Issues in Indian Economy

UNIT 10 BALANCED REGIONAL GROWTH

Structure
10.0 Objectives
10.1 Introduction
10.2 Nature of Regional Imbalance in India
10.3 Measurement of Regional Imbalance
10.4 Need for Balanced Regional Development in India
10.5 Factors Responsible for Regional Imbalance
10.6 Impact of Regional Imbalance
10.7 Policy Initiatives by the Government to Reduce Regional Imbalance
10.8 Issues in Balanced Regional Development
10.9 Let Us Sum Up
10.10 Key Words
10.11 Terminal Questions

10.0 OBJECTIVES
After going through this unit, you will be able to:
● Highlight the nature of regional imbalance in India;
● Measure regional imbalance;
● Find out the need for regional balance;
● Identify the factors responsible for regional imbalance;
● Describe the impact of regional imbalance;
● Describe the policy initiatives by the government to reduce regional
imbalance; and
● Identify the issues involved in achieving balanced regional growth.

10.1 INTRODUCTION
Regional disparity is a ubiquitous phenomenon of the developing countries like
India. Balanced regional development is an ongoing challenge for the government.
Reducing regional inequalities remains a daunting politico-administrative
challenge. The inter-state and intra-state disparities are a major source of concern
for faster and more inclusive development at national level.
Development is not only area specific but also time specific. Development varies
from area to area. You should note that in every country some regions are more
developed than others. Further, growth rate in all the regions are not equal – some
region are growing at faster rate than others.
Since the 1950s, central government has paid attention to those regions which
are lagging behind in economic growth and development. Despite this, one of
the features of development experience in India is the accentuation in regional
disparity in India. Disparities have strengthened over the years, instead of
weakening over time. Scholars have identified various factors that have
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contributed to such disparities. The issue of regional imbalance came into a
sharper focus after the economic reforms of the 1990s. The less developed states Balanced Regional Growth
are falling behind the richer ones instead of catching up. In this unit, we look at
various aspects of regional imbalance in terms of its concept, nature, need, causes
and policy initiatives taken by the government. In this Unit, you will learn the
nature and measurement of regional embalaces. The meal factors and import of
regional imbalance have been further discussed Policy initiatives and issues in
balamed regional development are further elaborated.

10.2 NATURE OF REGIONAL IMBALANCE IN

INDIA
Balanced growth means equitable development in various sectors of the economy.
It means achieving a balance between economic and human development where
economic growth compliments human development. Balanced Growth has two
dimensions spatial (intra-state) and inter-regional imbalance.
Developed regions provide number of attractions in terms of location, climate,
soil, hydrology, natural resource endowment, accessibility, etc. Besides these
natural advantages, such regions include the development of infrastructure, the
establishment of industries, transportation and communication network, nearness
to market, etc. Establishment of one industry paves the way for the development
of other industries by providing them with common facilities such as power,
transport, labour, etc. thus, showing agglomerative effect. Developed regions
also have number of social amenities.
Along with regional imbalance several terms have emerged such as, ‘backwash
effect’, ‘gap-widening’, ‘bridging the gap’, ‘disadvantaged regions’, ‘backward
area’, etc. Regional imbalance refers to the disequilibrium in economic
development and uneven economic achievement of various geographical regions.
It is reflected by the indicators such as per capita income, population living below
poverty line, population engaged in agriculture vis-à-vis engaged in industries,
literacy rate, educational attainment of people, availability of health facilities,
sanitation, housing, the ratio of urban-rural population, infrastructure development
of different states. Regional imbalance in development between different States/
Areas/ Districts is common and exists in India. According to Planning Commission
(2013), “regional inequalities, both between States and within States, present a
serious development challenge to the Indian economy”.
An important aspect of regional disparities in India is the significant level of
disparities, which exists within different states, e.g., Vidarbha and Marathwada in
Maharashtra, Saurashtra in Gujarat, Northern Karnataka, etc. Specific reasons are
responsible for backwardness of regions within states. Backwardness of certain
regions in Gujarat, Madhya Pradesh, Bihar and Odisha can be associated with
the distinct style of living of the inhabitants who are mostly tribal and the neglect
of such regions by the policy makers.
The following aspects of regional imbalance must be kept in mind:
(i) Spatial: (a) Intra-regional disparities such as Eastern and Western Uttar
Pradesh. (b) Inter-regional imbalance: Co-existence of relatively developed
states (such as Gujarat, Maharashtra, Punjab and Tamil Nadu) and
economically backward states (such as Bihar, Chhattisgarh, Madhya Pradesh,
and Uttar Pradesh).
(ii) Social: There is class differentiation in dwellings according to castes in a
village. The dwellings of the people from lower caste may be less developed 157
Issues in Indian Economy than that of the higher caste.
(iii) Disequilibrium in resource endowment: Two regions may be endowed
differently with respect to factors of production. This may culminate into
development gaps.
(iv) Regional consciousness which generate a pattern of flow of resources towards
the developed region.
(v) The rural-urban imbalance is very common in India. Rural areas are
not developed in terms of availability of the basic, economic and social
infrastructure like transport, roads, electricity, water, sanitation, education
and health facilities, etc. It is because of the absence of such facilities
that rural areas lag behind urban areas in terms of the basic indicators of
development.
(vi) Regional disparities may be classified on the basis of natural resources, man-
made, inter-state or intra-state, whole or sectoral.
Planning Commission (2013) has observed that “with its wide diversities in
physiography, history, demography and sociology, India has been characterized
by regional disparities in socio-economic development not only between states
but also between districts of a state and between areas and social groups within
districts.”

