Interstate Variations in Levels and Growth of Industry: Trends During the Last Three Decades

Abstract

Inter-regional disparity in the levels of economic development and per capita income has been a major issue in development debate and policy in India. There are large variations in the different indicators of development among the states which finally get reflected in the differences in per capita incomes and levels of living. There have, of course, been changes in the extent of disparities and in the relative positions of different states over the years. It is generally argued that it is primarily the level of industrialization and growth of industry that determine the relative levels of economic development of different regions. For, development of agriculture is primarily dependent on the quantity and quality of land which is more or less given, and growth of services mostly follows the growth of agriculture and industry. It is for this reason that most policy instruments for balanced regional development such as investment licences and fiscal and financial incentives that have been adopted in India have been directed towards industry, with the overall objective of ‘industrial development of backward areas’. It is, therefore, interesting to study the pattern of industrial growth in the post-reform period when most of the ‘interventionist’ measures have been removed in comparison with the pre-reform period when they were in place. In this context, this chapter looks at the changes in the levels of industrialization, rates of industrial growth and shares of different states in all-India industrial output and employment. In the process, it also examines whether rates of industrial growth and changes in the levels of industrialization have gone together with gross state domestic product (GSDP) growth rates of different states. The chapter also makes an attempt to examine the factors that have led to differences in the rates of industrial growth, particularly, in the more recent period. It may be noted that ‘industry’ is confined to ‘manufacturing’, in this chapter.