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Resource centre on India's rural distress
 
 

Keeping it going

The recently released figures from the Central Statistical Organisation that estimate how fast India’s states have been growing have undoubtedly been the biggest economic news of the new year. There are many fascinating aspects to the new numbers: for example, that Bihar is the country’s second-fastest growing state, growing at 11.03 per cent annually in the years since 2004-05 — only 0.02 per cent behind Gujarat, a more familiar success story. But not all of the erstwhile BIMARU states — Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, the traditional heartland laggards — were so fortunate. MP performed particularly poorly, growing at less than 5 per cent; but Rajasthan, at 6.25 per cent, and UP at 6.29 per cent, weren’t spectacular performers either.

Decomposing those figures further leads us to some disquieting conclusions. As The Financial Express explained recently, whatever growth that there is in India’s poorest states depends a lot on the services sector. In MP, for example, the communication sector grew at 18 per cent; in Orissa, at 20 per cent; in Jharkhand, at 24 per cent. That picks up, probably, the mobile phone revolution. But here’s the problem: that growth may be a one-time dividend. And that could well be the case in other states and sectors too. In Bihar, for example, growth in the construction sector jumped to nearly 40 per cent annually. That’s changed the landscape visibly, transforming Bihar into a buzzing beehive of activity: but the construction sector, as many a former boomtown can tell you, is merely a signifier that great things could be afoot — and not a long-term plan in itself.

So, while we should be relieved that the long delayed catch-up may have started for some states, and we now know on which states we need to concentrate the clamour for a better, more reform-oriented politics, these figures should be viewed with caution. A four-to-five-year growth spurt driven by specific services sectors need not translate into a genuinely higher growth path. That needs us, in the end, to expand manufacturing: which means, urgently, land acquisition reform, and labour law reform. Only then will India’s most backward states really get going.