10.3 MEASUREMENT OF REGIONAL IMBALANCE

The measurement of regional disparities in the level of development is not an easy
task. The basic issues in this context are those of criteria, scale and techniques
of measurement. Janardhan and Rajendra (2017) have observed that “there may
be a model approach wherein some developed region is visualized as a model
of development and other region are assessed in terms of development of this
model. Indicators for this model are production, consumption, per capita income,
energy consumption, agricultural development, industrial development, transport,
social development, environmental degradation, etc.”
A number of efforts have been made to measure the extent of regional inequality.
In this context, several indicators can be used to measure regional disparities
across states. These are as follows:
(i) Gini coefficient of regional GDP per capita,
(ii) The share of the population living in low-income regions
(iii) Urban/rural divide and rural poverty
(iv) Differences for non-income factors like education, health and living standards
(which covers various aspects of living condition such as electricity and
sanitation)
(v) Differences in labour productivity
(vi) Multidimensional Poverty Index (MPI)
The Organization for Economic Cooperation and Development (OECD)
commonly uses the Gini coefficient of regional GDP per capita with equal weights
for each region/ state regardless of its population size. The coefficient focuses
on output rather than income and this does not include government transfers
and remittances from richer to poorer areas. Joumard, et al. (2017) point out
that “India’s regional disparities are large compared with the OECD average. In
158 2013, output per capita in the poorest state (Bihar) was just 13 per cent the level
of Delhi, one of the richest territories. The share of the population living in low- Balanced Regional Growth
income regions in India is much higher, making poverty a more pressing issue.”
The urban/rural divide accounts for a large share of India’s spatial income
inequality. In the early 2010s, the fastest growing states tend to be those with
a large urban population and the richest states are the most urbanised. Rural
poverty is both widespread and severe, largely reflecting the very low agricultural
productivity. Poverty in rural areas often results in forced migration to cities,
distress sales of land and, in extreme cases, suicides. Overall, the absolute poverty
rate in rural areas, at 26 per cent in 2011/12, was almost twice the poverty rate
in urban areas, despite a faster decline since the mid-2000s.Differences for non-
income dimensions are even larger between rural and urban areas (Joumard, et
al., 2017).
The Government of India (2013) has developed methodologies, including human
development criteria, to measure states’ development level needs and allocate
central government transfers. The Oxford Multidimensional Poverty Index
(OMPI) suggests that deprivation in education, health and living standards (which
covers various aspects of living condition such as electricity and sanitation) is
even higher than in income (OPHI, 2015). Access to core public services is also
highly concentrated, with 69 per cent of the rural population multi-dimensionally
poor compared to 31 per cent in urban areas. The rural/urban divide is particularly
marked for electricity and sanitation. Access to health care also varies significantly
across states and between rural and urban areas (Joumard et al., 2017).
Differences in labour productivity are by far the most important factor driving
differences in per capita output across states. Productivity in the three poorest
states (Bihar, Uttar Pradesh and Assam) was less than one third the level of
Haryana (Joumard et al., 2017).
Omkar Goswami (2022) suggests two categories of variables to measure regional
disparities: (i) Economic Indicators, and (ii) Social Indicators.
Economic indicators include GDP and per capita state domestic product (for
the year 2019-20, at current prices in rupees), households with electricity,
