The encouraging story broke at the start of 2010 was that more than half the Bimaru states (whose extended definition covers the eight poorest states in the country) had done very well on growth in the five years to 2008-09. Bihar, Uttarakhand, Orissa, Jharkhand and Chattisgarh clocked between 7.3 per cent and 11 per cent annual growth, thus crossing into “Tiger” territory. Even UP and Rajasthan achieved 6.3 per cent, whereas the all-India average during these five years was 8.5 per cent. The Bimaru state bringing up the rear was Madhya Pradesh, with 4.9 per cent annual growth. All this was a sharp and welcome contrast with what prevailed in the 1990s, when the Bimaru states typically managed about 4 per cent annual growth, against a national average of about 6 per cent.
Now, with the numbers updated to include 2009-10, the story has got a new twist. While the laggard states have more or less maintained their relative momentum, the big difference (and therefore the bigger story now) is that the more advanced states are losing traction—not just in relative terms but also in their absolute growth performance. Thus, in the two years of 2008-10, when there was an economic slowdown, Tamil Nadu achieved barely 5 per cent annual growth, as did Karnataka. Andhra Pradesh was slightly better at 5.3 per cent. These numbers, while discouraging in themselves, were a dramatic drop from what these southern stars achieved in the previous four-year period, 2004-08: 9.8 per cent, 10.8 per cent and 10.1 per cent, respectively. Maharashtra, meanwhile, dropped from 10 per cent in the boom years to 6 per cent during the slowdown, while Punjab clocked 6.6 per cent. Both poster-boys of rapid development in an earlier era were slower than the all-India average growth rate of 7.1 per cent in 2008-10.
The only two among the better-off states that continued to do well were Gujarat (8.9 per cent) and Haryana (8 per cent). So we have the strange sight of the states that are more industrialised, have a tech base and/or have a higher per capita income, losing momentum and inter-state ranking.
One could argue that this is a blip, caused by the general slowdown; coastal states that have a higher share of international trade are likely to suffer more when there is a global recession. Also, investment has tended to be more resource-driven than in the past, and this has favoured the Bimaru states which have a preponderance of the country’s natural resources. But equally, Maharashtra and Punjab have poor fiscal policies and have been coping with the effects of bankrupt treasuries, yet neither is willing to correct for past mistakes. Maharashtra’s public debt began climbing in the mid-1990s (with the first Shiv Sena government), but successor Congress-led governments have been no better, and the debt has reached such proportions that half the state’s revenue goes to service the debt, leaving little money for investment in things like fresh power capacity. Punjab’s situation is perhaps worse, brought about by populist measures like giving free power to farmers. At the start of this decade, the state had an economy that was one-third bigger than Haryana’s, but it is now smaller than its sibling. Karnataka has had a run of poor state administrations, but the current one is said to be the worst ever, while Tamil Nadu could be suffering from kleptocratic rule. Whatever the reasons—and they deserve deeper study—it should cause worry that, just when the laggard states have got their act together, the states with the best track record so far have suddenly lost momentum.
