Diverging state trajectories

The World Bank classifies India as a low middle income country. But nine states in the country have per capita income closer to those of middle income countries, suggests a new report by HDFC Bank. These states — Haryana Uttarakhand, Maharashtra, Kerala, Tamil Nadu, Karnataka and Gujarat — have per capita incomes ranging between $2,000 and $2,700, in line with the average income of middle income countries.
 
But, the average all India per capita income level is dragged down by some states, which as the report points out continue to lie in the lower middle income category. These are Chhattisgarh, Rajasthan, Madhya Pradesh, Andhra Pradesh, and Uttar Pradesh.
 
The two outliers on either ends of the spectrum are Goa and Bihar. With a per capita income of $4,800, Goa is comparable to upper middle income countries while Bihar is the only Indian state that continues to lie in the lower income category with per capita income level close to $600 as of 2015.
 
Gujarat, Haryana, Tamil Nadu and Karnataka are expected to continue to maintain their high growth trajectory in the coming years. And while the states of Punjab, Maharashtra and Kerala are losing steam, the report labels states like Uttarakhand, Jharkhand, Bihar and Chhattisgarh as the rising stars. The latter have witnessed a surge in per capita income growth in the past few years and could well bridge the gap with the front runners in the coming years.
 
Interestingly, the report finds that smaller states such as Bihar, Chhattisgarh, Jharkhand and Uttarakhand have been growing at a faster pace than the larger states. “Amongst the service-oriented states, Bihar has emerged as a rising star, while southern states of Karnataka and Tamil Nadu continue to perform well” says the report.

Click on picture for details