households with improved drinking water at source, households with improved
sanitation facility, and households using clean fuel for cooking. All these have
been expressed in percentage terms.
Social Indicators include the following variables:
(i) infant mortality rate per 1,000 live births,
(ii) sex ratio at birth, last five years,
(iii) females per 1,000 males, women aged 20-24 married before age 18 (in per
cent),
(iv) women of 15-19 years who were mothers or pregnant (in per cent),
(v) female population (above 6) who ever attended school (in per cent),
(vi) women with 10 or more years of schooling (in per cent).
For each variable, comparison in value between the concerned state and the all-
India average. As such, for these variables, those that got high points were the
worse-off states. Lower the points, the better-off the state. Omkar Goswami (2022)
has highlighted that “the comparison among the states bring some interesting
facts. The worst state is Bihar, which secured 9 points out of 11 which means,
in 2019-21, for nine out of the 11 variables chosen, Bihar fared worse than the 159
Issues in Indian Economy corresponding all-India average. Jharkhand and Odisha with 8 of the 11 variables
being worse than all India average. After that comes Assam with 7 followed by a
cluster of four states, for each of which six of the 11 variables were poorer than
those of all India's: Uttar Pradesh, Madhya Pradesh, Chhattisgarh and Tripura. If
we look at “Rajasthan, West Bengal and Meghalaya, five of the 11 indicators are
worse than India's. For Jammu and Kashmir, Andhra Pradesh, Arunachal Pradesh
and Manipur, the score is 4 out of 11. For Maharashtra and Telangana, it is 3,
and for Nagaland, 2. And for Punjab, Chandigarh, Himachal Pradesh, Haryana
and Uttarakhand in the north, it is just 1 out of 11, as it is for Gujarat and Goa
in the west, for Karnataka, Kerala and Tamil Nadu in the south, and for Sikkim
and Mizoram in the northeast.”
It is important to note that “West Bengal may be economically poor, it is superior
in social and health indicators.” However, Goswami (2022) highlights that “Bihar
fails in all six social indicators vis-a-vis India. Jharkhand and Odisha fail in five;
Tripura, Andhra Pradesh and Rajasthan fail in four; and UP, Madhya Pradesh,
Chhattisgarh, West Bengal, Assam and Telangana do not make it on three out of
six social counts.”
It is disheartening to find that not much improvement is visible between 2001
and 2019-20. Most districts in Bihar, Jharkhand, Odisha, Chhattisgarh, Madhya
Pradesh and Assam, and some in West Bengal and Tripura, were among the worst
in terms of household-level assets and access to amenities. So is the case with
social indicators in these states. Even in 2022, there are eight states which are
very bad in terms of assets, amenities and social indicators.
Goswami (2022) comes to the conclusion that “most states of the east are among
the worst in India on both economic and social indicators. In contrast, those in
the north (excluding Rajasthan), the west, much of the south and some of the
north-east are far better off. It is interesting to find that development has driven
the northern, western and southern states and has left the centre, the east and the
north-east far behind over the two decades of present century.”
In this context, while discussing the grant of special category to states for transfer
of funds, the Rajan Committee (2013) has opined that “need of states should be
based on a simple index of under-development.” The index proposed by Rajan
Committee (2013) is an average of the following ten sub-components:
(i) monthly per capita consumption expenditure,
(ii) education,
(iii) health,
(iv) house-hold amenities,
(v) poverty rate,
(vi) female literacy,
(vii) percent of SC-ST population,
(viii) urbanization rate,
(ix) financial inclusion, and
(x) connectivity.
The Committee has emphasised that “less developed states rank higher on the
index, and would get larger allocations based on the need criteria” (Rajan, 2013).

