Resource Curse and India States

Abstract

Natural resources are expected to help in spurring growth and development of the country. But, in the exceptional case where natural resources dependence harms the economic progress is popularly termed as ‘Resource Curse ’. This topic has been extensively studied on various dimensions, starting from economic growth and developmental outcomes to various channels of causation. The outcome of the studies is conclusive that resource curse has become mainstream case rather than an exception. So far, studies have focused on cross-country examinations and studies on cross-country or provincial analysis are very limited. Keeping this research gap in mind, the present study focuses on the relevance of resource curse hypothesis to Indian context with state-level analysis. This study is inspired from Sachs and Warner (1997) and proceed to test for resource curse hypothesis after controlling for socio-economic and geographic characteristics associated with Indian states on the decadal growth rate of net state domestic product. This study concludes that higher dependence on resource sector leads to the lower growth of state and natural resource curse hypothesis stays valid for Indian states.