2016-17 indicated that in the 2000s, when per capita standards of living increased in all states, the disparities among them also increased – called Divergence. The Least Developed State (Tripura) increased its per capita GSDP from Rs. 11,537 in 1984 to Rs. 64,712 in 2014. You can do a full course in Economic Survey and Union Budget online with us. In contrast to India, internationally, disparities across countries are declining – called Convergence


Internationally, poorer countries are catching up with the richer ones, and within these countries also, the poorer states are catching up with the richer ones. But in India the less developed states are not catching up with the more developed one at a good pace. In the 1990s convergence patterns were similar across the world, China and India. Whereas things changed for the world and China in the 2000s, they did not change for India. This was despite the fact that less developed states like Bihar and Madhya Pradesh had started improving. However, this improvement was neither adequately strong nor sufficiently durable to change the picture of divergence. In poorer regions the returns to capital must be high to attract capital and labour, thereby increasing productivity. India is an exception to this. Although borders within India are porous, convergence has not happened, whereas across countries where borders are thicker, convergence has been successful. Trade within India is quite high and mobility of people has also been on the rise.

In China, the mobility of labour from farms in the interior to the factories on the coasts has increased the productivity and wages in the poorer regions. This has not happened in India, and hence the disparities. Two more reasons can be – (1) India has relied on growth of skill-intensive sectors rather than low-skill ones, which could be a reason for divergence. (2) Poor governance or institutional traps could be the other reason. Continued divergence among states is against competitive federalism. You can view relevant data and numbers here, here and here.     
 




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Bodhi Booster: Diversity – thy name surely is India!
Diversity – thy name surely is India!
The dangers of regional inequalities not getting rapidly bridged in India are all too apparent.
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