Economic Complexity and Capabilities of Indian States

Abstract

We explore economic competitiveness of Indian states based on the economic complexity algorithm, using a pair of coupled non-linear maps to characterize the Fitness of states and Complexity of products exported by them. We find that states produce almost all products within their productive capabilities - diversifying rather than specializing, and that the probability of coexistence of any pair of productive capabilities is maximized when capabilities are of similar complexity. Therefore, states require long time horizons to build complex capabilities and diverse products. We contextualize Fitness using human development, and find an emergent typology of states. Of most concern are the states of Odisha, Uttar Pradesh, and Bihar, stuck in vicious feedback cycles of poor economic complexity and low human development. Economic complexity also reveals significant concerns with the economic trajectories of Punjab, Gujarat, and West Bengal. We discuss these emergent trends within the framework of India’s modern economic history.