A recently published working paper from the Economic Advisory Council to the Prime Minister, or EAC-PM, highlights the economic performance of India’s states in the last 65 years. Many southern states have performed very well in terms of contribution to the nation’s GDP and are to be commended for their efforts. However, states that were traditionally ahead, like Punjab and Kerala, must introspect, revisit their history, and move toward contributing more for the vision of a Developed India by 2047. This is an attempt to analyse the interplay between policy decisions, infrastructure, resource allocation, and regional development in India.
Today’s new politics of North vs South has its roots in the imperialist policy of ‘divide and rule’. Some politicians and their cronies continue to indulge in such divisive politics, which is nothing but subterfuge for their personal gains. Credibility in politics is as essential as it is in personal life and spaces. While other states must rise too, the South cannot use its performance to float the ‘southern exceptionalism’ argument and shouldn’t play politics.
It would help to remember that the success of southern states didn’t come out of the blue. A history of concessions and policy support from New Delhi for the South has played a key role. It would further help to look at past parliamentary questions and debates, where it was made clear that citizens in the South are as much our brothers and sisters as those in the North. If they do well, so does India. These decisions have been taken in national interest, not out of any regional interest, despite what some may perceive as parochialism.
Policy support & success stories
It is well understood that policy decisions made by the central government in policy decisions, right from India’s independence till date, have contributed to the success of Tamil Nadu, Andhra Pradesh (including what’s now Telangana), and Kerala.
These states were given incentives through the Freight Equalisation Scheme (FES) of 1948 and the Coal Subsidy Plan, which subsidised the transportation of inputs like coal and iron from eastern states such as Bihar and Odisha. The idea was to promote equal industrial development across southern and western India. However, a 2018 study by Cornell University found that the central government’s FES actually led to the decline of resource-rich states like Bihar, which today has only a 4.3 per cent stake in the GDP despite having the highest density of population.
Further, literacy and skill training were strongly promoted in the southern states of Kerala, Tamil Nadu and Andhra Pradesh post-Independence through various schemes launched by the central government. This led to sustained economic growth, with a skilled workforce readily available for the technology, pharmaceutical, and automotive industries. Human capital development has thus been a major factor in attracting investment in industry, healthcare, and education.
With the active support of the Centre, many Industrial Training Institutes (ITIs) were opened, training manpower in fields such as electrical work and plumbing. The Government of India provided further incentives through the new IT Policy of September 2022 to leverage human capital resources, thus boosting the economic development of Andhra, Telangana, and Tamil Nadu—states that account for almost 30 per cent of India’s GDP in 2023-24, per the report.
The implementation of the unified Goods and Services Tax (GST) system is another revealing measure. The northern states have higher GST collections than their southern counterparts. This indicates that southern states are selling more products and services— including automobiles, IT, healthcare, etc— to the northern states.
Improved physical infrastructure, including access to developed networks of roads and ports, have also been a factor in attracting investment for industries. Power supply, which was earlier erratic, is now stable with the efforts of the central government and its policies, especially in the last decade. This has made southern and western states all the more attractive for industries and investments. In Andhra Pradesh, for example, the state government obtained funds from the Government of India for restoration and modernisation of electrical plants under the Accelerated Power Development Programme.
The focus on infrastructure has facilitated easier movement of goods and people, reducing transaction costs and boosting economic activity. The National Infrastructure Pipeline (NIP), launched in 2019 by Prime Minister Narendra Modi’s government to ensure better connectivity throughout the country, is helping less developed states get ahead by providing better accessibility to raw materials.
It is also heartening to observe the commendable development of Gujarat. The state came into existence only in the 1960s, but has rapidly made progress. Gujarat surpasses even Maharashtra in per capita income, achieving 160.7 per cent of the national average in 2023-24. The success story of Gujarat can be attributed to the progressive vision of its leaders over the last 30 years.
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States that must course-correct
West Bengal’s continuous decline, despite having access to abundant natural resources, proximity to the sea, and adequate educated manpower, is a shocking testimony to the apathy of successive governments and political disinterest in its well-being. Once a leading contributor to India’s GDP—10.5 per cent in 1960-61—the state’s share has now declined to 5.6 per cent.
The myopic vision and skewed priorities of West Bengal’s policymakers are solely responsible for the decline of this once-powerful state. It is time for all stakeholders to introspect and learn from states like Odisha, which despite being traditionally backward, has overtaken Bengal in per capita income.
Similarly, well-governed states like Madhya Pradesh offer a model to several others on how a bimaru (sick) state can be turned around and transformed into a middle-income, development-oriented state.
The dispensations of some northern states have used government resources for their own political survival by indulging in handout politics such as free electricity and water. While these giveaways are done under the banner of promoting a just and equitable society, the reality is exactly the opposite on the ground. Faulty implementations provide no roadmap for a Viksit (developed) Bharat, with no incentivisation for entrepreneurship, development, or start-up culture. Punjab has been unable to leverage the benefits of the Green Revolution and has been overtaken by traditionally backward Haryana. While Haryana’s relative per capita income has climbed to 176.89 per cent, Punjab’s has declined to 106 per cent.
Kerala is another state that needs to ensure that it doesn’t allow the policies of its government to erode the advantages of its high literacy rates.
Rather than creating a North-South divide, it would behove underperforming states to manage their resources better to promote development and economic growth.
The Niti Aayog, which replaced the Planning Commission in 2015, aims to take India to the centrestage of development by 2047. There are lessons to be learned on both sides. Policymakers need to have more holistic policies for the balanced development of the entire nation.
States like Uttar Pradesh, Bihar, and Jharkhand—which have lagged behind due to issues such as lower literacy rates, inadequate healthcare, and poor infrastructure—have impeded their ability to attract investment and foster growth in high-value sectors. They must pull up their socks and effectively strike a balance between resource management and economic development.
A leaf can be taken from the book of a homemaker who, despite a limited budget, manages family expenses, food, entertainment, and gifting, while still saving for a rainy day. We must all take pride in who we are for economic pride to return. Let’s focus on deprived sections and sectors to realise the vision of a developed nation by 2047. The mantra is: “Let no one be left behind.”
Meenakshi Lekhi is a BJP leader, lawyer and social activist. Her X handle is @M_Lekhi. Views are personal.
(Edited by Asavari Singh)
Most the development u see in southindia is post 1990 economic liberalisation and it is due to pro business attitude of southern state governments who were at last given freedom from the delh-mumbai nexus license raj rule.States that have benefitted from freight equalization policy are western states like gujarat and Maharashtra don’t try to take away the credit from southern states 2 kilo rice ,mid day meal ,education and health is a state subject
BJP is so shameless; takes credit for whatever is good.
So she is admitting that the Centre, including the present government never did as much for the North and East as it did for the West and South.
The Freight Equalisation Scheme and Coal Subsidy Plan wreaked havoc on the industrial might of eastern India. Bengal and Bihar were the worst affected. This resulted in a flight of capital and investment to western and southern India from Bengal and Bihar.
Major industries relocated and shut down their operations in eastern India. In effect, these policies are the primary reason for the impoverishment of eastern India.
The merchant communities of western India and southern India wielded immense clout in Indian politics in the 1930s and 40s and immediately after Independence set in motion plans and schemes which in the long run would benefit them while depleting eastern India. Bengal Congress was beset with infighting and the state (along with Bihar, Odisha) was ravaged by Communist insurgency. These factors played into the hands of the merchant communities of western/southern India who went on designing scheme after scheme to promote industrialisation of their part of the nation. In the process, the east was left impoverished.