India’s states are unlike each other in the extreme. Haryana, one of India’s richest states, is six times richer than Bihar. In the years shortly after Independence, West Bengal was richer than most other large states in India when measured on a per capita income basis. Maharashtra, Punjab and Gujarat were close behind. In the last six decades, though, West Bengal has fallen significantly off its pole position; it is now a low-income state even by Indian standards. The rest of the high-income states on the list mentioned above have remained relatively stable.

The distance between the rich and poor states, nevertheless, has widened. All five of the southern states, unsurprisingly, were among the ten richest large states in 2018-19.

A prevailing theory in newly independent India was that with time, the economic growth and per capita income of various states would converge. This hypothesis was one of the assumptions on which the centralised approach to industrial planning was anchored back then. But many researchers have now shown that economically disparate states do not converge to a single steady state.

They converge to different “steady” states, instead. That is, poor states converge to being poor; rich ones converge to being rich. Some reasonably well-to-do states have done better than their rich peers; and that, data suggests, can be entirely explained by state-level policymaking and implementation.

It is useful at this stage to take a step back and ask some key questions:

What counts as a rich state in India? If one had a choice, is one better off being born in a state with a relatively high per capita income? Like, say, Gujarat? Or should one look for other markers of prosperity even if one were to restrict oneself to economic prospects as criterion? Also, why are the rich states rich and, conversely, why are the poor ones poor?

What’s the Union government’s role in each state’s economic trajectory? Does its policy even have an effect? What should states do to ensure prosperity for their citizens? What can they do, and are they given the space in India’s federal structure to do what they ought to be doing, to achieve this?

Agriculture, which was the mainstay of the country’s economic output at the time of Independence, has remained an unproductive and low-yielding economic activity for a variety of reasons. Despite that, it still employs the largest number of people in India. Subsistence farming has been a source and a symptom of poverty for a long time now.

Economic progress in India and in much of the developing world, therefore, has been linked to moving people away from agriculture and into manufacturing and services. No country became rich by growing food crops in the last half century, after all. Agriculture contributes less than 5 per cent to the GDP in most advanced economies.

Agriculture has also been ruinous to India’s environment, given the focus on hydrophilic crops such as paddy, wheat and sugarcane. These crops have minimum support prices (MSPs) that encourage their sowing at the expense of other crops which demand less water. The loss of crop diversity in the country has meant an overdependence on pesticides, which results in pesticide run-offs. Poor farming practices have thus contributed to desertifying an already water-starved country.

A good way to understand the economy of various states is to look at the different sectors and their respective contributions to the states. The degree of agriculture’s contribution to the Gross State Domestic Product (GSDP) serves as a useful benchmark of a state’s progress. One may assume that states with a low agricultural output to GSDP ratio are on the path towards industrialisation and
modernisation of their societies. This doesn’t have to mean that those states have low agricultural output; rather, it is that their output in other sectors is high.

Interestingly, the states with high levels of human development and relative prosperity have the lowest contribution of agriculture towards their GSDP.

For example, agriculture contributes only 3.91 per cent to Tamil Nadu’s GSDP. That’s the lowest proportion in the country among the large states. Kerala follows its neighbour, at 4.07 per cent. Other peninsular states, like Telangana, Maharashtra and Karnataka, all have relatively low ratios
too. Among the southern states, only Andhra Pradesh has a double-digit ratio, with agriculture contributing 11.5 per cent to its GSDP.

States with low human development indices and low per capita incomes, meanwhile, dominate the list of states where agriculture contributes significantly to the GSDP. Punjab is the exception to India’s agriculture conundrum. It is a relatively prosperous state with reasonable levels of human development that still has a high degree of dependence on farming as an economic activity. Agriculture contributes 13.27 per cent to Punjab’s GSDP. It’s also the state with the highest yields per hectare, which makes farming a worthwhile profession there, unlike in most other states.

The problem of agriculture being poorly remunerative is a worldwide phenomenon. But in India, it is further complicated by the large numbers of people working on small tracts of land that yield harvests much below the global averages.

South vs North: India’s Great Divide

Excerpted with permission from South vs North: India’s Great Divide’, Nilakantan RS, Juggernaut.