Regional imbalances

The Standing Committee on Finance recently recommended that the Central Government create a comprehensive action plan to evenly distribute industries across states to reduce the regional imbalances in India. The 26th Report titled “Roadmap for Indian Economic Growth in Light of Global Economic and Geopolitical Circumstances” emphasized that while industrial development is a state subject, the Central Government’s initiatives are crucial for guiding this development. Additionally, the Economic Survey 2024-25 also highlighted the significant disparities in industrial development between states.

Regional imbalances refer to uneven economic growth and development between different geographical regions of India, with some states developing faster than others. The government is now focusing on addressing these imbalances, which hinder overall national progress.

Reasons for Regional Imbalances in India

Several factors contribute to these regional imbalances:

1. Historical Factors:

   • During the British era, development was concentrated in areas like West Bengal and Maharashtra, leaving many regions underdeveloped.

2. Geographical Factors:

   • Difficult terrain in areas like the Himalayas and Northeastern states raises costs and makes it harder to implement development projects.

3. Political Factors:

   • Political instability and protests can also affect industrial development. For example, the Tata Nano project was relocated from West Bengal to Gujarat due to protests and political issues.

4. Policy Disparities:

   • Certain policies like the Green Revolution disproportionately benefited states like Punjab and Haryana, exacerbating existing regional imbalances.

5. Lack of Ancillary Industries:

   • Despite developing large public sector enterprises in regions like Rourkela and Bhilai, there has been a lack of ancillary industries in many backward areas, leading to slow industrial growth.

6. Location-Specific Growth:

   • Cities near national capitals or well-connected regions, like Gurugram or Noida near Delhi, naturally develop faster due to proximity and better infrastructure.

7. Infrastructure Deficit:

   • Poor infrastructure—including roads, railways, banking services, and electricity—limits industrial growth in many states, especially in the Northeast and other backward areas.

Consequences of Regional Imbalances in India

The regional disparities have wide-ranging consequences:

1. Security Concerns:

   • Areas with low development face insurgency (e.g., North-East India) or left-wing extremism (e.g., Madhya Pradesh, Chhattisgarh, and Odisha), which undermines national security.

2. Political Fragmentation:

   • There is an increasing demand for new states and autonomy (e.g., Telangana, Vidarbha), reflecting dissatisfaction with uneven development.

3. Economic Slowdown:

   • Uneven development hampers national economic growth and deepens the economic divide. States like Karnataka (per capita income Rs 2,04,605) are far ahead of Madhya Pradesh (Rs 70,434).

4. Reinforcing Imbalances:

   • Prosperous regions attract more investments, creating a cycle where cities like Chennai and Bangalore continue to grow faster than others.

5. Environmental Damage:

   • Industrial concentration in certain areas leads to pollution (e.g., Delhi’s air pollution) and environmental degradation.

6. Social and Human Development Issues:

   • Frustration among vulnerable groups (like SC/ST, OBCs, and women) is heightened by disparities in healthcare, education, and housing.

   • There are stark disparities in the Human Development Index (HDI), with Goa ranking at the top and Bihar at the bottom.

   • Healthcare inadequacy is evident in states like Bihar, where one doctor serves 28,391 people, compared to Delhi, where one doctor serves just 2,203 people.

Way Forward: Addressing Regional Imbalances

To address regional imbalances, India needs to adopt a multi-pronged approach:

1. Promoting New Financial Institutions in Backward Regions:

   • Establishing new financial institutions in backward areas could help foster all-around development in these regions.

2. Setting up New Regional Boards:

   • Creating regional boards with the necessary legal powers and funding can help in targeting the removal of imbalances.

3. Establishing Growth Corridors:

   • Growth corridors should be developed, encompassing education zones, agriculture zones, and industrial zones for the rapid development of backward areas.

4. Performance-Based Funding:

   • A performance-based funding system could reward states that significantly reduce internal regional disparities, incentivizing development in lagging areas.

5. Additional Funds for Infrastructure:

   • Extra funding should be provided to improve core infrastructure in backward regions, particularly at the inter-district level.

6. Strengthening Governance in Backward States:

   • Effective administration can help these states raise revenues, attract investment, and improve the utilization of resources.

7. Deregulation, R&D, and Innovation:

   • Policies aimed at deregulating industries, promoting research and development, and boosting innovation could facilitate industrial growth in underdeveloped regions.

Conclusion

To effectively address regional imbalances and foster balanced development, India needs to create an environment that promotes innovation, attracts investment, and ensures efficient use of resources. By focusing on strengthening governance, improving infrastructure, and promoting cooperative and competitive federalism, the country can help all states develop at a more equitable pace. As the Standing Committee on Finance suggests, addressing these regional disparities is not only critical for national growth but also for ensuring social stability and economic autonomy in the long run