The Hindu Business Line : Post-reform anomaly — Parts not keeping `full' pace

THE overall growth rate of the country should not blur our vision to the growing disparities in the prosperity level, per capita income and job opportunities from State to State. The strategy for a higher growth in these sub-par States should be multi-pronged and vary depending upon the strengths and opportunities of each.

The economic growth this year may not reach the 7 per cent the Government expects., thanks to the good monsoons, and an upbeat industry. The stock market is buoyant. The flow of FDI is expected to increase in the coming years giving a thrust to economic growth. The possible divestment of oil PSUs through public issue should meet a portion of the budgeted receipts on this score and bring down the fiscal deficit to an extent.

While the country can take comfort from all this — the good outcome of the reform policy — and the steady accumulation of forex reserves, one disconcerting feature is the uneven growth among the States with some coming out with very good results and a few stagnating still at the low levels not very far from where they were when the reform process started.

The government at the Centre cannot ignore the stark reality that a few States such as Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Tamil Nadu, Kerala, West Bengal and Rajasthan, have achieved a growth rate in State domestic product (SDP) higher than or very much near the national average while Bihar, Uttar Pradesh, Orissa are much below the average. Even Punjab, Haryana and Andhra Pradesh were below the average in 1999-2000.

The poverty levels of a few States bring out the disparity and the lopsided outcome of the reform process. While the per capita SDP in Maharashtra is over Rs 4,800, it is Rs 1,000 in Bihar.

The percentage of population in poverty as on 1999-2000 reveals that against the national average of 26.10, Orissa, Bihar, Madhya Pradesh Uttar Pradesh and West Bengal in that order had a significantly larger percentage in poverty ranging from 47.15 to 27.02.

There has been no doubt a decrease over the earlier years but it is not significant compared with other States. Contrast this with Punjab (6.16), Haryana (8.74) and Kerala (12.72), the picture becomes clear. The agricultural revolution since 1960s in the former two and the inward remittances from abroad to Kerala can only partially explain the spectacular growth in these States.

The sector-wise contribution to the growth in the period between 96-97 and 2000-01 was 6 per cent by agriculture, 23 per cent by industry and 71 per cent by services. This puts the backward States at a serious disadvantage as agriculture, their predominant occupation, and industry are no longer the engines of growth. Employment opportunities in these two traditional sectors naturally dwindle.

There are also differences given their geographical position — coastal States have a natural advantage over those in the hinterland, as also the availability of good infrastructure such as rail, road and power, presence of raw materials and mineral resources, the people and their literacy levels, the standard of governance, more important, the volume of investments made by the government.

Generally the hinterland States with no port facilities and poor without well-connected roads and rail network have very limited manufacturing activities and consequently do not attract large investments — not even domestic let alone foreign. Rajasthan is however an exception with its tourism sector, boost in agriculture and adequate power supply. Among the coastal States too, Orissa, has not done well despite the rich mineral resources and well developed port possibly due to frequent ravages by cyclones and a large population of undeveloped tribal people.

This is bound to lead to social unrest The States at the lower rungs may feel left out giving rise to parochial jingoism and growing intolerance weakening the federal spirit. The recent agitations in some States that recruitments should be made only from the sons of the soil are manifestations of this problem.

India has many thickly populated cities in the interior States with considerable political influence. The impact of reforms and the growth should be adequately felt in these parts and through them to the smaller cities and villages. The strategy for a higher growth in these sub-par States should be multi-pronged, and vary depending on the strengths and opportunities of each. No standard solutions are possible.

But, as a rule, substantial investments towards building good infrastructure, such as rail, roads, communication facilities and power, are a must. The easy mobility of goods from the producing centres to the urban areas and ports is crucial. The State governments alone cannot do all this on their own what with their financial condition.

Investors would be hesitant to come to these laggard States unless there are some natural advantages. The State governments should explore the avenues to attract private investments.

The Centre must pitch in, and persuade private investments too, to supplement its effort. The Centre's investment policy should take note of the inherent handicaps of backward States in the allocation of resources without putting a premium on efficiency. The ultimate aim could be to achieve a balanced growth of the entire country in ten years.

The States, on their part, should use resources judiciously. Massive investments can be possible only with corporate support and FDI. For this States must provide concessions on various taxes, conducive labour laws, and eliminatered tape and corruption. Upgradation of skills of the local population should also receive attention of the State governments through literacy programmes, technical education and health facilities.

(The author is a Chennai-based freelance writer.)

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