Self-assessment Exercise A
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1) What is meant by regional inequality? Balanced Regional Growth

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2) Describe the nature of regional imbalance in India.
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3) Explain how regional imbalance can be measured.
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4) Describe the criteria suggested by the Rajan Committee for grant of funds
to states.
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10.4 NEED FOR BALANCED REGIONAL

DEVELOPMENT IN INDIA
It is important to note that balanced regional development does not mean equal
development of the regions in the state. It simply implies the fullest realization
of a region’s potential so that the benefits of overall economic growth are shared
by the inhabitants of the region. Given the economic condition, the objective of
the government should be to move towards a more egalitarian society, coupled
with balanced development of different regions. Despite taking a number of steps
to reduce the regional disparities, sizeable differences in development still exist
between states and between districts within a state.
It is well to remember that there have been demands for separate States in India
since independence. Creation of some of the States in the past in the wake of
popular agitation was based on perceived neglect of certain backward regions
in some of the bigger states. Examples could be creation of Andhra Pradesh and
Gujarat in the 1950s, and creation of Punjab, Haryana and Himachal Pradesh in the
1960s. Similarly, there is a demand for a separate Vidharbha State in Maharashtra.
Recently, in 2014, a separate state of Telangana was created from Andhra
Pradesh. Earlier, Chhattisgarh from Madhya Pradesh, Jharkhand from Bihar and
Uttaranchal from Uttar Pradesh were created. These demands for separate states
were mainly due to the lack of economic development in the regions.
Planning Commission (2008) is also of the opinion that “the gains of the growth
witnessed have not reached all parts of the country and all sections of the people in
an equitable manner. Widening income differentials between more developed and
relatively poorer states is a matter of serious concern.” Growth and development
must exhibit regional balance. India is a union of 28 states and 8 union territories
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Issues in Indian Economy which differ in terms of their productive potential and the type of industry they
can support. The realization of their potential holds the key to increasing the
competitiveness of the nation as a whole.
The sustainability of the growth rate and the goal to achieve its development
target will be difficult to meet unless India develops as an integrated whole of
regional competency. Some regions are lacking in natural resources even then
they are ensuring their development through technological development. So there
is a need for stability in the development process of the country by adopting the
process of balanced regional development of the country.
A balanced regional development is necessary for the following reasons:
a. Inequality breeds economic inefficiencies and limits productivity. Thus
regional balance is required to accelerate the overall growth rate of GDP.
b. It will minimise backwash effects. Backwash effect refers to movement of
wealth from poorer region to richer region.
c. It will lead to development of regions which are below national average.
d. It will provide certain minimum standard of living to inhabitants of the
backward states.
e. It will help in maintaining political stability and tackling the problem of left
wing extremists and insurgency to have a strong India. Thus it will lead to
social harmony.
Keeping in view the importance of balanced regional development, we now look
into the factors that should be emphasised. Majumder (2005) has highlighted the
following variables for balanced regional development:
(i) Agricultural development,
(ii) Industrial development,
(iii) Human development related to social indicators of literacy, mortality, etc.
(iv) Infrastructure which is composed of physical, financial and social
infrastructure. Physical infrastructure consists of Agro-specific infrastructure
(irrigation and agricultural credit), transport & communication infrastructure
(road, railways, and communication networks), and power infrastructure.
Financial infrastructure consists mainly of banking services while social
infrastructure consists of availability of educational and health facilities.
Each of these components of development and infrastructure themselves
consists of several variables / indications.

