A holistic assessment of states' performance across seven pillars

This study evaluates states on seven pillars, including economic, fiscal, social, and financial development

In India’s competitive federalism structure, both the Centre and state governments play very critical roles in driving policy initiatives and reforms. Hence, as we aspire towards becoming Viksit Bharat by 2047, the states’ role in this journey will be of paramount importance.

 

Different states have followed different development trajectories, and it is important to periodically assess their journey. With this objective, we have done a detailed study of various states’ performance and ranked them accordingly. As no single metric can capture the performance of a state adequately, we have looked at seven pillars, namely economic, fiscal, social, financial development, infrastructure, governance, and environment. The idea is to not just capture data on growth and physical infrastructure, but to look at a holistic assessment covering softer aspects like social development, financial inclusion, environment, and governance. These pillars together capture equitable and sustainable growth potential.

 

Before going into the outcome of the ranking exercise, let’s dwell a little more on our methodology. Under the seven pillars specified, we have captured 50 indicators. We have used a method of normalisation of the indicators and arrived at a composite score based on a weighted average. The weights have been assigned based on our assessment of the impact of the pillars/indicators on the overall performance of the state. Data availability was also a consideration in assigning weights to the pillars.

 

We have given a combined weight of 45 per cent to economic and fiscal pillars as we feel these two pillars have a strong bearing on the overall performance of a state. The performance of these two pillars also has a strong trickle-down effect on other pillars. Under the fiscal pillar, we have not just focused on deficit and government debt, but also captured the quality of government expenditure as that has a strong bearing on social and infrastructure pillars and overall growth potential. Hence, we have captured the state governments’ capital expenditure and spending on health and education. 

 

For financial development and infrastructure pillar, we have given a weight of 15 per cent each. We have not just looked at the physical infrastructure in terms of roads, railways, and power availability, but also looked at the agriculture infrastructure (by capturing net irrigated area as per cent of net sown area) and social infrastructure (by capturing doctors’ availability and pupil teacher ratio in schools) under this pillar. 

 

For the social and governance pillar, we have given a weight of 10 per cent each. Under the social pillar, we have looked at indicators covering education, health, poverty, and the labour market. We have given a relatively lower weight of 10 per cent to the social pillar as the social infrastructure part is already covered under our infrastructure pillar. The governance pillar captures the strength of the institutions and plays a very significant role in the performance of a state. But this is also the most difficult pillar to measure quantitatively. Under this pillar, we have looked at aspects like ease of doing business, security conditions, effectiveness of the judiciary and local government, and public service delivery. The environment pillar has been assigned a relatively lower weight of 5 per cent. However, we expect the prominence of this pillar to increase in the long run.

 

Amongst the large states, Maharashtra tops the ranking, followed by Gujarat and Karnataka in the second and third ranks respectively. With Mumbai as the financial capital, Maharashtra scores high in the financial development pillar, while also scoring well in economic, social, and fiscal pillars. Gujarat, with high per capita income and high investment, scores well in the economic pillar and shows favourable outcomes in the fiscal and infrastructure pillars. Karnataka showed strong performance in the economic, fiscal, governance, and environment pillars.

 

The bottom two rankers, amongst the large states, are Bihar and Jharkhand, occupying the 17th and 16th spots respectively. These two states fare poorly across the pillars, specifically financial development, social indicators, and infrastructure.

 

We have separately ranked the Northeast, hilly, and small states as they are not strictly comparable with the larger states due to their size and location. In this category, Goa tops the ranking with a superior score across most pillars.

 

We have also ranked each of the pillars. To give a broad sense, Gujarat, with high per capita income and higher investment, tops the economic pillar amongst all the large states. In the fiscal pillar, Odisha ranks at the top, as fiscal reforms in the last two decades have helped the state significantly 

 

reduce its fiscal deficit and government debt. Punjab tops the rank in infrastructure, given higher per capita power availability, railway density, and a high percentage of net irrigated area. However, it is to be noted that Punjab fares very poorly in government capital expenditure.

 

Kerala, with a high score in education, health, and poverty, tops the social pillar. However, the high unemployment rate remains a concern for this state. Andhra Pradesh tops the governance pillar, supported by an effective business environment and a strong score of the judiciary and local government.

 

The objective of this study is to present a comprehensive assessment of the states and thus indicate the best practices that can be emulated by others. Such assessment is vital to policymakers, investors, researchers, citizens, and other stakeholders involved in making critical decisions, while also encouraging competitive federalism amongst the states.

 

The writer is the chief economist, CareEdge Ratings