South states outperform others in GDP race, West Bengal lags behind

A working paper released on Tuesday by the Economic Advisory Council to the Prime Minister (EAC-PM) reveals stark differences in the economic performance of Indian states. The southern states — Karnataka, Andhra Pradesh, Telangana, Kerala, and Tamil Nadu — have become big contributors to India's GDP, with these regions accounting for 30 per cent of the national output by March 2024.

Karnataka’s flourishing tech industry and Tamil Nadu’s robust industrial base have been key drivers of this growth.

Telangana, India’s youngest state, established in 2014, has also performed remarkably well, emerging as a major player in the national economy.

West Bengal's dramatic decline

On the other hand, West Bengal, once a dominant force in India's economy, has experienced a dramatic downturn. Its GDP contribution, which was 10.5 per cent in 1960-61, has now fallen to 5.6 per cent. Additionally, the state’s per capita income, previously 127.5 per cent of the national average, has dropped to 83.7 per cent, placing it behind historically less prosperous states like Rajasthan and Odisha.

The report notes that West Bengal has seen a steady decline in its relative economic performance over several decades, despite its advantageous geographic position and strong historical background.

Experts remain perplexed as to why the state, once a thriving economic hub, failed to sustain its early success. The report describes Bengal as an outlier among maritime states, which have mostly seen economic progress. The state's industrial policies, particularly following the post-liberalisation period, have been a subject of ongoing debate regarding their role in the economic stagnation.

Punjab stagnates, Haryana soars high

Punjab, a major beneficiary of the Green Revolution, has similarly faced a stagnation in its economic growth since 1991. Once boasting a per capita income 169 per cent above the national average in 1971, the figure has since dropped to 106 per cent. In contrast, Haryana has seen significant economic growth, with its per capita income soaring to 176.8 per cent above the national average, much of this progress happening after 2000. This divergence is notable, as Haryana, once behind Punjab, has now surpassed it in several key economic indicators.

Maharashtra’s GDP leadership

Maharashtra continues to be India’s largest contributor to GDP, though its share has decreased from over 15 per cent to 13.3 per cent in recent years.

Despite being home to the financial capital, Mumbai, and a per capita income of 150.7 per cent above the national average by 2024, the state no longer ranks among the top five in per capita income.

Poorer states

The report also brings attention to challenges faced by poorer states. Uttar Pradesh, once contributing 14 per cent of India’s GDP in 1960-61, now accounts for only 9.5 per cent, while Bihar, despite being the third-most populous state, adds just 4.3 per cent to the economy.

Although Odisha has shed its status as an economic laggard, Bihar remains far behind other states in economic growth. The paper suggests that states have followed widely different economic trajectories since liberalisation.

Fuelling growth

The southern states have leveraged reforms to fuel national economic growth, while West Bengal remains an unsolved puzzle, continuing to lag despite its promising beginnings.

With the gap between regions growing, the report stresses the need for a deeper investigation into the policies and factors driving state-level economic performance.