The Hindu Editorial Analysis- 30th October 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

A picture of a growing economic divide in India 

Why in News?

The Economic Advisory Council to the Prime Minister (EAC-PM) recently released a report titled ‘Relative Economic Performance of Indian States: 1960-61 to 2023-24’. 

• The report highlighted a significant disparity in the economic performance of Indian states from 1960-61 to 2023-24. 

What are the Key Findings of the EAC-PM Report? 

• Economic Performance:
• Southern States' Growth:
  • The southern states of India, including Karnataka, Andhra Pradesh, Telangana, Kerala, and Tamil Nadu, have become important players in the country's economy.
  • By March 2024, these states contributed 30% to India's total GDP.
  • Their economic growth picked up speed after the country opened up its markets, leading to big improvements in areas like technology and industry.
• West Bengal's Economic Decline:
  • West Bengal's share of GDP has fallen from 10.5% in 1960-61 to just 5.6% in 2024.
  • The state's per capita income has dropped from 127.5% of the national average in the 1960s to 83.7% in 2024, making it fall behind states like Rajasthan and Odisha.
  • Several factors have contributed to this decline, including:
    • Stagnation in government policies
    • A decrease in industrial activities
    • Political instability
    • Migration of skilled workers
  • These issues have slowed down growth and made the state less attractive for investments.

• Maharashtra is the biggest contributor to India's GDP, making up 13.3%.
• However, its contribution has decreased from over 15%.

Per Capita Income Data:

• Delhi, Telangana, Karnataka, and Haryana had the highest per capita income relative to the national average in 2023-24.
• Delhi's per capita income is 250.8% of the national average.
• Gujarat has a per capita income of 160.7% of the national average, while Maharashtra stands at 150.7%. Both states have maintained incomes above the national average since the 1960s.
• Odisha has seen a significant rise in per capita income, increasing from 55.8% in 2000-01 to 88.5% in 2023-24.
• When comparing Punjab and Haryana: 
  • Punjab has faced economic stagnation since 1991, with its per capita income dropping to 106% of the national average.
  • In contrast, Haryana has seen strong growth, with its per capita income increasing to 176.8%.
• Among smaller states: 
  • Sikkim’s per capita income grew from 93% of the national average in 1990-91 to 319% in 2023-24.
  • Goa also improved its income from 144% in 1970-71 to 290%.
  • Both Sikkim and Goa are now among the richest states in India based on per capita income.

• States like Uttar Pradesh and Bihar face major challenges in their economic growth.
• Uttar Pradesh contributes only 9.5% to the country's GDP.
• Bihar contributes even less, at just 4.3%.
•  Although some states, such as Odisha, have shown improvements, Bihar is still lagging far behind in terms of economic development.

• The report emphasizes the importance of a thorough examination of the policies and factors that affect economic growth at the state level.
• It particularly aims to tackle the growing regional inequalities in India.
• There is a need to understand better how different policies impact economic performance.
• This investigation is crucial to finding solutions for the disparities seen between various regions.

What are the Reasons for Steady Growth in West and South States? 

• Robust Industrial Base:Gujarat and Maharashtra have a solid and varied manufacturing sector, including areas like textiles, chemicals, and engineering.
  • Their policies encourage investment, making it easier for businesses to thrive.
  • This has attracted a lot of both local and international investments.
• Thriving Service Sector:States in the south, like Karnataka and Tamil Nadu, have seen quick growth in cities and better infrastructure.
  • This growth has positively impacted their IT and service industries.
  • There is a strong emphasis on education and skill development, leading to a talented workforce.
  • This skilled workforce boosts productivity and economic development.
• Agricultural Advancements:Maharashtra and Kerala are using sustainable farming methods.
  • These include organic farming, growing different crops, and using water-saving irrigation techniques.
  • They also practice agroforestry and offer a variety of products, which increases productivity and food security.
  • Government support for irrigation, market access, and technology has improved farming results and economic progress.
• Strong Regional Connectivity:The western and southern regions have well-developed transport and logistics systems.
  • Gujarat's ports and Tamil Nadu's roads facilitate trade effectively.
  • The closeness to major markets increases local demand, driving economic growth in these areas.

Economic Advisory Council to the Prime Minister (EAC-PM) 

• Independent Body: This organization is not part of the constitution or any law and operates independently.
• Purpose: Its main role is to provide advice on economic and related matters to the Government of India, especially to the Prime Minister.
• Neutral Perspective: The council focuses on bringing important economic issues to the government's attention from a neutral standpoint.
• Areas of Advice: It offers guidance to the Prime Minister on various economic topics such as inflation, microfinance, and industrial output.
• Nodal Agency:NITI Aayog acts as the main agency for the EAC-PM in areas like administration, logistics, planning, and budgeting.
• Reports: The council produces periodic reports, including the Annual Economic Outlook and the Review of the Economy.

What Measures Can be Taken to Enhance the Economic Performance of the States? 

• Decentralised Planning and Governance: Empower local governments to create and implement development plans that meet local needs. Involve community members in decision-making to ensure everyone is included.
• Infrastructure Development: Focus on investing in roads, railways, ports, and digital connections through Public-Private Partnerships (PPP). This will improve trade and mobility while ensuring projects are completed on time and resources are used effectively.
• Sectoral Focus and Diversification: Increase agricultural productivity by using new technologies and better irrigation methods, while also supporting industries related to agriculture.
• Promote targeted policies that enhance manufacturing (like textiles and electronics) and services (such as IT and tourism) based on the strengths of each region.
• Skill Development and Human Capital: Create vocational training programs that align with what industries need, improving job opportunities. Also, work on enhancing education quality by focusing on critical thinking skills and access to higher education.
• Innovation and Entrepreneurship: Encourage a culture of innovation by supporting startups through incubators and funding. Promote partnerships among universities, businesses, and government for research that leads to new technologies.
• Digital Transformation: Use digital tools for governance to make public services more transparent and efficient. Also, support digital literacy programs to help citizens gain the skills they need.
• Collaborative Governance: Promote cooperation between states to share effective practices and resources. Ensure that central and state governments work together to align their policies and resources for development.

Conclusion

• The growth in the Western and Southern states is due to careful planning.
• These regions have strong industrial and service sectors.
• There are effective government policies in place that support this growth.
• There is a focus on sustainable practices to ensure long-term benefits.
• As these states continue to innovate and adjust to new economic situations, they are crucial in helping India aim for a USD 7 trillion economy by the year 2030.
• It is important to address regional differences and promote inclusive growth to keep this progress going.
• Ensuring balanced development across the entire country is key to sustaining this momentum.