As debates on the issue of regional convergence or divergence continue, most evidence shows that regional inequality kept rising in the 1990s. Various theories have expounded different reasons for this trend. But when we look at the more recent figures, from the current decade, they show that more dramatic changes are occurring in the economy as the impact of liberalisation becomes more visible. Not only are the poorest states and the resource-rich states, which have been bogged down till now, catching up quickly with the rest, but new disparities are emerging between coastal and hinterland states, and also between states that have made greater gains in core areas of human resource development like education and the laggards.
The overall picture from 2000-01 to 2008-09 shows that topping the ranks of the 21 major states, with an SDP of at least Rs 10,000 crore at constant prices in the middle of the decade, were Haryana (9.1%), Uttarakhand (9.1%), Delhi (9%), Gujarat (8.8%) and Bihar (8.1%). This is an odd mix that included rich (Delhi), poor (Bihar), coastal (Gujarat), landlocked (Haryana) and new (Uttarakhand) states.
But a deeper perusal reveals a more rational picture. While the rich states, with per capita net SDP of more than Rs 40,000, continue to grow much faster, the poorest states, with per capita net SDP of less than Rs 20,000, are quickly catching up with the middle-income states, with per capita net SDP between Rs 20,000 and Rs 40,000.
Average numbers for the decade show that while overall annual growth in the richest states was 7.4%, that of middle-income states was 6.7% and that of the poorest states was 5.7%. The rich are making greater gains, as the pickup in the rich states was much faster, with the annual average growth picking up by 4.4 percentage points to get to 10.1% in the second half of the decade (here the annual average data was limited to 3-4 years).
But what was more striking was that low income states were able to close the gap, with their average annual growth accelerating by 2.7 percentage points in the second half, which is just two notches below the 2.9 percentage point increase clocked by the middle-income states. However, the 7.2% second half annual average growth in the low-income states still remained marginally lower than the 8.4% clocked by the middle-income states.
More importantly, the four Bimaru states?Bihar, MP, Rajasthan and UP?that are at the core of the rich-poor debate seem to have fared much better than even the middle-income states. Average growth rates in the Bimaru states accelerated by 3.5 percentage points, which is even better than the 2.9 percentage point improvement in the middle-income states. The largest gains were made by Bihar, followed by MP, Rajasthan and UP.
But the reduction in growth disparities between the poor- and middle-income states seems to have sparked off new disparities in other areas, the most significant of which seems to be that between coastal and hinterland states. Numbers for the first half of the decade show that annual average growth was strikingly similar in both the coastal and hinterland states, with the former clocking 5.8% and the latter 5.7%. But growth in the coastal states then accelerated sharply, going up by 3.4 percentage points to 9.2% in the second half of the decade. In contrast, growth in the hinterland states went up by only 2.5 percentage points to 8.2%.
However, on the positive front, note that the five resource-rich states?MP, Orissa, Chhattisgarh, Karnataka and Jharkhand?that have generally lagged in growth have been able to keep up with the rest in the most recent period. While the 4.7% average growth in the mineral-rich states was slower than the 5.6% clocked by the other major states, the former were able to accelerate growth by 2.8 percentage points, the same as that of the other major states. And the 7.5% growth in the mineral-rich states in the second half of the year was just one percentage point lower than the 8.5% growth clocked by the other major states. The spurt in the growth of resource-based sectors like power and metals seems to have finally removed the curse on the resource-rich states.
The growing role of the resource base in fostering faster growth is evident not only in physical resources but also in social resources. A look at the supply of human capital from the gross enrolment rate in secondary education shows that states with enrolment levels of more than 50% fared much better than the rest.
The 11 states with higher enrolment rates clocked an annual average growth of 7.6% during the decade, which was substantially higher than the 5.8% achieved by the other major states. But what is more important is the greater gains made by the former. Numbers show that states with higher enrolment in secondary schools were able to improve growth rates by as much as 3.2 percentage points to 9.5% in the second half of the year, as compared to the 2.7% gain in the states with laggard educational attainments.
p.raghavan@expressindia.com