3. (b) Why does inter-State disparity in income persist in India despite plethora of development initiatives undertaken by the Government of India? Analyse.

Understanding Inter-State Disparity in Income

Inter-state income disparity refers to the unequal distribution of economic resources and opportunities, leading to significant differences in per capita income and Gross State Domestic Product (GSDP) across various states and Union Territories within India. This phenomenon is a critical challenge for policymakers, as it reflects uneven development and can exacerbate social and political tensions.

Reasons for Persistent Inter-State Disparities

The persistence of inter-state income disparities in India, despite numerous central government initiatives, can be attributed to a complex interplay of historical, geographical, economic, governance, and institutional factors.

1. Historical and Colonial Legacy

• Uneven Development during Colonial Rule: The British administration concentrated development in specific regions (e.g., Bombay, Calcutta, Madras) for trade and resource extraction, while neglecting hinterlands. This laid the foundation for an uneven economic landscape at independence.
• Early Industrialization Patterns: Post-independence, industrial development often continued in already industrialized regions, further widening the gap.

2. Geographical and Natural Resource Endowments

• Resource Distribution: States rich in mineral resources (e.g., Jharkhand, Odisha) or fertile agricultural lands (e.g., Punjab, Haryana) have historically had an economic advantage. Conversely, states with challenging terrain or limited natural resources face inherent disadvantages.
• Coastal vs. Inland States: Coastal states often benefit from developed ports and waterways, facilitating trade and industrial growth, unlike many landlocked states.

3. Economic Factors and Sectoral Growth

• Uneven Industrialization: Post-liberalization (1991), some states were better equipped to attract investments due to existing infrastructure, skilled labor, and conducive policies. States like Maharashtra, Tamil Nadu, and Gujarat leveraged their industrial bases, while others struggled to industrialize beyond traditional sectors.
• Service Sector Dominance: The growth of India's service sector, particularly IT and finance, has largely benefited urban centers and states with advanced human capital and infrastructure (e.g., Karnataka, Telangana). This has created a divide with states heavily reliant on agriculture or traditional industries.
• Agricultural Productivity: While agriculture is the backbone of many backward regions, issues like low productivity, inadequate investment, fragmented land holdings, and volatile market prices contribute to lower incomes.
• Capital and Labor Migration: The textbook economic logic suggests capital should move to poorer regions or labor from poorer to richer regions. However, capital often gravitates towards already developed regions with better infrastructure and market access, while labor migration from poorer to richer states does not always translate into proportionate wage differences or improved living standards due to limited portability of welfare benefits.

4. Governance and Institutional Weaknesses

• Quality of Governance: States with efficient administration, robust law and order, ease of doing business, and political stability tend to attract more investment and achieve sustained growth. Weaker institutions, red-tapism, and corruption in some states hinder development.
• Investment in Human Capital: Disparities in investment in education, healthcare, and skill development lead to varied human development outcomes. States with higher literacy rates and better health indicators tend to have more productive workforces and attract higher-value industries.
• Policy Implementation Gaps: Even well-intentioned central schemes sometimes suffer from poor implementation at the state level due to administrative inefficiencies, lack of capacity, or political will.

5. Fiscal Federalism and Resource Allocation

• Vertical and Horizontal Fiscal Imbalances: States often have more expenditure responsibilities than their own revenue-generating capacity, leading to dependence on central transfers. While Finance Commissions aim for progressive transfers (more funds to poorer states), the share of devolution for low-income states has sometimes been observed to be decreasing or not sufficiently addressing the widening gap.
• Impact of GST: While the Goods and Services Tax (GST) aimed to create a unified market, some states argue it has impacted their fiscal autonomy and revenue buoyancy.
• Centrally Sponsored Schemes: While beneficial, these schemes often come with conditionalities and uniform guidelines, which may not always align with the specific needs and priorities of diverse states, leading to suboptimal outcomes in backward regions.
• Borrowing Capacity: The ability of states to borrow and finance developmental projects also varies, influenced by their fiscal health and central government guidelines.

Government Initiatives and their Limitations

The Government of India has launched a multitude of initiatives to address regional disparities, including:

• Special Category Status (SCS): Providing special financial assistance and incentives to states like those in the North-East and hilly regions.
• Backward Regions Grant Fund (BRGF) (launched 2007): Aimed at providing financial support to backward districts for infrastructure, education, and healthcare, allowing local authorities flexibility in fund utilization.
• National Rural Employment Guarantee Act (NREGA, now MGNREGA): Guarantees 100 days of employment to rural households, promoting rural development and poverty reduction.
• Pradhan Mantri Krishi Sinchai Yojana: Focuses on expanding irrigation facilities in water-scarce regions.
• Digital India Campaign and BharatNet Project: Aims to bridge the digital divide by providing high-speed broadband connectivity, particularly in rural areas.
• Skill India Mission: To bridge the skill gap and enhance employability across regions.
• Finance Commissions (e.g., 15th FC): Recommend fiscal devolution to states (e.g., 15th FC increased tax revenue share to states to 42.02%) to address regional inequalities.

Despite these initiatives, their effectiveness has been limited by factors such as:

• Implementation Challenges: Delays, leakages, and inadequate capacity at the state and local levels.
• One-size-fits-all approach: Some schemes may not be flexible enough to address the unique challenges of each backward region.
• Focus on input rather than outcome: Measuring success often relies on expenditure rather than actual developmental impact.
• Lack of sustained growth momentum: While some low-income states show intermittent high growth, they often struggle to maintain it consistently to bridge the gap with richer states.

The persistent gap is evident in per capita GSDP figures. For instance, in FY 2022-23, states like Sikkim ($7,083) and Goa ($5,937) have significantly higher per capita GSDP compared to states like Bihar ($830) and Uttar Pradesh ($1,255) (StatisticsTimes.com, 2023-24 data estimates).