10.5 FACTORS RESPONSIBLE FOR REGIONAL

IMBALANCE
The level of development of a state largely depends on a complex set of cultural,
historical, natural and sociological factors. Regional inequalities in the levels
of development are the result of the disparities in the distribution of physical
resources, diverse culture, and technological achievements. Technology is a vital
input of development strategies as there is a positive correlation between the level
of technological improvement and the level of economic development. Regional
disparities in the level of development are the product of collective effect of all
these factors. Further, factors like distance to the nearest urban agglomeration,
differences in urbanization, availability of electricity and certain state-specific
characteristics play a crucial role in explaining divergence across regions.
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In India, regional inequality is the product of the following factors: Balanced Regional Growth

1. Geographical Factors
a. Some regions are endowed with natural resources such as minerals,
water, fertile land, proximity to the ocean, and accessibility to
waterways. Such regions are more developed than geographically
disadvantaged regions of hilly terrain, desert, infertile land, etc. As for
example, North-Eastern states have remained mostly backward due to
their inaccessibility and other inherent difficulties.
b. Coastal states have geographical advantage as they have a port to do
business abroad. These are more developed compared to many non-
coastal states.
2. Manmade / Historical Factors
a. Historical factors also play an important role in regional disparity.
Development during colonial rule has contributed to regional inequities.
The British rulers preferred to develop those regions of the country
which had potential for manufacturing and trading activities. At
that time, they did not had any industrial policy focusing on overall
development.
3. Social Factors
a. Illiteracy and lack of education in the less developed regions has high
fertility rate and thus growing population.
b. Non-availability of required social services.
c. Social peace and harmony are conducive for development. That is why
the region having a peaceful society is more developed.
4. Economic Factors
a. Inadequate infrastructure like transport system in poorer states.
b. Incapacity of the states to harness rich demographic dividend due to
less developed job market.
c. There is disparity in availability of power supply among states.
5. Political Factors
a. Faulty development strategies in the post-independence era.
b. Inter-state disparities in development have increased post economic
reforms period.
c. Some regional governments implemented development policy more
effectively as compared to other regions, hence they are more developed.
d. Red-tapism, corruption and administrative inefficiency. Added to this
is the lack of political will to fulfil regional needs.
e. Neglect of some regions and preference of other regions in terms of
new investments and infrastructure facilities. It is apparent that new
investment in the private sector has a tendency to prefer those regions
having basic infrastructural facilities.
f. Unhealthy business environment because of extremist activities, law
and order problem, etc. have obstructed the flow of investments into
backward regions besides making flight of capital from backward states.
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Issues in Indian Economy
10.6 IMPACT OF REGIONAL IMBALANCE
Regional disparity in development has the following consequences:
(i) Violent conflicts occur because of uneven regional development which leads
to several agitations intra-state or inter-states.
(ii) Insurgency in the north-east and the left wing extremism in large parts of
the central and eastern states of India.
(iii) Unplanned and haphazard migration from backward areas to the developed
areas in search of livelihood. For example, migration from rural to urban
areas, as the latter provides better quality of life and job opportunities.
(iv) Economic deprivation and inequality in access to resources.
(v) Concentration of industrial development at one place leads to air and sound
pollution, shortage of housing and water, problem of congestion, etc.
(vi) Pressure on existing infrastructure in metropolitan cities.
The states with low level of socio-economic development have become more
vulnerable to the adverse effect of liberalisation. Bihar, Madhya Pradesh,
Rajasthan and Uttar Pradesh are still lagging behind in terms of per capita income
and social indicators.
Poverty and under-employment are especially acute in areas with heavy pressure
of population and in those with scanty development of natural resources. Thus,
regional imbalance is a threat to the goal of inclusive growth and reduction of
poverty. Such imbalances have dampened the speed of further economic reforms,
and pose an obstacle to India’s future economic growth. They affect character
of social life, the nature of the political process, and the priorities of the state.

