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The Geography of Post 1991 Indian Economy

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Study Conducted by Laveesh Bhandari and Aarti Khare, Indicus Analytics May 2002. …

Study Conducted by Laveesh Bhandari and Aarti Khare, Indicus Analytics May 2002.
The economic geography of India has been changing in line with a changing economy in the post-reform period. This paper uses sub-State (regional) level data to study economic growth in the post reform period. Using the latest available data (for the late nineties) at the sub-State-level we find that a very clear break is observable between the eastern and western parts of India. That is, the western part of India has had an increase in its share in the economy as against the eastern part that has lost out during this period.
Unlike others, this study covers all the 78 regions in 35 States of India. The smaller States that are generally left out in State level studies are covered here. This allows us to generate a comprehensive picture of the geographical profile of India and how it is changing. We find some evidence that regions that have a predominantly natural resource based economy are not growing as fast. We also find some evidence that regions that contain important river systems have not performed as well. Other issues are identified as well.
This study finds that much more work is required and is possible with available data. It concludes by identifying a research agenda on the geographical profile of the post-reform Indian economy

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  • 1. The Geography of Post 1991 Indian Economy Laveesh Bhandari Aarti Khare Indicus Analytics, New Delhi (May 2002) Indicus Analytics 1
  • 2. Abstract The economic geography of India has been changing in line with a changing economy in the post-reform period. This paper uses sub-State (regional) level data to study economic growth in the post reform period. Using the latest available data (for the late nineties) at the sub-State-level we find that a very clear break is observable between the eastern and western parts of India. That is, the western part of India has had an increase in its share in the economy as against the eastern part that has lost out during this period. Unlike others, this study covers all the 78 regions in 35 States of India. The smaller States that are generally left out in State level studies are covered here. This allows us to generate a comprehensive picture of the geographical profile of India and how it is changing. We find some evidence that regions that have a predominantly natural resource based economy are not growing as fast. We also find some evidence that regions that contain important river systems have not performed as well. Other issues are identified as well. This study finds that much more work is required and is possible with available data. It concludes by identifying a research agenda on the geographical profile of the post-reform Indian economy. Key Words: Indian Economy, Geography, BIMARU, State, Socio, Demographic, Credit, Bank, Commercial, Motor, Spirit, Manufacturing, Service, NSDP, GSDP, Index Value, Indicus Analytics, Laveesh Bhandari, Aarti Khare. Indicus Analytics 2
  • 3. 1. Introduction It has been over ten years since the first round of important reforms. While countless studies have investigated the impact of the reforms in accelerated economic growth, the impact of reforms on India’s economic-geography is yet to be studied in detail.1 Such an assessment of reforms needs to be carried out at various levels. While State level assessment of reforms has been done by many, (Ahluwalia (2001), Sachs et al (2002), Shand and Bhide (2001), etc.), a sub- State level analysis has been attempted by few. This paper is such an attempt. We study the changes in the economic growth of regions or at the sub-State (or region) level under reforms.2 A regional level analysis is essential for many reasons, we mention two. First, since balanced economic growth is no longer a key post-reform policy objective it would be interesting to study the differences among regions that are surfacing in a more free economy. Second, fewer central government controls and interventions have led to an increased importance of State-level and regional level factors in determining the level of economic activity. Effectiveness of the State and sub-State level factors can only be measured by regional analysis. Many studies conducted in the nineties (and most using data from the eighties and till the mid nineties) found that the northern States were at the bottom of most socio-economic indicators. These States – Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh – have since been referred to as the BIMARU (sickly) States of India. Their poor performance was generally ascribed to poor governance, which was also reflected in poor socio-demographic indicators (low literacy, high population growth, poor health indicators). Ahluwalia (2001) and others using data essentially till the mid nineties also put forth the view that post-reform the lowering of central government controls and interventions also led to a fall in the preferential treatment of these States. And greater economic activity in the nineties tended to favor locations with better governance, human capital, etc. Debroy and Bhandari (2000, 2002) using data till the late nineties and till 2001 found that the BIMARU syndrome appeared to be over. Their study incorporated about a hundred different parameters ranging from economy to social sector to consumer purchases and therefore was broader based. They found that Rajasthan – a large component of the BIMARU States – was performing much better than many other States. And even Madhya Pradesh