Between 2012 and 2025, eight ‘high performing states’ will account for over half of India’s incremental growth and will have 57% of the consuming-class household. These include current powerhouse states such as Gujarat, Maharashtra and Tamil Nadu; smaller states such as Himachal Pradesh and Haryana; and city states such as Delhi, Chandigarh and Goa. Rapid urbanisation and high income growth in these states would raise their per capita income levels to that of today’s middle-income nations.
A report by McKinsey says that, going by the current trends, Madhya Pradesh and Andhra Pradesh will rise in the next 10 years to join the group of ‘high performing states’. However, Punjab is likely to slide from the club of ‘high performing states’ currently to ‘performing states’ unless it reinvents its economy and attract sectors with higher productivity. Some of the laggard states such as Bihar, Uttar Pradesh and Jharkhand will remain ‘low performing states’ even in 2015, despite rapid GDP growth due to their high population growth rate.
The report holds that companies willing to target first-time aspiring households could benefit by focusing on five ‘performing states’ of Chhattisgarh, Madhya Pradesh, Odisha, Rajasthan and West Bengal. These states will lift 18 million households from strugglers to aspirers and account for 51 million aspiring households, or about 30% of total such households in India by 2025. Rising demand from a new aspiring class will stimulate growth for industries such as low-cost housing, cement, pharmaceuticals, FMCG and two-wheelers.
Eight very high and high performing states are India’s economic powerhouses
Between 1992 and 2012, these eight states grew 1.1 times faster than the national average
Bihar and Madhya Pradesh are now focusing on economic reforms
By 2025, very high and high performing states will mirror today’s high and middle income nations
In 2025, living standards of performing states will mirror that of today’s high-performing states
Some low performing states will need to grow 1.5 times faster to catch-up
By 2025, 79 metropolitan districts will account for 50% of India’s income pool