Self-assessment Exercise B
1) Mention four factors responsible for regional imbalance in India.
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2) Describe the nature of regional imbalance in India.
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3) Explain how regional imbalance can be measured.
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4) Explain why regional balance is important for a country and states.
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 Balanced Regional Growth
10.7 POLICY INITIATIVES BY THE GOVERNMENT
TO REDUCE REGIONAL IMBALANCE
A number of questions arise at this point. What criteria a government should
consider to evaluate regional imbalance? What type of policy a government
should adopt to bring in balanced regional development? It is not easy to answer
these questions. Active state intervention however has been envisaged to reduce
the disparities. During the past 70 years of planned development in India, many
efforts have been made to bring backward regions at par with the advanced
regions. Some of these steps are given below.
(i) Priority has been given to programmes in areas such as agriculture,
community development and irrigation, local development works, etc. These
sectors have a strong linkage with the locality and helps in development of
the area.
(ii) Ensuring provision of economic infrastructure such as power, water supply,
transport and communications, training institutions, etc. in backward areas.
Availability of infrastructure in the area would provide incentives for
establishment of industries and provide employment opportunities to the
local people.
(iii) Launching of programmes for the expansion of micro, small and medium
enterprises (MSMEs). Industrial estates have been set up in all states and
increasingly they are to be located in the smaller towns and rural areas.
(iv) In the case of location of new enterprises, particularly public enterprises,
consideration has been given to the need for developing all the regions of
the country. Many higher education institutions have also been established
in backward regions.
(v) According to the erstwhile Planning Commission (2013) the regional aspects
of development were dealt with in the following manner:
(a) In the plans of the states emphasis was given to programmes which had
a direct bearing on the welfare of the people in different parts of the
country.
(b) Special programmes were undertaken in specific regions areas where
development had either received a temporary setback, or was being
held back by certain basic deficiencies.
(c) Steps were taken to secure more dispersed development of industry
which, in turn, created conditions for development in several related
fields.
(d) In general, efforts were made to enlarge the possibilities of development
in areas which have in the past been relatively backward.
The mechanism employed to achieve regional balance in development was
the transfer of resources from the Centre to the states. These transfers, which
are more heavily directed to populous and poorer states, have been channelled
through the Finance Commission and the Planning Commission. Some of these
transfers are as follows:
a) The Gadgil Formula was evolved in 1969 for determining the allocation
of central assistance for state plans. The formula took due cognizance
of the need for balanced regional development. Special weightage has
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been given to backward states in allocation of resources.
Issues in Indian Economy b) The concept of Special Category States was introduced by the Fifth
Finance Commission (1969) for providing special assistance to
disadvantaged states with a low resource base, difficult terrain, low
population density, inadequate infrastructure and non-viable state
finances.
c) The Planning Commission adopted an area-specific approach in
its planning strategy and introduced multiple centrally sponsored
programmes.
d) The Tribal Development Programme, the Hill Area Development
Programme, and the Western Ghats Development Programme were
initiated, catering to geographically homogeneous and backward regions.
However, such area-specific approaches for growing divergences in
development patterns have not been successful.
The Rajan Committee (2013) proposed a general method for allocating funds
from the Centre to the states based both on a state’s development needs as well
as its development performance. The Committee proposed allocations based
on the index, but with allocations increasing more than linearly to the most
underdeveloped states. The scheme of allocation accommodates differences
in needs, even while recognizing that the truly needy states should be given
disproportionately more funds. Over the years there has been an improvement
in some areas in reducing regional disparities. However, because of the fact that
several states are not able to access the fruits of development equitably, the overall
stress in the national polity has been increasing (Planning Commission, 2013).

10.8 ISSUES IN BALANCED REGIONAL

DEVELOPMENT
Not only are regional disparities pronounced, they have even increased since the
1990s (Ahluwalia 2000). Economic growth since economic liberalisation has
enhanced divergence rather than fostering convergence.
The objective of balanced regional development has consistently featured as
an important agenda of development plans. India’s geographical diversity and
different levels of development across regions imply that targeted action would
be required in less prosperous regions to ensure a minimum acceptable level
of prosperity. This requires a common set of national policies which must be
complemented by policies and programmes targeted at specific regions.
The NITI Aayog (2017) in its agenda proposed policy changes and programmes
for action during 2017-18 to 2019-20. This document highlighted regional
disparity as a critical development issue and offered ambitious proposals for
policy changes within a short period. The geographical characteristics of the
country require region-specific policies and programmes. With these factors in
view, the NITI Aayog (2017) focused on targeted actions in the following four
regions in India:
a. North Eastern Region (NER)
b. Coastal Areas and Islands
c. North Himalayan States
d. Desert & Drought Prone Areas