was no longer in the bottom league. Instead the eastern part of India – Orissa, Assam and even West Bengal in some instances, were found to be performing much worse. At the same time the northern States of Punjab, Himachal Pradesh, and Haryana were performing as well if not better than their western and 1 Ahluwalia, I. J. and I.M.D. Little (1996); Joshi, V. and I.M.D. Little (1996) 2 We use regions as defined by the National Sample Survey Organization (NSSO) as our basic units of analysis. The NSSO divides the Indian States into 78 homogenous agro-economic regions that are groups of contiguous districts. They have been demarcated on the basis of agro-climatic homogeneity. Each agro-climatic region is contained within a State or UT. Together these 78 mutually exclusive and exhaustive regions of India cover all the 35 States and Union Territories of the country. Indicus Analytics 3
  • 4. southern counterparts. In other words, their results indicate that the poor performers (in a general sense) are not so much the northern States, but those in the eastern part of India3. The problem with their study (as with almost all such studies) is that they were working with State level data. And there are widespread intra-State disparities that the aggregates miss-out on. For instance, it is generally considered that the western parts of Uttar Pradesh and Maharashtra (located close to Delhi and Mumbai respectively) have much stronger economies and greater economic well being than the eastern part of those States. Circumstantial evidence also indicates that these regions' economies have performed much better in the post reform India than their eastern parts. This study is different from others in many ways. First, it only deals with economic growth. Issues such as literacy, population growth, and socio-economic welfare are not studied. Neither are governance issues. Consequently, this study is more focused. Second, we work with data at the sub-State level. This, as discussed before, allows us to study the geographic impact of reforms at a much finer level. Third, this study covers all of India. All the 78 regions in 35 States and Union Territories (UTs) are covered, not merely the larger States. For instance, we are also able to investigate the economic performance of northeastern States, UTs such as Chandigarh and Delhi, and smaller States such as Goa and Himachal. The picture that we present therefore is of the whole country. Fourth, this study only aims at answering the question – What is happening to India’s economic geography? Why such changes are taking place, or how, are not dealt with here. Of course what we leave out is extremely important. But that forms part of our future work and is discussed later. This paper proceeds as follows. The variables used and the methodology applied are discussed in the second section. The indices that were obtained are discussed in the third section. The fourth section presents the results. Based on the results presented in the fourth section the directions for future research are charted out in the fifth section. The last section concludes. 3 Their results also underscored the Kanpur – Chennai thesis that essentially states that if a vertical line is drawn joining Kanpur and Chennai then the regions lying to the right of the line are stagnant as compared to those on the left which are much more buoyant (Jairam Ramesh (1996). Indicus Analytics 4
  • 5. 2. data and Method We consider two points in time from the post reform period. 1991-92 and 1998- 99. The reforms started in mid 1991 and therefore we consider the time period after 1991. We have restricted our time period to 1998-99, which was the latest date for which good quality data is available when conducting the analysis.4 Five variables are used to gauge the performance of the economy. These are motor spirit (petrol), HSD (diesel), commercial bank credit (credit) and deposits, and production of cereals. By itself, each of them capture a small part of the overall economy of a region, however, when taken together, they closely reflect the level of economic activity. This is also tested (and reported) in the next section. Motor spirit is the most popular fuel used in transportation. It is used by cars, two wheelers and other vehicles meant for personal transportation. We consider quantity of motor spirit sold as representative of the general economic well being and to a certain extent the affluence of the population. Diesel is also used for transportation, but more so by vehicles used for commercial transportation. Raw materials are brought in and the final goods are taken away by these vehicles. Diesel also has other uses, such as for driving water pumps, and generators. Diesel usage therefore reflects agriculture as well as manufacturing activity. We use quantity of diesel sold as a measure of overall commercial activity. Deposits in all Scheduled Commercial Banks are representative of the surplus available with the people. Savings of the people show up as deposits in banks, among other financial instruments. Though commercial bank deposits do not capture savings in its entirety, they are nevertheless an important and one of the most significant components of it. The bulk of Scheduled Commercial Bank Credit is for working capital for large and small businesses. Increasingly this also includes some agriculture establishments. Term loans components are also now a part of bank credit. The level of credit in an economy is representative of the extent of investment in existing and new ventures in various sectors of the economy. As in the case of deposits, credit is available from many other sources, but bank credit is an important component. Finally, as a direct representative of the performance of the agrarian sector we include cereal production. Cereal production may not be representative of the level of agrarian production for commercial purposes but is none the less an important variable. Subsistence of a large section of the Indian population is directly dependent on the production of cereals. The other variables used by us such as fuel sales as well as bank credit and deposit also capture the production of agriculture cash crops. Data sources 4 Admittedly a better method would be to study the changes over the whole period and not merely base them on two endpoints. We leave that for the future. But we believe that the two end-points also strongly reflect the changes. Later, while crosschecking with State GDP data, we find that our results reflect the economic performance quite strongly. Indicus Analytics 5
