Market Forces Alone Not Enough To End East’s Poverty

To achieve India’s ambition of Viksit Bharat@2047, it is crucial that all states and regions contribute to India’s development. Equitable participation in India’s growth story by all states will not only ensure greater social inclusion but will also support and nurture the country’s fascinating diversity. 
At present there is a visible distinction in the economic status and growth performance between the six southern states, viz., Kerala, Goa, Tamil Nadu, Karnataka, Andhra Pradesh and Telangana on the one hand and the six north-central and eastern states—Uttar Pradesh, Madhya Pradesh, Bihar, Jharkhand, Chhattisgarh and West Bengal—on the other. According to official statistics, the per capita income in Goa is nearly 10 times that of Bihar. The average per capita income of the six peninsular states in 2021–22 was Rs 1.50 lakh in constant 2011–12 prices. The average of the six eastern states for the same year works out to be only Rs 56,000, or a third of their southern counterparts. The divide becomes even more marked when the seven north-eastern states are included. The differences in per capita income cogitate the lack of opportunities in these states; this is also reflected in the migration pattern of the population which is induced by the low livelihood earning opportunities. As per the last census, around 40% of the Indian migrants are from these six eastern states.

Similarly, most human development indicators, provided by the fifth National Family Health Survey show these to be at a significantly lower level in the eastern states when compared to those in the six peninsular states. This holds true for indicators like longevity, literacy, child malnutrition, women suffering from anaemia, etc. This results in a sharp distinction between the two sets of states in terms of the sustainable development goals (SDGs). Nearly all the six peninsular states have an SDG score in the 70s, with Kerala topping the list with a score of 75. On the other hand, the six eastern states, on an aggregate, manage a score in the 50s, nearly 20 points lower than the southern states.

The significantly weaker economic performance of the eastern and north-central region, when compared to the western and the southern regions, is ironic because the former boasts a much larger share of India’s natural resources. For instance, together, Jharkhand, Chhattisgarh, West Bengal, Madhya Pradesh and Bihar hold more than 60% of the coal reserves in India. Jharkhand and Chhattisgarh hold about 45% of iron ore reserves in India, but the two states account for only about 25% production of iron ore in the country. The eastern region also has the most fertile and well-irrigated arable land in the country, being an integral part of the Gangetic river basin. The region contributes a large share of the country’s agriculture output—20% of rice, wheat and oilseeds and 80% of jute. However, all this output is sold in its primary form without any processing or value addition, which is often done in the more industrialised states. This reflects the major weakness of the eastern region, which is its inability to attract private investment flows that are necessary for establishing industrial and manufacturing capacities.

For markets to develop and function efficiently and for investment to flow into these six states, there is a need for a robust enabling ecosystem, comprising strong law and order enforcement, business-friendly policy and regulatory framework, development of skills and human talent and world-class physical infrastructure. The eastern states suffer from weaknesses in all these areas. The India Residential Energy Survey data states that residents of Jharkhand and Bihar experience power outages for long periods, indicating bottlenecks in the provisioning of the energy and power requirements of the region. Data from Telecom Regulatory Authority of India reflects that Bihar, Madhya Pradesh and West Bengal lag in their digital uptake both in the rural and urban areas.

Next, as per the latest available estimates, the six eastern and north-central states have a combined population of 61 crore, or 44% of the total country’s population, with Uttar Pradesh and Bihar being leaders demographically. In contrast, the six southern states, with a combined population of 27 crore, account for only 19% of the total. This can result in a growing dichotomy of increasing political influence of the more populated eastern states and the higher and rising economic clout of the southern states. Growing regional imbalances can be inimical to not only inclusive growth but can also result in national security issues. In as diverse a country as India, very large movements of migrant worker populations can result in straining the social fabric in the recipient states. In the states that supply the migrants, a vicious circle of poverty, lack of investment, slow economic growth and continued outflow of working age population can create an atmosphere of hopelessness and despair. 

Market forces themselves will not address the issue as capital tends to flow to areas which are already developed and have better quality of physical and social infrastructure. Conscious policy direction and consistent and effective implementation of government projects to improve the ecosystem in the less developed states is needed to reverse this vicious cycle. Two sets of measures should be undertaken to make India’s economic growth more inclusive and regionally balanced. First, both the Central and state governments should work together to harvest the demographic dividend in the more populous six eastern states and also in the seven north-eastern states. But for that to happen, the youth, both young men and women, must be skilled, educated and assured of good health. Without converting its rich human resource to high quality human capital, the eastern region could see the large population becoming a liability rather than an asset. Second, a massive effort is required to improve the physical infrastructure in the region. These two measures can be the key to ensuring that, going forward, India achieves a regionally balanced growth, which will make the country’s economic performance more equitable, sustainable and inclusive.

Rajiv Kumar is chairman and Chavi Asrani is a visiting fellow at the Pahle India Foundation, Delhi, a not-for-profit policy think tank