Regional Income Disparities in India

INTRODUCTION Regional disparities in the level of economic growth experienced in India is a major challenge for policy makers and planners, as it produces serious threat to the socio-political harmony of the country. States have experienced different pace of economic growth, with some states showing fast progress and others languishing behind, although the national growth has been remarkable for the past two decades. Like the national planning the regional planning also has the objective of accelerating the process of social advancement of the community through the technique of economic and social planning, though it is restricted to the given area of the country. The major objective of the regional development is to remove regional disparities in respect of economic and social development and bring out the region at par with other regions of the country. It is a significant means to remove regional backwardness, meet regional aspirations and demands, make optimum and judicious use of regional resources, solve regional problems and involve local people in plan formulation and implementation. It may also help in conserving the environment and cultural heritage of a particular region. REASONS FOR REGIONAL DISPARITIES Disparities in economic and social development across the regions and intra-regional disparities among different segments of the society have been the major planks for adopting planning process in India since independence. Apart from massive investments in backward regions, various public policies directed at encouraging private investments in such regions have been pursued during the first three decades of planned development. While efforts to reduce regional disparities were not lacking, achievements were not often commensurate with these efforts. Considerable level of regional disparities remained at the end of the Seventies. The accelerated economic growth since the early Eighties appears to have aggravated regional disparities. The on-going economic reforms since 1991 with stabilisation and deregulation policies as their central pieces seem to have further widened the regional disparities. The seriousness of the emerging acute regional imbalances has not yet received the public attention it deserves. Most of the studies on inter-country and inter-regional differences in levels of living and income are done within the theoretical framework of neoclassical growth models. These models, under plausible assumptions demonstrate convergence of incomes. Three notable recent studies, TRENDS IN REGIONAL DISPARITIES According to the 1980 data, there are huge disparities among the Indian states. Goa has the highest per capita GSDP, whereas Tripura has the lowest, about one third of Goas figure. In 2006, Goa continues to be the state with highest per capita GSDP, with five times higher figure than that of the state with the lowest, Bihar in this case. This shows that the disparity in per capita GSDP has risen during the period. Only five states performed better than the national economy, in 1980, namely Goa, Gujarat, Haryana, Maharashtra and Punjab. Rests of the states are below the average national per capita GSDP level. The per capita GSDP of Bihar, Orissa, Rajasthan, Tripura and Uttar Pradesh have a substantially lower than other states. In 2006, the major difference is in the number of states, performing better than the Indian economy as a whole. In terms of per capita GSDP (at 1993-94 prices), 10 states performed better than the nation as a whole. Apart from the five leading states in 1980, Himachal Pradesh, Karnataka, Kerala, Sikkim and Tamilnadu have also shown a positive difference in per capita GSDP as compared to the

national GDP. It is evident from the discussion above that regional disparities in income growth are prevalent in India. IMPLEMENTATION WITH 5-YEAR PLAN Regional development has two dimensions, i.e., (i) conceptual base, and (ii) implementation of development plans and policies. The need for regional development was felt since the beginning of the planning era in the country. That is why during the first and second five-year plans special attention was given to develop backward areas. A number of new industrial centres were located in backward areas to provide boost up to the regional economy and create employment opportunities for local people. During the Third Five Year Plan it was decided to accelerate the industrial and agricultural activities on the regional basis to achieve the goal of balanced regional development. But at the end of the plan it was realized that there has not been considerable progress in realizing the objective of balanced regional development. The Fourth Five Year Plan marks a watershed in Indian planning, as it spelt out, for the first time, some distinct regional policies and took certain concrete steps towards balanced regional development. Since the Fourth Plan it was realized that in order to reach the social and economic goals of development, a greater diffusion and growth of activity and employment at local levels would be needed. Hence, some attempts were made to decentralize the planning process to the sub- national and sub-state levels. This change may be seen as a shift towards more enlightened approach to the understanding of regional problems, assessment of local and regional needs and initiation programmes that may benefit local areas or ergot. Among the backward areas, the need to accelerate development of areas inhabited by certain social groups like the tribals, who had been bypassed during the development process, had become a priority issue. Simultaneously the need was felt for directing effort towards building elements of special assistance to small and marginal farmers and agricultural labourers in the area development programmers. These considerations led to the evolution of a definite "target area" and "target group" approach in planning, which must be seen as important developments since the Fourth Plan. Therefore, in the Fourth Plan measures were initiated to consider backward regions in the allocation of financial assistance to the states, (ii) to install central projects in the backward areas, (iii) to make provision of financial support to medium and small industries in the backward areas, and (iv) to provide special financial assistance to small and marginal farmers and agricultural labourers in rural areas. The measures introduced during the Fourth Plan have been continued and even enlarged during the Fifth Plan. During the Sixth Plan programmes of technology up gradation and technology transfer were initiated to strengthen the resource base of the region. Presently the concept is to develop the backward regions as an integral part of the overall planning process.