  • 6. Data for diesel and motor spirit is obtained from the Ministry of Petroleum and Natural Gas, Government of India. The two time points for this data are 1991- 92 and 1998-99. The district level data on credit and deposits in scheduled commercial banks was taken from Reserve Bank of India. The two time points considered are 1991 and 1997. The source for data on cereal production was Ministry of Agriculture for 1990-91 and 1998-99. Comparison over time There are many different ways of studying how particular variables have changed over time. These range from percentage change to absolute change. We however take a slightly different approach. Instead of attempting to answer, which region has grown faster and which has grown slower, we study the question: Whether a region’s share of the overall Indian Economy has increased or decreased? This therefore involves the following steps. 1. First create a distribution of each of the five variables for the two years. For instance, Region X may have a 0.5% of the total cereal production in India in 1991-92 which has increased to 0.7% by 1998-99. We therefore have 10 distributions (5 variables, two points in time), each distribution adding up to 100%. 2. Second, create a single overall index. There are many different ways of creating a single Index. The differences boil down to how the weights are decided. We use an often-used method Principal Component Analysis, which does not give us any flexibility in deciding upon the weights. PCA is part of a factor analytic model that assigns weights to the variables on purely objective basis and takes away the need to introduce subjective weights. Table 1 Variable Relative weights % Motor Spirit 21.7 Diesel 21.0 Credit 20.3 Deposits 21.6 Cereals 15.4 Note that motor spirit obtains the highest weight closely followed by commercial bank deposits. Next is Diesel and commercial bank credit. The lowest weight is received by cereal production. These weights seem realistic given the nature of reforms that have been introduced. Though such reforms have had an impact on the agricultural sector, their impact on the manufacturing and tertiary/ service sector is more direct and obvious. Indicus Analytics 6
  • 7. 3. An index for both the time points is obtained using the five variables. For each time point a region's index value reflects its share in the Indian economy. For instance, if regions A and B have index value of x and y respectively, and if x>y then region A's share in India’s economy is larger than region B’s. In other words, the index indicates whether the share of the region in the economy is more than or less than the share of another region in the same period. We therefore have indices for 1991-92 and for 1998-99 and refer to them as Index of the Economy, 1991-92, and Index of the Economy, 1998-99. 4. To gauge performance over time we consider the change in the region's index values over the two time periods. This is done by subtracting values of 1991-92 from those of 1998-99 for each region. The differences represent the increase or decrease in each region's share in the economy. We refer to this difference as our Index of Economic Change. A positive value of the Index of Economic Change indicates an increase and a negative value indicates a decrease in a region's share of India’s economy. A higher positive value shows that the region has had an increase in share more than other regions. For example, if coastal Maharashtra has a higher index value than inland Maharashtra and if both have a positive value, it implies that over the post reform period the coastal region's share in the economy has increased more than that of the inland region. Thus, the position of a region is in terms of the extent of increase or decrease in the contribution to the economy. A similar exercise for the States is done to enable a State level analysis. A region whose share has increased is one that is growing faster than the aggregate growth rate of the Indian economy. Indicus Analytics 7
  • 8. 3. Index of the Economy & Index of Change Most studies on performance of States use figures on gross domestic product of the States and its growth to do a comparative analysis of the States. There are no GDP figures calculated at the sub-State level. Even for a State level analysis, as pointed out by Ahluwalia (2000), Gross State Domestic Product (GSDP) data for individual States is not fully consistent with the national accounts estimates of GDP. Methods of estimating GSDP differ across States. Since we are not using the GSDP series, the criticisms do not directly apply to us. Our data is collected across the country in a similar fashion and therefore we are relatively sure of its efficacy in capturing economic activity in a consistent manner. However, as a cross check, we regress NSDP in 1992-93 at 1993-94 prices and GSDP in 1998-99 at 1993-94 prices with the Index of the Economy for the years 1991-92 and 1998-99 respectively. We find that for both 1991-92 and 1998-99 our index explains about 93 per cent of the variation in State domestic products. Tables 2 & 3: Cross-checking the Index of the Economy Table 2 Table 3 Log of State NSDP in 1992-93 (1993-94 prices) Log of State GSDP in 1998-99 (1993-94 prices) No. of observations 26 No. of observations 23 R-squared 0.930 R-squared 0.928 Adj R-squared 0.927 Adj R-squared 0.924 Variable Coef. t Variable Coef. t Log of index 1.67 17.89 Log of index 1.54 16.41 Constant 8.94 98.56 Constant 9.40 102.11 We are however interested in a regional level analysis. Since, the State level figures are obtained by aggregating the regional values and since our index at the State level is highly correlated with the GSDP series the index has been constructed to be just as representative of the economy at the regional level. Indicus Analytics 8
