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December 07, 2017

States of growth

Gujarat, Madhya Pradesh, Haryana, fastest-growing
Punjab, Uttar Pradesh, Kerala bring up the rear

Equitable economic development requires that we do not miss the woods for the trees. But India‟saggregated GDP and other vital statistics hardly reveal how its constituent states are faring.


Not only are there wide divergences in state-level performance, but also a lot of policy action these daystakes place at the state level. Additionally, they are getting exposed to increasing competition, and nowhave the responsibility for some key reforms such as of land and labour laws, which can play an importantrole in shaping macroeconomic outcomes at the sub-national level. Details on these get buried in aggregatenational statistics.


This report gauges the performance of states on three key macroeconomic parameters – growth, inflationand fiscal health.


We trace the growth paths of different states, identifying leaders and laggards in GDP growth, and trackingthe progress in convergence of poorer states to richer states. We also take a look at one of India‟s biggestconcerns at the moment – unemployment – and assess which states are performing relatively well in thelabour-intensive sectors.


We also evaluate inflation trends and analyse the growth-inflation dynamics at the sub-national level.Inflation fell in most states between fiscal 2013 and fiscal 2017. In 11 major states inflation declined fasterthan the all-India average. But was there a growth-inflation trade-off? Did states that grew faster than theall-India average experience higher inflation?


In addition, we analyse the fiscal situation of states, looking at their debt and deficit parameters. Byjuxtaposing the growth performance of states with their fiscal positions, we have identified the topperformers and the laggards in this space.