• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Sudhanshu Ranade

Future growth of overall GDP will be influenced by good performers

Chennai , Sept. 16

Uttar Pradesh, Bihar, Orissa and Madhya Pradesh together grew at a compound annual growth rate (CAGR) of only 3.77 per cent between 1993-94 and 2000-2001, as against a 6.3 per cent in total GDP.

Since these States accounted for 24.3 per cent of the GDP, their poor performance exerted a significant drag on the overall growth over that period. But for them, the overall GDP growth would have been higher.

Of course, slow growth reduced the share of these States in total GDP: From 24.3 per cent in 1993-04 to 20.5 per cent in 2000-01. Were they to continue to grow at the same rate over the next 15 years, their GDP share would fall to less than 13 per cent.

The converse holds good for the fast growingDelhi, West Bengal, Karnataka, Tamil Nadu, Gujarat and Rajasthan. By 2020-21, they would account for 40 percent of total GDP. Overall growth since 2000-01 has been almost two percentage points higher than in the earlier period. This means either that fast growing States have started to grow even faster and/or more States have joined the ranks of fast growing States.

Future growth of overall GDP will, therefore, be more and more influenced by the good performers, rather than the tail-enders. Pushed to its logical conclusion, this implies that over the long run it will no longer matter whether slow growing States grow slow, fast, or not all.

The logic that applies to slowly growing States also applies to the agricultural sector which now accounts for about 20 per cent of GDP. Its rate of growth has dropped from 3.5 per cent in the 1980s to 2.5 per cent in the 1990s, to 1.3 per cent in recent years. Second, disparities in per capita income across States and sectors will become a serious political problem.

The tail enders will continue to grow, but they will fall further and further behind. India is definitely shining, but most Indians are not. As a consequence, even as the economy moves into a new world, politicians will trip over one another in their race back to the old one.

More Stories on : Economy | Economy | Other States

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
UP, Bihar, Orissa, MP drag down GDP growth

Copyright © 2006, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line