  • 9. 4. Results The map below shows how each region's share in the overall economy has been increasing or decreasing in the nineties. In the map below, the two most densely shaded regions are those whose share of the economy has increased. In the next three less densely shaded regions, the share has decreased. The most dense and the least densely shaded regions imply a higher increase or fall. (See the Appendix for a list of the Index Values) Figure 1: India – Index of Economic Change Indicus Analytics 9
  • 10. Broadly we find that: The contribution of eastern part of India has been falling in the nineties. This is in line with results obtained in other studies. This is true both for the eastern States as well as the northeastern States. Regions containing major metros such as Delhi, Mumbai, Bangalore, Hyderabad and Pune have shown high increases in their contribution to their economy. This is in line with the direction of reforms that have been oriented towards the formal sector, manufacturing, and formal services. However, not all metros have shown an increase in their share. Regions containing Kolkata, Chennai, and Ahmedabad may have grown, but their share of the economy in the late nineties is lower than at the beginning of the post-reform period. Not all regions of southern India show increases in the share of the economy. Parts of Andhra Pradesh (especially the coastal region) and the northeastern part of Tamil Nadu have not done as well. Most regions in the north have improved their shares. However Uttar Pradesh is an important outlier. Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, and Tamil Nadu show the most variability in our measure of growth performance. Whether their shares are increasing or decreasing, change in regions within northern and eastern States is more even. Among the larger States, Rajasthan and Punjab followed by Karnataka, Kerala, and Haryana have had the most even growth across different regions. A discussion of the major States 1. Andhra Pradesh This State is composed of four regions, covering 23 districts, making Andhra Pradesh the fifth largest State geographically5. In the post reforms period, regions other than the coastal region have also grown. That is coastal AP's position relative to other regions has deteriorated. The most dynamic has been the Inland Northern region. This region (also referred to as Telangana contains Hyderabad, Andhra Pradesh’s capital and also most dynamic city. 5 The geographical ranking of the States is done among 32 States - that is we do not include Jharkhand, Chhattisgarh and Uttaranchal as separate States. Indicus Analytics 10
  • 11. Inland Southern is next, followed by South Western region. (Also sometimes referred to as Rayalseema) The latter three regions have improved their position while coastal Andhra has not managed to do the same. 2. Assam On the whole, Assam's relative position has deteriorated over the period under study. In that the hilly region of Assam has deteriorated the least in its relative position. Next are the eastern plains. The worst off have been the western plains whose relative position has suffered the most. 3. Bihar All the three regions of Bihar have suffered a setback in their relative positions. The worst hit is Jharkhand, next is Bihar central. Northern Bihar has not performed as badly as the other two regions but its relative position has fallen all the same. 4. Gujarat As a State the relative position of Gujarat has improved over the time span under consideration. All regions of Gujarat have improved their positions except for the inland northern region, whose relative position has deteriorated. This northern region consists of Ahmedabad, Anand, Gandhinagar, Kheda and Sabar Kantha districts. It is not clear why this may be the case. It goes contrary to our priors. Further analysis should first confirm whether this is just a statistical anomaly. The region showing the most improvement in its position is Saurashtra. The Eastern region is next, followed by the Dry areas and the southern plains. 5. Haryana This State is divided into two regions. The eastern and the western region. The eastern region that is closer to Delhi has improved in its position. This region consists of the districts of Ambala, Faridabad, Gurgaon, Jhajjar, Kaithal, Karnal, Kurukshetra, Panchkula, Panipat, Rohtak, Sonipat and Yamunanagar. Moreover, this State that had excelled during the green revolution has managed to improve its share in the economy even under the economic reforms of 1991. 6. Karnataka Four regions made up of 27 districts form the State of Karnataka. The inland southern region has improved its relative position significantly. This is also the region that contains Bangalore – India’s IT capital. There is a marginal improvement in the position of the inland eastern and the Coastal and Ghata regions. On the whole all the regions of Karnataka have improved. Indicus Analytics 11
