Business Economics

Name: Mohmedfaizal Kadri Assignment No.: 02 (BIMARU states) Roll No.: D-302422 Date: 4th October, 2012

Introduction :

BIMARU are the states of India. It refers to Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. In Hindi BIMARU also means sick. Some of the states have worked hard to get themselves out of this coveted list. Today, the only state that would associate as bimaru would be Uttar Pradesh. In terms of lawlessness, Uttar Pradesh (UP) and Bihar have to do a lot. Bihar is at least on the right path but UP is yet to wake up. In the mid 80s, economic analyst Ashish Bose coined an acronym BIMARU, in a paper submitted to the Prime Minister Rajiv Gandhi. BIMARU has a resemblance to a Hindi word "Bimar" which means sick. This was used to describe the bad state of economy in backward states Bihar, Madhya Pradesh, Rajasthan and Uttar pradesh. Later Orrisa was included in the list. Several studies, including those by the UN, showed that the performance of the BIMARU states affected the GDP growth rate of India. Population Growth : The BIMARU states have some of the highest fertility rates in India. In 2010, total fertility was 3.7 for Bihar, 3.5 for Uttar Pradesh, 3.2 for Madhya Pradesh, and 3.1 for Rajasthan, compared to 2.5 for India as a whole. Notably, the higher than average population growth rate is a recent phenomenon, observed since the 1970s only As late as 1981, ignoring urban city like Delhi, Kerala was the state with the highest population density. This is remarkable since the habitable portion of Kerala as a percent of the total area is much smaller than the Genetic plains states with their highly fertile land. Economic Growth : The differences in economic and population growth rates between the BIMARU states and other Indian states sharpened over the 1990s. The economy of the four BIMARU states grew at an average of 4.6% per year in the 1990s, compared to 6.5% per year for India as a whole since population growth in the BIMARU states was much higher that the Indian average in this period, the income disparity between the BIMARU states and India as a whole also increased. Recent Development :

In recent years some of these states have seen real push in terms of economic growth. Although, some of these states have experienced high growth rates, they still lag other more progressive states. This is particularly worrisome, since the BIMARU states begin with a lower base, and given this growth rates should in fact be higher.
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(1) HDI (Human Development Index) :

It is a tool developed by the United Nations to measure and ranking countries. Levels of social and economic development based on four criteria: Life expectancy at birth, mean years of schooling, expected years of schooling and gross national income per capita. The HDI makes it possible to track changes in development levels over time and to compare development levels in different countries. In the year of 2010, the index ranked Norway, New Zealand, Australia, the United States and Ireland at the top of its list for very high human development. The countries that fell at the bottom of its low human development list were Mozambique, Burundi, Niger, Congo and Zimbabwe. The index also shows that countries with lots of income do not always spend that money in ways that create high life expectancies or education levels. Problem and Analysis :

Apart from the relatively easily solvable problems (education, healthcare, pollution), India's main reason for low HDI is its low GDP/capita value, meaning that poverty is extremely high. There are two ways to handle this: first, you can gradually reduce the population while keeping the economy level, meaning that people will become more wealthy, which will increase HDI both directly and through various welfare stats, such as mortality; second, you can increase the region's GDP. The latter is generally more of a challenge, since India eats up a lot of power, but has few natural resources (including renewables), meaning that the growth of the economy is fairly limited; there's also the fact that India starts from a rather bad situation, so it's not easy job. There are several ways to increase GDP, though not all equally effective. Moving workers into commerce or industry will help, since these sectors make more money; you can do this fairly easily, but it won't have that much of an effect if there are other issues; also, India comprises a good 10-15% of the world's population, so be careful not to cause a global financial crisis. Another, more long-term solution is playing Cap & Trade (once all regions are Altruistic or greener), which will funnel green investment into India. Of course in a fairly short scenario, this will probably not work that well. The last tool is the Quantum Computing technology, which increases efficiency (and thus GDP) in all sectors, not to mention it allows for greater growth. I highly recommend that you spend some money on infotech research and acquire this technology in India as soon as possible, it will help a lot.

Overall, India has a habit of being the most problematic region in the game; people on the forums have said (yes, there are other threads about this topic) that you
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can get above the 0.7 mark just by fixing education, healthcare and stability, but it's apparently a pretty close call.

(2) State Domestic Product :

State Domestic Product, or SDP, is the total value of goods and services produced during any financial year within the geographical boundaries of a province or state. Also called the state income, SDP is always calculated or estimated in monetary terms, and is instrumental in the evaluation of per capita income. State here refers to a sub national entity, as in the states of the United States and the states of India. While GDP gives a good estimate of the entire nation's output, SDP provides more detailed economic details about sub national territories. State-Wise Indices of Economic Development Per-capita GSDP (Rs) in 1993-94 Prices States 198081 3711 4615 5522 4783 6092 5476 7361 7963 199596 4107 6120 7685 8169 9803 9429 14871 13556 200405 5430 7380 9457 10995 15401 15431 19899 20397 Average Annual GSDP 1993-94 Prices Growth Rate 19811990200082 to 91 to 01 to 19901999200491 2000 05 4.42 3.19 5.01 4.96 4.30 7.23 3.34 5.65 6.37 6.29 3.79 5.75 6.69 5.92 6.93 7.02 6.79 4.24 3.32 5.39 6.88 6.12 6.85 5.13 Poverty Ratio (Percent) 1983 2004-05

