How Haryana's new govt can sustain and expand recent economic gains

The state cannot take its outperformance for granted

As Haryana went to the polls on October 5, it’s an opportune time to reflect on the state’s economic journey over the last couple of decades to understand the priorities for the new government.

In FY24, the state’s real per capita gross domestic product (GDP) is Rs 1.85 lakh, 75 per cent higher than the national average, a significant lead compared to 1994 when it was approximately 45 per cent higher. This impressive growth performance over the last three decades puts Haryana alongside Gujarat, Uttarakhand, Karnataka, and Tamil Nadu as one of India’s fastest-growing states.

What makes this growth performance even more impressive is that it involved Haryana shifting from an agriculture-dominant economy to an industrial and service powerhouse. A contrast with Punjab illustrates the point clearly. In 1994, agriculture constituted around a third of the GDP for both Haryana and Punjab. And while Haryana’s agricultural share of GDP has halved by FY24, picked up equally by industry and services, agriculture still accounts for about 25 per cent of Punjab’s GDP. Consequently, Haryana’s per capita GDP is the seventh highest in 2023, while Punjab’s has slipped to the 18th place from the fifth spot in 1994. This begs the question, what caused Haryana’s economy to perform better, and how can the incoming government build on this momentum further?  

Haryana has two key economic centres (KECs), Gurugram, and Faridabad, which have played an important role in its accelerated growth performance. Their combined GDP share increased from 27 per cent in 2000 to 34 per cent by 2020. Without them, the state’s GDP growth was 6.9 per cent between 1994 and 2020, the same as India’s. Gurugram’s annual GDP growth of 9.7 per cent between 2000 and 2020 played a defining role in the state’s outperformance.

The Government of India’s decision in the early 1980s to build Maruti Suzuki’s first automotive plant in Gurugram, the lack of developable space in Delhi, prompting real estate developers to look for adjoining areas, and the city’s proximity to the airport are catalysts for the city’s meteoric rise.

Today, it alone produces a fifth of India’s two-wheeler output. Gurugram’s journey of becoming a service powerhouse started with GE opening its first back office in 1997. It has since graduated to become the central business district of north India, housing offices of more than 250 Fortune 500 companies and boasting the third-biggest unicorn hub in the country. Growth has created job opportunities, triggering migration, resulting in Gurugram’s urban population swelling from around 170,000 in 1981 to a million plus by 2011, with an additional 150,000 – 200,000 people commuting daily from Delhi to work in the Millennium City. 

What should the new government focus on to maintain this growth momentum? Haryana needs to adopt a two-pronged strategy, one at the state level, and the other focused on its KECs. Despite being one of the fastest-growing states, Haryana is not strong on all or most growth-inducing attributes related to physical capital, human capital, or productivity. It outperforms India’s average in terms of having a pool of higher-educated youth, and availability of affordable land. The gross enrolment ratio in higher education is 15 per cent higher than average, and land is 15-20 per cent more affordable.

However, it needs to improve on health indicators, fiscal discipline, road networks, and law and order. According to the NITI Aayog Health Index 2020, Haryana ranked 11th out of 20 states. Its fiscal deficit-to-GDP ratio was below the national average till 2009, but it has been deteriorating ever since. Haryana’s road availability per capita has been 70 per cent of India’s average over the last two decades, and worryingly, this has been declining over time.

Finally, while the state’s violent crime rate was lower than the national average initially, by 2020, it exceeded India’s average by 40 per cent. This mixed picture of growth determinants further reinforces the above argument regarding the positive spillover from Delhi that has helped Gurugram (and Haryana) grow faster over the last two-three decades. Improving these state-level attributes will not only aid the existing growth centres, but will also improve the growth performance of other areas in the state.

At the city level, while Gurugram is a significant success story — with a GDP of $20 billion and a population of 1.1 million — it remains relatively small compared to major centres like Mumbai UA (Urban Agglomeration) and Bengaluru, which have a GDP of around $145 billion and $65 billion, and populations close to 25 million and 14 million, respectively. Thus, Gurugram has a long way to go. Its proximity to Delhi and the airport, once key advantages, are now fading or facing competition. Limited land is left in Gurugram bordering Delhi and an international airport is coming up in Jewar near Noida, Uttar Pradesh’s KEC, which also borders Delhi. While Gurugram has little control over these exogenous developments, it needs to pull up its socks when it comes to urban service delivery to try and retain its strategic advantage. For example, in the latest Swachh Survekshan, Gurugram ranked 140th compared to Noida’s 14th, in more than 1 lakh cities category.

Lastly, in addition to the existing KECs, the government should pay special attention to emerging new hubs like the education city in Sonipat. Already, there are tens of thousands of students studying there in 10 universities, and the future looks bright. From that perspective, the operationalisation of Urban Extension Road 2 by the end of 2024, which is estimated to reduce travel time between the Kundli border adjoining the education city and Delhi airport to under 20 minutes, assumes critical importance.      

Haryana has done well in terms of economic growth over the last couple of decades. For it to continue to lead the growth ladder, the new government has to work hard on multiple dimensions. In an election where all major political parties have engaged in welfarism, we hope this article serves as a reminder not to take economic growth as a given.   

The writers are, respectively, senior fellow and research associate, Centre for Social and Economic Progress. The views are personal