  • 12. 7. Kerala The two regions of this State divide Kerala onto the northern and southern parts. Both these show an improvement in their relative positions. Among them though the southern region has performed relatively better. 8. Madhya Pradesh The centrally located State of MP has shown a downward movement in its position relative to other States. Out of the seven regions of the old State of MP, only three managed to improve their position over time. Malwa region has improved the most, next is Northern MP followed by the Vindhya region. The region whose share in the economy has reduced the most is Chhattisgarh. Next is South MP, followed by central and southwestern MP. 9. Maharashtra This is a large State composed of six regions. Geographically it ranks third among 32 States. Not surprisingly, the region which has shown the most improvement over the post reform period is the Coastal region, which includes the city of Mumbai. The effects seem to have spread out. The Inland western region adjacent to it is next in terms of improvement in its relative position (this region contains Pune), closely followed by the Inland central region (Vidarbha). The regions with a deteriorating share are the Inland Eastern (Marathwada) and Inland Northern. 10. Orissa Various studies have shown that Orissa has been lagging behind most other States. Over the post reform period, this has been further reinforced. The relative position of Orissa appears to be deteriorating. The region with the least decline is the Southern region. Next is the Northern region. The region which has faced the most decline in terms of share of the overall economy is the Coastal region. 11. Punjab This State had prospered under the green revolution and appears to have gained a lot from the reforms introduced in the 1990's as well. The position of the State has improved on the whole. Punjab is divided into the northern (Doab) and the southern regions (Malwa). The northern region that contains districts such as Jalandar, Amritsar and Ludhiana has shown better progress than the southern region. Its relative position has improved more than that of the southern region. Indicus Analytics 12
  • 13. 12. Rajasthan There are four regions in this large State. Rajasthan -one of the BIMARU States has shown some improvement in the post reform period. Its relative position has improved as a whole and every region within it has also increased its share of the economy. This is true especially of the regions that are closest to the State of Gujarat, namely the southern (Mewar) and the western regions (Marwar). The growth of Marwar has also been aided by the impressive growth on the agricultural front in the northern part due to the increasing impact of the Rajasthan canal. 13. Tamil Nadu This southern most State of India comprises of four regions. Three of the four regions are located on the coast. However only the coastal and the southern regions have had an improvement in their relative position. The coastal northern region has suffered a decline in its position (containing Chennai, Tamil Nadu’s capital). Again it is not clear why this may be happening, and goes contrary to our priors. The inland region's position however has been improving. 14. Uttar Pradesh Unlike Rajasthan this BIMARU State has only suffered further decline relative to other States in the post reform period. Its five regions inclusive of Uttaranchal have all moved lower in terms of their share of the economy. Eastern UP has declined the most and southern and UP has declined the least. 15. West Bengal The four regions in this State are the Central, Eastern and the Western plains and the Himalayan region. While the positions of all these regions have declined in the post reform period, the worst change has been for the Central plains, which also includes Kolkata – West Bengal’s capital. The Western plain's position has declined only marginally. Indicus Analytics 13
  • 14. 5. Issues for further research As mentioned in the introductory section, we believe that more research is required before a more thorough picture emerges on the regions of India. In this section we discuss, some directions that future research could and should take. There are two important aspects of further work in this area, the first is related to data and methodology, and the second relates to the kinds of questions thrown up by this (admittedly preliminary) work. 5.1 Improving the Data and Methodology Greater, better, and later data should be included. Many other district level variables are available, and for later years. Since the start of this work, district level data for 2000 for bank credit and debit is available, data on telephone connections are also available. Agriculture data on not only cereal production, but also of cash crops should be included. Our index of the Economy could explain about 93% of the variation in State level GDP. We believe that with the inclusion of other important series, this explanatory power can be increased significantly. The scope of this study should be expanded from being purely economic in nature. To expand its scope it would be good to include issues such as literacy rates, education profile, and health conditions. The bulk of such data are at the State level. Fortunately, however, other data sources such as the NSSO can also be accessed for consumer, employment, and demographic data. (The NSSO's large sample data are collected so as to be representative at the regional or sub-State level). The Census of India is also releasing data at the sub-State level and can be another important source. Infrastructure considerations are of significant policy interest, and as of now we have not incorporated any infrastructure data in the study. That is a gap that needs to be filled. State level infrastructure