The Gross Domestic Product (GDP) growth rate in South Indian states, especially Tamil Nadu and Andhra Pradesh, have slowed down considerably and fell below the national average of 8.7 per cent.
A report by Confederation of Indian Industry (CII) and McKinsey & Co shows that GDP growth for Tamil Nadu and Andhra Pradesh stood at 7.4 per cent between 2005 and 2010, while Karnataka grew 8.5 per cent and Kerala 8.1 per cent.
The report said while Gujarat and Haryana grew 11.3 per cent and 11 per cent, respectively, Bihar recorded 9.6 per cent and Uttarakhand 7.8 per cent growth.
Industry leaders say several factors, including rising land prices, labour shortage, infrastructure bottlenecks and growing urban congestion in major metros including Chennai, Bangalore and Hyderabad, have resulted in the decline in growth rate.
The study said growth in other states was primarily on the back of stable policy initiatives by state governments, significant investments in infrastructure and growth in specific industry clusters.
Bihar and Uttarakhand, have shown impressive growth of 16 per cent and 14 per cent respectively, aided by investor-friendly government policies. For instance, Uttarakhand has created a simplified procedure for setting up industries, provided investment subsidies and exemptions on entry tax on plant and machinery for industries. Similarly, the Bihar government has increased its spending on development projects, which catalysed the state’s growth.
The study said the state governments in South India should focus on increasing physical infrastructure, including power, roads, ports, logistics and housing, which, in recent years, has not kept pace with the demand. The other focus areas should be managing talent and its availability, further strengthening policy and building capability to move up to the value chain across sectors.
South India had been a major driver of growth for India from 2000 to 2010, contributing to over 22 per cent of India’s GDP and 28 per cent of its employment. The opportunity in the region is estimated to touch $500 billion by 2016 and around $650 billion by 2020.
