Here is a paper by Utsav Kumar and Arvind Subramanian (2011) that presents four facts about state-level growth in the 2000s:
The paper is very simple, seeking only to present and prove the facts, rather than trying to explain the causation. The four stylised facts presented by the author are:
- Growth in the main states, except three, increased in 2001–09 compared to 1993–2001: The three laggard states are identified as West Bengal, Himachal Pradesh and Rajasthan. This is, however, not as much an indictment of these states as it is reflective of their solid performance in the 1990s. I was surprised to learn that Bengal was among the top performers in the 1990s.
- Despite the strong performance of the hitherto laggard states, we find that divergence in the growth performance across states continues: The authors prove this using a number of models. In essence, they run a regression of the growth rate of the states in different time periods (2001-09, 1970-2009, 1994-2009 etc) versus their initial income level and find that the coefficient of initial income level is positive, i.e. richer states grew faster. What they also find is that divergence has been a constant phenomenon since the 1970s, and that the pace of divergence has only increased in recent years.
- States with the highest growth in the pre-crisis years, 2001–07, suffered the largest deceleration during the crisis years (2008 and 2009): The authors identify Karnataka, Maharashtra and Gujarat as those states whose growth rate decelerated most sharply in the crisis years. These were incidentally also the states that grew the most in the pre-crisis years. The laggard states, notably Assam, Madhya Pradesh and Bihar, were the ones that continued to maintain high growth rates even in the crisis years. The authors then hypothesize that this deceleration was a function of the openness of the state economy. Since no metric for a state's global economic integration exists, the authors use the share of the manufacturing and services sector in the SGDP as a proxy for openness. They find a negative relationship between the change in growth rate and the share of the manufacturing/services sector, thus implying that states that were most open to the global economy also suffered the most.
- For the period 2001–09 we do not find any positive effect of the so-called demographic dividend: To me, this was the most surprising observation. However, a deeper reading made it evident why it was so. 49% of our demographic dividend is supposed to come from the BIMARU states. However, these states were also the poorest performers in the time period that the paper covers. Hence, the clear demographic dividend that was observed in previous years was reversed in the 2000s. This is also a dire warning for India's continued growth - unless the youth in the BIMARU states are either allowed to migrate to other states or employment opportunities are generated for them within their states, India's date with the demographic dividend might never come.
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