data however is of very poor quality, and at the sub-State level, is more or less absent. As a consequence, until the Census releases its district-level infrastructure data for 2001, we do not see how this gap can be fulfilled. Be that as it may, the need for infrastructure is an important consideration for policy purposes. A detailed study on the impact of infrastructure on State-level economic growth is first required. This could then be supplemented by economic growth at the sub-State level to identify regions where infrastructure is posing a constraint. We believe that there is adequate information available to circumvent the data constraints with the use of appropriate econometric techniques. The methodology used here, is one among many that could have been used. We do not claim that ours is the best. The methodology would of course depend upon the particular questions being asked and the kind of data used. However, we believe that the kind of econometric techniques that are generally used to study inter-country divergence or convergence of growth are not appropriate for studies at the sub-State level. Indicus Analytics 14
  • 15. 5.2 How and why is the economy changing In one sense, this is the most essential part of future work. That the eastern parts of India have not performed as well as western parts, and that areas around large cities appear to be growing faster are not the only aspects of our results. Others are discussed below. A. Moving away from a resource based economy: The map below shows the geographical density of India’s economy in 1991-92. The more densely shaded regions represent a higher share of the national economy. Broadly, the northern and eastern parts of India are essentially resource based economies. The kind of agriculture that was traditionally the norm there was based on high quality land/soil, natural means of irrigation, natural resources and natural resource based industry. Indicus Analytics 15
  • 16. The other parts of the Indian economy were less resource based. For instance the high agriculture production in Punjab is dependent on canals, tube wells, fertilizer, HYV seeds, and so forth. Similarly, the large economy of western Maharashtra is based more on engineering, chemicals, and textile industry. Now consider the map of the Index of Economic Change again. All the important natural resource based regions show a fall. It includes all of UP and Bihar, the new States of Jharkhand and Chhattisgarh, and this also includes coastal Andhra and Tamil Nadu – the deltas of Rivers Krishna, Godavari and Cauvery. Whether agriculture, mining, or natural resource based industry – natural based economy of India has fallen in importance. The implications of this possibility are manifold. In employment opportunities, the type of infrastructure required, the kind of activities that the respective State government’s are pushing for, all require a better understanding of this structural shift. Indicus Analytics 16
  • 17. B. The relative fall of the great river system economies. Leaving Punjab, there are six or seven major river systems in the country that account for the bulk of India’s agriculture production. The Ganga in the north, the Brahmaputra in the east, Krishna, Godavari and Cauvery systems in the south, and Narmada, Tapti and Sabarmati in the west. The map below shows all the major rivers in the country. Apart from Punjab, all the important river systems show a fall in their share of the economy. The first possibility is that somehow we are not capturing the rural agriculture economy adequately. While that is possible, we believe, that something more is occurring. All the reforms have somehow circumvented agriculture. Though international trade, financial institutions, manufacturing permissions and licenses, all have seen major changes. Agriculture conditions in the nineties remained broadly similar to those before the 1991 reforms. Indicus Analytics 17
  • 18. One reason why the regions surrounding the river systems may not be performing well is that water management is not done properly. There are technical as well as political problems in water management and sharing agreements. Unresolved inter state water disputes pose a significant hurdle in the path towards development in agrarian regions since none of the regions involved are able to use the water efficiently. Bad water management adds to the existing problem of fragmented land holdings that are characteristic of the regions surrounding these river systems. Punjab and Haryana that do not have this problem perform very well in comparison to these regions. Uneconomic sizes of land holdings of the small and marginal farmers constrain them in their ability to make complementary investments. Investments in terms of agricultural inputs are required to reap the benefits of having an abundant supply of water. Opening up of the Indian economy and the resulting competition with cheaper agricultural imports requires and increase in yield. This makes availability of better technology inputs in terms of higher yielding seeds, fertilizers and pesticides indispensable for the Indian farmer. Lack of working capital with these farmers to carry out the investments may be a reason for the poor performance of these regions. Other factors such as the political economy of these areas, the spread of tube-wells in otherwise non-irrigated areas, terms of trade, all may have played a role. In any event, to investigate this further would require a district level analysis of agriculture, and agriculture production. C. Governance and other issues. Many have asserted the importance of governance, law and order, and higher education as being necessary for fast economic growth. Data on political stability of the States, crime statistics, location of educational institutions should therefore all be looked at. In sum, many factors could be associated with this divergence between east and west India. It is conceivable that all have played a causal role though in varying degrees. Further research is called for on all these fronts. Indicus Analytics 18