Bihar Uttar Pradesh Madhya Pradesh Rajasthan Kerala Karnataka Gujarat Maharashtra

66.22 47.07 49.78 34.46 40.42 38.24 32.79 43.44

41.13 33.13 38.96 22.10 15.00 25.00 16.80 30.70

Source: http://jhss.org/printartical.php?artid=146
The study of per capita gross state domestic product at 1993-94 prices shows that though growth differentials between state is both developed and developing states existed in the pre globalized period also however the gap between them was not quite substantial. The study shows that the combined average per capita domestic product for developing states that was about Rs. 4658 in 1980-81 against Rs. 6723 for developed states and the gap between then was 1:1.4, though there was an incremental trend in the combined state domestic products of developing states in the post globalisation period, however the gap between them kept on climbing to 1:1.8 and finally to 1:2.1 there by clearly exhibiting that the benefits of liberalisation and globalisation has been largely cornered by the developing states which has accentuated the problem of regional disparities. Further, the study of per capita gross State Domestic Product (SDP) for 1993-94 prices shows that BIMARU (less developed states) have grown at an average of 79 percent, the growth rate for developed states was worked out to be 164 percent, which is more
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than two times that rate of BIMARU states. If this trend is allowed to continue, it is likely to accentuate the problem of inter-regional disparities. Similarly, the study of average annual growth of gross domestic product shows that the BIMARU state's combined growth rate was about 5.2 percent, while it was 5.4 percent for developed states in the pre liberalized period; however in the post liberalised period, the average growth rate for BIMARU was about 4.5 percent - a drop of about 13 percent, while the combined growth rate for developed states was worked out the about 6.2 percent - an enhancement of about 15 percent! This substantiates our point that the process of liberalization has not provided an even level playing field for developing states. The study also shows that though the level of poverty has declined uniformly, however the rate of decline in the developed states has been far steeper at about 43 percent as compared to the average decline of about 31.0 percent in BIMARU states.

(3) Taxation policy of BIMARU states :

Taxation policy plays a very significant role in the Indian economy. The government of India imposes an Income tax on taxable income of individuals, Hindu Undivided Family (HUFs), companies, firms, co-operative societies and trusts (identified as body of individuals and association of persons) and any other artificial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by the Central board for direct taxes (CBDT) and is part of the Department of Revenue under the Ministry of finance, Government of India. Income tax is a key source of funds that the government uses to fund its activities and serve the public. There are close to 35 million income tax payers in India.

(4) SEZ Policy of All the states :

Special Economic Zones (SEZ) are specifically delineated duty-free enclaves treated as a foreign territory for the purpose of industrial, service and trade operations, with exemption from customs duties and a more liberal regime in respect of other levies, foreign investment and other transactions. Domestic regulations, restrictions and infrastructure inadequacies are sought to be eliminated in the SEZs for creating a hassle-free environment. The SEZ Scheme seeks to create a transparent system by introducing simplified procedures for enhancing productivity and making it easier to do business.

According to Government of India Guidelines, SEZs can be developed in the public, private or joint sectors, or by the State Governments. They are expected to promote establishment of large, self-contained areas supported by world-class infrastructure oriented towards export production. Exploiting the full potential of the concept, SEZs would
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bring large dividends to the State in terms of economic and industrial development and generation of new employment opportunities. Objectives of SEZ :

The prime objective of the Government is to develop specially delineated economic zones conforming to the guidelines of the Government of India to provide enabling infrastructure and a hassle free environment to promote exports from the State. Special emphasis will be laid on development of product specific Special Economic Zones to harness inherent potential of the State in the fields of Gems & Jewellery, Handicrafts, and Woollen Carpets etc. which would result in increase in exports of these commodities with high value addition.

(5) Political Governance :

Dalits and even backward caste people were not allowed to wear good clothes or put on shoes in the villages of Bihar. They could not remain sitting or stand with their heads up before upper caste men or argue with them. Such was the stranglehold of the feudal order in the village that upper caste landlords were supposed to have an undisputed right to over Dalit and backward caste woman. Attempts to mobilise the majority of Bihars population against the small minority of upper castes that dominated the states politics, professions, education systems, police service and public bureaucracy go back many decades. They were organised and animated in particular by the social movement and Socialist Party led by Jayprakash Narayan and Ram Manohar Lohia. The fruits, as measured by representation in the state assembly, began to be visible from the 1970s. In the 1980s, Lalu Prasad Yadav became prominent among a range of politicians who were reflecting, spearheading and shaping this lower caste revolt. The pattern of representation in the state assembly changed markedly. The upper castes lost out although they remained over-represented relative to their numbers, and recently have clawed back some of their earlier losses. Their losses were mirrored in gains for the so-called Backward Castes, who are dominantly cultivating groups and actually middling in the caste hierarchy. After the 1977 state elections, the upper caste Members of the Legislative Assembly (MLAs) outnumbered Backward Caste members by 50 per cent. At their high point in 1995, the Backward Castes had twice as many MLAs as the upper castes. The Yadavs are by far the most numerous single caste in the state. They are significantly over-represented in the state legislature. Their share of Backward Caste MLAs increased over time. On the basis of these numbers, one could talk of the rise of the Yadavs