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REGIONAL ECONOMIC IMBALANCES IN INDIA: REASONS & REMEDIES



  Jun 20, 2024

REGIONAL ECONOMIC IMBALANCES IN INDIA: REASONS & REMEDIES



Extent of Regional Economic Imbalances

Regional economic imbalances in India are significant and persistent, marked by disparities in income, growth, and development across different states and regions. For instance, the per capita income in Maharashtra is approximately ₹215,000, while in Bihar it is around ₹40,000, highlighting a stark contrast.

Reasons for Regional Economic Imbalances

1. Historical Factors: Colonial policies and historical developments have left certain regions, particularly in eastern India, more underdeveloped.

2. Resource Distribution: Uneven distribution of natural resources such as minerals, water, and fertile land has contributed to regional disparities.

3. Economic Policies: Post-independence economic policies, including industrial licensing, subsidy distribution, and investment patterns, have favored certain regions over others.

4. Infrastructure Development: Disparities in infrastructure such as roads, ports, and power supply have hindered growth in less developed regions. For example, the road density in Kerala is about 517 km per 100 sq. km compared to 186 km per 100 sq. km in Madhya Pradesh.

5. Governance and Political Factors: Variations in state governance and political stability have impacted economic performance across regions.


6. Educational and Skill Development: Differences in educational attainment and skill development programs have led to unequal economic opportunities. Literacy rates, for instance, vary significantly, with Kerala at 96% and Bihar at 61.8%.

Impact of Regional Economic Imbalances

1. Migration: Economic imbalances lead to migration from less developed regions to more developed areas, causing urban overcrowding and pressure on urban infrastructure.

2. Social Tensions: Disparities in economic conditions can lead to social tensions and unrest, impacting national integration.

3. Economic Efficiency: Imbalances result in suboptimal utilization of resources, affecting overall economic efficiency and growth.

4. Political Implications: Persistent regional inequalities can lead to demands for greater autonomy and regional political movements.

Remedies to Address Regional Economic Imbalances

1. Targeted Investment: Increasing targeted investments in underdeveloped regions through special economic zones, industrial corridors, and infrastructure projects. The Delhi-Mumbai Industrial Corridor (DMIC) is a key initiative aiming to develop new industrial cities as Smart Cities and converge next-generation technologies across infrastructure sectors.

2. Policy Reforms: Implementing policy reforms to ensure equitable distribution of resources and economic opportunities, including tax incentives for investments in less developed regions. The Backward Regions Grant Fund (BRGF) is designed to catalyze development in backward areas.

3. Skill Development: Enhancing educational and skill development programs tailored to the needs of underdeveloped regions to improve employability and income levels. The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) aims to enable a large number of Indian youth to take up industry-relevant skill training.

4. Improved Governance: Strengthening governance mechanisms at the regional level to ensure efficient implementation of development projects and policies.

5. Decentralization: Promoting decentralization and empowering local governments to address regional issues effectively. The 14th Finance Commission has recommended increasing the share of states in the central divisible pool of taxes to 42%.

6. Inclusive Growth Strategies: Formulating inclusive growth strategies that focus on the needs of marginalized and backward regions, ensuring balanced regional development. The Aspirational Districts Programme aims to quickly and effectively transform these districts in terms of health, nutrition, education, agriculture, and basic infrastructure.

Addressing regional economic imbalances in India requires a multi-faceted approach involving coordinated efforts from the government, private sector, and civil society to achieve sustainable and inclusive growth across all regions.



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