  • 19. 6. Conclusion Our results clearly point out the regions and States that have gained and those that have lost out in the post reform period. Measures to further improve the position of the regions that have done well in the post reforms period can be suggested and introduced only after a better understanding is gained of how and why this has occurred. That is, this would require detailed study of the processes that have ensured their better performance. A large part of this paper is devoted to suggesting issues for further study. We believe that many of our results can be improved upon by way of later data and greater statistical robustness. Nevertheless we believe that the broad direction of our results strongly reflect reality. Our results also bring out the changes in regional disparity over the post reforms period. Reforms that would benefit the regions that have lost out entirely in the wake of the economic reforms of 1991 need to be introduced. Agriculture reforms being an important area of national focus. It may very well be that differences among India’s regions are increasing purely because of the differences in the sectors where greater liberalization has occurred. When certain sectors are ignored (cities, agriculture, governance) by reformers, by default they are also ignoring certain geographical regions. ♠ Indicus Analytics 19
  • 20. Appendix India map with NSSO regions and their identifiers Indicus Analytics 20
  • 21. Table A1: Regions, their identifiers and States NSSO reg. ID Region name State name NSSO reg. ID Region name State name 21 Coastal Andhra Pradesh 144 Inland Central Maharashtra 22 Inland Northern Andhra Pradesh 145 Inland Eastern Maharashtra 23 South Western Andhra Pradesh 146 Eastern Maharashtra 24 Inland Southern Andhra Pradesh 151 Plains Manipur 31 Arunachal Pradesh Arunachal Pradesh 152 Hills Manipur 41 Plains Eastern Assam 161 Meghalaya Meghalaya 42 Plains Western Assam 171 Mizoram Mizoram 43 Hills Assam 181 Nagaland Nagaland 51 Jharkhand Jharkhand 191 Coastal Orissa 52 Northern Bihar 192 Southern Orissa 53 Central Bihar 193 Northern Orissa 61 Goa Goa 201 Northern Punjab 71 Eastern Gujarat 202 Southern Punjab 72 Plains Northern Gujarat 211 Western Rajasthan 73 Plains Southern Gujarat 212 North Eastern Rajasthan 74 Dry areas Gujarat 213 Southern Rajasthan 75 Saurashtra Gujarat 214 South Eastern Rajasthan 81 Eastern Haryana 221 Sikkim Sikkim 82 Western Haryana 231 Coastal Northern Tamil Nadu 91 Himachal Pradesh Himachal Pradesh 232 Coastal Tamil Nadu 101 Mountainous Jammu & Kashmir 233 Southern Tamil Nadu 102 Outer Hills Jammu & Kashmir 234 Inland Tamil Nadu 103 Jhelam Valley Jammu & Kashmir 241 Tripura Tripura 111 Coastal and Ghata Karnataka 251 Uttaranchal Uttaranchal 112 Inland Eastern Karnataka 252 Western Uttar Pradesh 113 Inland Southern Karnataka 253 Central Uttar Pradesh 114 Inland Northern Karnataka 254 Eastern Uttar Pradesh 121 Northern Kerala 255 Southern Uttar Pradesh 122 Southern Kerala 261 Himalayan West Bengal 131 Chhattisgarh Chhattisgarh 262 Eastern Plains West Bengal 132 Vindhya Madhya Pradesh 263 Central Plains West Bengal 133 Central Madhya Pradesh 264 Western Plains West Bengal 134 Malwa Madhya Pradesh 271 Andaman & Nicobar A & N Islands 135 South Madhya Pradesh 281 Chandigarh Chandigarh 136 South Western Madhya Pradesh 291 Dadra & Nagar Haveli Dadra & Nagar 137 Northern Madhya Pradesh 301 Daman & Diu Daman & Diu 141 Coastal Maharashtra 311 Delhi Delhi 142 Inland Western Maharashtra 321 Lakshadweep Lakshadweep 143 Inland Northern Maharashtra 331 Pondicherry Pondicherry Indicus Analytics 21
  • 22. Table A2: Region-wise index of economy and index of change Index of change Index of the Index of the Region ID Region State between 1992 and Economy in 1992 Economy in 1999 1999 21 Coastal Andhra Pradesh 0.45 0.35 -0.09 22 Inland Northern Andhra Pradesh 0.40 0.51 0.11 23 South Western Andhra Pradesh -0.50 -0.49 0.00 24 Inland Southern Andhra Pradesh -0.52 -0.51 0.01 31 Arunachal Pradesh Arunachal Pradesh -0.66 -0.67 -0.01 41 Plains Eastern Assam -0.50 -0.56 -0.06 42 Plains Western Assam -0.47 -0.55 -0.07 43 Hills Assam -0.63 -0.64 -0.01 51 Jharkhand Jharkhand 0.00 -0.15 -0.16 52 Northern Bihar -0.20 -0.23 -0.04 53 Central Bihar 0.02 -0.12 -0.15 61 Goa Goa -0.48 -0.47 0.01 71 Eastern Gujarat -0.04 0.03 0.07 72 Plains Northern Gujarat 0.14 0.12 -0.02 73 Plains Southern Gujarat -0.64 -0.61 0.03 74 Dry areas Gujarat -0.34 -0.29 0.05 75 Saurashtra Gujarat -0.21 -0.07 0.14 81 Eastern Haryana 0.08 0.20 0.12 82 Western Haryana -0.31 -0.28 0.03 91 Himachal Pradesh Himachal Pradesh -0.47 -0.44 0.03 101 Mountainous Jammu & Kashmir -0.57 -0.59 -0.02 102 Outer Hills Jammu & Kashmir -0.67 -0.68 0.00 103 Jhelam Valley Jammu & Kashmir -0.56 -0.57 -0.01 111 Coastal and Ghata Karnataka -0.43 -0.41 0.02 112 Inland Eastern Karnataka -0.54 -0.52 0.02 113 Inland Southern Karnataka 0.24 0.35 0.11 114 Inland Northern Karnataka -0.15 -0.14 0.00 121 Northern Kerala -0.34 -0.29 0.05 122 Southern Kerala 0.28 0.41 0.13 131 Chhattisgarh Chhattisgarh -0.09 -0.13 -0.04 132 Vindhya Madhya Pradesh -0.52 -0.50 0.02 133 Central Madhya Pradesh -0.42 -0.45 -0.03 134 Malwa Madhya Pradesh -0.25 -0.22 0.03 135 South Madhya Pradesh -0.46 -0.50 -0.04 136 South Western Madhya Pradesh -0.55 -0.56 -0.01 137 Northern Madhya Pradesh -0.53 -0.50 0.03 141 Coastal Maharashtra 2.83 3.05 0.22 142 Inland Western Maharashtra 0.32 0.36 0.04 Indicus Analytics 22
