The State Of India's States: Here Are The Prime Movers, The Steady Climbers, And The Economic Laggards

A new year and a new impending budget provide a good time to review the economic status of India's states, based on the Reserve Bank of India’s annual handbook of state-level economic data released a month ago.

The good news is that the five largest economies, which constitute half the economy, are all growing at a fair clip: Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh, in descending order. But the rest, barring Haryana and Delhi to some extent, are fluctuating between tepid growth and a near plateau.

The list of laggards is a wide spectrum, ranging from a still-overwhelmingly rural Bihar, through Kerala which has the best Human Development Indices (HDI) in the country, to what was once India’s richest state — The Punjab.

Sadly, on the other hand, though, that much-vaunted ‘Kerala Model’ appears to have degenerated into a fig leaf for an impending fiscal cataclysm, ‘Udta Punjab’ has been failing to gain altitude for over a decade now, and Bihar remains ‘that’ place which is still bypassed by real progress.

The next comparison involved a rigorous analysis of the value added to a state’s Gross State Domestic Product (GSDP) by agriculture, manufacturing, and services, for the financial year 2022-23 (2023-24 could not be used because the data set is incomplete since figures for many states have yet to be published).

In order to neatly project both absolute and relative values of the large states into one graphic, the following methodology was adopted: three dimensionless bubble cross plots were generated for agriculture, manufacturing, and services, in which, per capita value addition was plotted on the Y-axis against state population size on the X-axis.

First, agriculture:

To much surprise, Madhya Pradesh tops the list. Or maybe not so surprising, because the forceful, sustained, focused manner in which the Bharatiya Janata Party (BJP) has brought a near-revolutionary transformation to the agriculture sector in the state over the past two decades, is probably why it keeps getting re-elected there.

While it is no surprise that big granaries of the subcontinent like The Punjab, Haryana, Telangana, and Andhra Pradesh cluster well above the dotted India average line, it is once again a reflection of sustained government policy (again, by the BJP) that has forced two very drought-prone arid states like Gujarat and Rajasthan to rise markedly above the national average. Encouragingly, Odisha has nearly doubled its value added from agriculture in the past six years.

Bihar, the third most populous state of the union, remains at the bottom of the list for a host of legacy structural reasons that no government has been able to overcome yet. This is a crying shame.

Second, manufacturing:

Gujarat has now entered a league of its own in both absolute and relative terms. It has firmly zoomed past the other three traditional industrial powerhouses, Maharashtra, Tamil Nadu, and Karnataka, to become the number one manufacturing state in the country.

The massing of industrial clusters in Haryana and Delhi means that both states now hold their own, but in absolute terms, they are still well behind the Big Four. The fastest growth by manufacturing value since 2017 has been Andhra Pradesh. It has doubled in this period, and if these trends keep up over the next decade, the state could claim its seat at the high table of industry.

On the socialist side of the fence, Kerala, a state which had modern steel mills, textile mills, and factories even before independence, remains a manufacturing minnow with the blessings of its patron saint, Karl Marx.

Third, services:

It is no surprise that Karnataka tops the list in per capita terms since it is the coding capital of the country. Similarly, it is no surprise that Maharashtra is number one in absolute terms since Mumbai is the nation’s financial capital.

Kerala may make a surprise appearance near the top, but do not be misled; while the state has an extremely evolved and flourishing service sector, the consumption comes not from earnings or profits generated by economic activity within the state, but from foreign remittances. This is the sole reason why the state has not descended into utter financial chaos… yet.

To sum up, only four states show robust, balanced economic growth across the three main sectors — agriculture, manufacturing, and services: Maharashtra, Gujarat, Tamil Nadu, and Karnataka.

These states will remain the prime movers of our economy for a good while to come until Uttar Pradesh, Andhra Pradesh, Rajasthan, Madhya Pradesh and Telangana come into their own (they will, albeit at an agonisingly gradual pace). Additionally, an industrial revival is wrought in Punjab, West Bengal, and Bihar.