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Development policies should enable backward regions to overcome the Balanced Regional Growth
disadvantages they face and make available at least some minimum standard
of services for their citizens (Planning Commission, 2008). Kurian (2005) has
stressed that “reduction of regional disparities should be looked upon as a national
objective. The strength of a building depends on the strength of its weakest pillar.
In a similar way the strength of the Indian economy depends on the strength of
the economy of Bihar. Similarly, the bottom line of India’s human development
will depend on the incomes and socio-demographic indicators of development
in northern and eastern India”.
Kurien (2005) is of the view that “the solution mainly rests with the local
leadership. Unless the local leadership – political, bureaucratic and intellectual
–resolve to usher in development based on sharing the gains on egalitarian basis
with the masses, results will be hard to come by. Resources are not the real
constraint. It is the way resources are spent. Unless the work culture in public
services changes, funds alone will not solve the problems. It is imperative that
Centre and the leadership of the backward States should evolve institutional
arrangements to ensure that funds transferred result in the best use in terms of
development”.
Fostering competition amongst states through the business reforms action plan
is expected to improve regional balance. Inter-state competition in improving
governance and the ease of doing business will be of help towards balanced
regional growth. But enticing private investment will need further action on
simplifying regulatory architecture, reducing the litigation and alternative dispute
settlement mechanisms, and easing factors of production, where action rests with
the state. This could also catalyse private investment and innovative public-private
partnerships (Shankar, 2017).
These backward regions should make efforts themselves to improve their
economic and social condition. However, these can be achieved only by taking
concrete action on the ground. If India has to do well, the States as a whole must
do well. Many State Governments are also taking action to redress the problem
of regional imbalances. The role of the Centre in promoting equity among States
and regions has assumed added importance in the post liberalization era.
The main issues of achieving regional balance relate to
(i) Reducing divergence and fostering convergence across regions.
(ii) Keeping in view the geographical diversity of the country, there is a need to
have targeted action plan for less developed regions to ensure that a minimum
acceptable level of prosperity is brought to these regions.
(iii) To make action plan effective, there is a need to have a common set of
national policies which would complement policies and programmes targeted
at specific regions.
(iv) There is a case for having region-specific programmes to provide a given
minimum level of amenities to less developed regions at the earliest because
growth and prosperity must exhibit regional balance.
(v) Need for investments in backward areas.
(vi) Ensuring good governance in backward states.

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Issues in Indian Economy Check your progress
Q1. Is policy needed to reduce regional imbalance? Give two arguments.
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Q2. What important policy measures have been taken by the government to
achieve regional balance? Mention four measures.
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Q3. Which kind of policy measures are important? Write five sentences.
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Q4. Point out reasons for policies not being very effective. Indicate important
ones.
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Q5. What suggestions will you give for achieving regional balance? Write four
of them.
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10.9 LET US SUM UP

Regional imbalance is a common phenomenon in India. The co-existence of
relatively developed and economically depressed states and even regions within
each state is known as regional imbalance. Regional Imbalances implies that there
are differences in the level of economic development across regions. Regional
imbalances may be inter-state or intra-state. Some parts of the country are highly
developed and some parts are severely affected by lack of resources and facilities.
Some regions are quite rich in natural resources but they are poor because they
are unable to utilize the resources. A group of factors are responsible for regional
disparity such as historical, geographical, political, location-specific, social, etc.
Income Inequalities is another important problem.
Regional imbalance is a threat to the goal of inclusive growth and reduction of
poverty. Impact of regional disparities may be discerned in the form of unplanned
migration, social tension, conflict with local people, unutilized vs. over-utilized
resources, left wing extremism, political uncertainty, etc.

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The issue of achieving regional balance has been an integral component of Balanced Regional Growth
development policy. Various steps have been taken to address the issue of
regional imbalance through the mechanism of Finance Commission and Planning
Commission.
Despite having pro-backward areas policy and programmes, considerable
economic and social inequalities exist across states. After economic liberalisation,
the disparity across states has increased. Intra-state disparity has also increased over
time. There is a strong need for strengthening good governance in the backward
areas. Towards this end, it is necessary that the local bodies in the backward
areas are empowered and strengthened to reduce the regional imbalances in the
country. Investing in education, connecting areas and regions (through roads, rail,
air and information technology), improving urban management, empowering the
poor, and introducing social safety nets are some of main areas where concerted
action is needed.

