Inter-State Disparities in Economic Growth in India: Some Policy Implications for Laggard States

Faster economic growth of some of the backward states like Bihar, Uttarakhand and Chhattisgarh in the post 2004-05 compels us to think if it is any indicative of convergence among states of India. However, PCNSDP (per capita net state domestic product) shows huge gap between traditionally high income and newly faster growing state economies. Regional imbalance has been one of the perennial issues of Indian economy which has led to formation of smaller states and present demand for some separate states is result of the same. This study makes an attempt to find causes and extent of inter-state disparity in India by taking data for various variables related to three sectors- agriculture, industry and service sector (including infrastructure) – for 19 major states for 2007-08. A multi-stage Principal Component Analysis is used to identify factors that contribute most of inter-state disparity and Composite Index of Economic Growth is built to measure the extent of disparity. A policy implication for the lagging states is to identify a ‘lead’ sector as an engine of overall growth.