  • 23. Index of change Index of the Index of the Region ID Region State between 1992 and Economy in 1992 Economy in 1999 1999 143 Inland Northern Maharashtra -0.35 -0.36 -0.01 144 Inland Central Maharashtra -0.42 -0.39 0.03 145 Inland Eastern Maharashtra -0.28 -0.31 -0.03 146 Eastern Maharashtra -0.59 -0.59 0.00 151 Plains Manipur -0.68 -0.69 -0.01 152 Hills Manipur -0.71 -0.71 0.00 161 Meghalaya Meghalaya -0.61 -0.62 0.00 171 Mizoram Mizoram -0.69 -0.68 0.00 181 Nagaland Nagaland -0.67 -0.67 -0.01 191 Coastal Orissa -0.33 -0.43 -0.10 192 Southern Orissa -0.64 -0.66 -0.02 193 Northern Orissa -0.45 -0.47 -0.02 201 Northern Punjab 0.62 0.66 0.04 202 Southern Punjab 0.21 0.23 0.03 211 Western Rajasthan -0.15 -0.12 0.03 212 North Eastern Rajasthan 0.03 0.05 0.02 213 Southern Rajasthan -0.56 -0.52 0.04 214 South Eastern Rajasthan -0.52 -0.49 0.03 221 Sikkim Sikkim -0.69 -0.69 0.00 231 Coastal Northern Tamil Nadu 0.38 0.37 -0.01 232 Coastal Tamil Nadu -0.35 -0.33 0.02 233 Southern Tamil Nadu 0.04 0.12 0.09 234 Inland Tamil Nadu 0.12 0.18 0.06 241 Tripura Tripura -0.66 -0.66 -0.01 251 Uttaranchal Uttaranchal -0.38 -0.41 -0.03 252 Western Uttar Pradesh 1.07 0.97 -0.09 253 Central Uttar Pradesh 0.16 0.12 -0.04 254 Eastern Uttar Pradesh 0.71 0.53 -0.18 255 Southern Uttar Pradesh -0.51 -0.53 -0.01 261 Himalayan West Bengal -0.54 -0.56 -0.02 262 Eastern Plains West Bengal -0.41 -0.42 -0.01 263 Central Plains West Bengal 1.37 0.89 -0.48 264 Western Plains West Bengal -0.44 -0.45 0.00 271 Andaman & Nicobar Islands Andaman & Nicobar Islands -0.68 -0.68 0.00 281 Chandigarh Chandigarh -0.52 -0.50 0.03 291 Dadra & Nagar Haveli Dadra & Nagar -0.70 -0.66 0.04 301 Daman & Diu Daman & Diu -0.70 -0.69 0.01 311 Delhi Delhi 1.82 1.95 0.13 321 Lakshadweep Lakshadweep -0.71 -0.71 0.00 331 Pondicherry Pondicherry -0.62 -0.61 0.01 Indicus Analytics 23
  • 24. State-wise relative growth index The ratings of the States have been done in two groups. The 32 States and Union Territories have been divided into 15 large States and 17 small States. A regional level analysis has been done only for the 15 large States. Table A3: Relative growth Index 1992 to 1999 Small States Index of Sr. No. Small States & UTs change 1 Delhi 0.126 2 D & N Haveli 0.04 3 Himachal Pradesh 0.031 4 Chandigarh 0.027 5 Goa 0.011 6 Daman & Diu 0.01 7 Pondicherry 0.007 8 A & N Islands 0.001 9 Mizoram 0.001 10 Sikkim 0.001 11 Lakshadweep 0 12 Meghalaya -0.005 13 Arunachal Pradesh -0.005 14 Tripura -0.007 15 Nagaland -0.007 16 Manipur -0.011 17 Jammu & Kashmir -0.026 Table A3 presents the position of the small States in terms of the change in their relative position over 1991-92 to 1998-99. Mizoram is the only north- eastern State that appears in the top 9 small States and UTs, while Lakshadweep is the only Union Territory that appears in the bottom 8 small States and UTs. A clear east - west division is visible. Baring Jammu & Kashmir and Lakshadweep all the other States among the bottom 8 small States and UTs are situated in the Eastern flank of India. Among the top 9 States, except for Mizoram and Andaman & Nicobar Islands all the others are in western India. Indicus Analytics 24
  • 25. Table A4 presents the position of the large States in terms of the change in their relative position over 1991-92 to 1998-99. A look at this table shows a pattern similar to the small States and UTs. All the top 8 States are located in the western block of India while the lower 7 States belong to the eastern block. Table A4: Relative growth Index 1992 to 1999 Large States Index of Sr. No. Large States change 1 Gujarat 0.262 2 Maharashtra 0.236 3 Kerala 0.176 4 Karnataka 0.154 5 Haryana 0.148 6 Tamil Nadu 0.146 7 Rajasthan 0.117 8 Punjab 0.072 9 Andhra Pradesh 0.028 10 Madhya Pradesh -0.044 11 Assam -0.14 12 Orissa -0.141 13 Bihar -0.343 14 Uttar Pradesh -0.352 15 West Bengal -0.514 That is to say, baring a few exceptions, in the post reforms period, western India's performance has improved relative to eastern India. Indicus Analytics 25
  • 26. Bibliography Ahluwalia, I.J. and I.M.D. Little (eds.) (1996): India's Economic Reforms and Development, Oxford University Press, New Delhi. Ahluwalia, Montek S. (2000): Economic Performance of States in Post-Reforms Period, Economic and Political Weekly. Ahluwalia, Montek S. (2001): State Level Performance Under Economic Reforms In India, Working Paper No. 96, Center for Research on Economic Development and Policy Reform. Bajaj J.L. (eds.) (September 2001): The Indian State in Transition, National Council of Applied Economic Research, New Delhi. Bhandari L, P. Bajpai and M. Bordoloi (2002): Market Skyline of India 2002, Indicus Analytics, New Delhi. Debroy, B. and Laveesh Bhandari (2000): How are the States Doing? 1999, Confederation of Indian Industry, New Delhi. Debroy, B. and Laveesh Bhandari (2002): How are the States Doing? 2002, Confederation of Indian Industry, New Delhi. Jackson, J. E. (1991): A User’s Guide to Principal Components, New York, John Wiley & Sons. Joshi, V. and I.M.D. Little (1996): India's Economic Reforms: 1991 - 2001, Oxford University Press, New Delhi. National Council of Applied Economic Research (August 2001): Economic and Policy Reforms in India, New Delhi. Ramesh J.(March 1996): East Needs Yeast, India Today. Sachs, J.D., N. Bajpai and A. Ramaih (2002): Understanding Regional Economic Growth in India, Working Paper No. 88, CID. Shand, R. and S. Bhide (2000): Sources of Economic Growth Regional Dimensions of Reforms, Economic and Political Weekly, pp.3747-3757, October 14, 2000. Shand, R. and S. Bhide (2001): Growth in India’s State Economies Before and With Reforms: Shares and Determinants, Australia South Asia Research Centre, The Australian National University, Australia. Indicus Analytics 26

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