10.10 KEY WORDS

Gini Coefficient: The Gini coefficient is a measure of inequality. It is often
used as a measure of inequality across households or individuals, which can be
extended to measure inequality across regions or states or countries. The Gini
coefficient takes on values between 0 and 1, with zero interpreted as perfect
equality. The Gini coefficient assigns an equal weight to each region regardless
of its size. Differences in the values of the coefficient across countries may partly
reflect the differences in the size of regions in each country.
OMPI: the Oxford Multidimensional Poverty Index is an international measure
of acute poverty covering over 100 developing countries. Recently India has
started measuring poverty across states by using MPI (see Unit 7). The OMPI
complements traditional income-based poverty measures by capturing the
deprivations that each person faces at the same time with respect to education,
health and living standards.
Inter-State Council: This is not a permanent constitutional body, which can be
created at any time. It was set up in 1990 through a presidential ordinance for
the first time as per the recommendations of the Sarkaria Commission under
the Ministry of Home affairs. The secretarial functions of the Zonal Councils
have been reassigned to the Inter-State Council Secretariat from 1st April 2011.
Inter-State Council works as an instrument for cooperation, coordination and the
evolution of common policies. The interstate council is proposed to meet thrice a
year. But in 26 years, it has met only 11 times. The latest meeting was held after
a gap of 10 years in Delhi in July 2016.
NITI Aayog: The National Institution for Transforming India, better known
as NITI Aayog, is constituted to replace the Planning Commission, which had
been instituted in 1950., NITI Aayog, was formed via a resolution of the Union
Cabinet on January 1, 2015.
This is the premier policy think tank of the Government of India, providing
directional and policy inputs, apart from designing strategic and long-term policies
and programmes for the Government of India. It also serves relevant technical
advice to the Centre, States, and Union Territories. The Governing Council of
NITI Aayog is chaired by the Prime Minister and comprises Chief Ministers of
all the States and Union Territories with legislatures and Lt. Governors of the
Union Territories.
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Issues in Indian Economy
10.11 TERMINAL QUESTIONS
1. What do you mean by balanced regional growth? Is regional inequality in
India actually a problem of economic geography? Discuss.
2. Analyse the causes of regional imbalance in India? Which cause(s) you
consider to be of importance in the present condition?
3. Describe the impact of regional imbalance in the economy. Classify the
impact into social, economic and political.
4. Explain the policy steps taken by the government since 1960 and with what
effect?
5. How do you suggest the policy makers for an effective plan for achieving
balanced regional growth in the country? Narrate your plan in some detail.

SOME USEFUL BOOKS / REFERENCES

Ahluwalia, M. (2000), “State Level Performance under Economic Reforms in
India” (Paper presented at the Centre for Research on Economic Development
and Policy Reform Conference on Indian Economic Prospects: Advancing Policy
Reform, May 2000; Stanford University) http://planningcommission.nic.in/
aboutus/speech/spemsa/msa007.pdf
Goswami, Omkar (2022, January 26). A Tale of two Indias: The regional skew in
Government of India (2013), Report of the Committee for evolving a composite
development index of states.
Janardhan, Gadekar Deepak & Rajendra, Sonawane Vijay (2017, May).
Regional Disparities of Socio- Economic Development in Ahmednagar District,
Maharashtra (India). International Journal of Recent Research and Applied Studies
Volume 4, Issue 5(5).
Majumder, Rajarshi (2005) Infrastructure and regional development: Interlinkages
in India. Indian Economic Review, Vol. XXXX, No. 2, pp. 167-184
Niti Aayog: India (2017): Three Year Action Agenda (2017-18 and 2019-20)
Planning Commission (2013). Twelfth five year plan (2012 - 2017) Vol. I. Sage
Publications India Pvt Ltd, New Delhi.

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