G N Bajpai: Nation & the states

There is a serious mismatch between the potential of UP and aspirations of the people, and its level of economic development. In 1700, India's share in world GDP was 24.4 per cent, 2 percentage points higher than China's (OECD publication). Currently, even the most economically powerful nation, the United States of America (USA), contributes only 28.36 per cent (2004) to global GDP. That the Indian economy went downhill and hit the bottom of the pyramid of the global economic structure is history.

The political independence inspired, encouraged and enthused the executive to aggressively plan for the economic emancipation of the teeming millions. The politico-economic perspectives erected the pillars of a mixed economy and the commanding heights of the public sector. However, the first three decades of the post-independence era did not register appreciable performance for a variety of reasons. GDP growth averaged 3.6 per cent and was euphemistically described as the "Hindu rate of growth".

In the middle of the 1980s, the vision of the political executive changed. Quite a few domestic deregulations were formed and the outlook turned positive, leading to the average GDP growth rate rising up to 5.4 per cent during the period 1980-81 to 1991-92.

Propelled by financial crises, in particular foreign exchange, the government at the beginning of the nineties embarked on a host of structural and economic reforms, leading to an upsurge in the Indian economy. Eventually, GDP growth rose to a respectable average of 6.31 per cent during the period 1992-93 to 2005-06. Now, the Indian economy is accelerating. The sterling features seem to be a high and stable growth rate of output per capita and increase in total factor productivity, along with high gross domestic savings (29.1%) and investment (30.1%).

India's membership in the league of highest-growth economies has metamorphosed the attitude and perception about the country within and outside. Indians, who used to despise themselves, now take pride in the developments of the country. People who condemned India for its poverty now look up to the country with admiration and awe, and propound protectionism against India. The world is betting on India for propelling global economic resurgence. In fact, there has been a transmutation in the assessment and thought processes; from a sense of pity to passionate admiration (read The World is Flat, by Thomas Friedman).

However, in this all the states of India are not at the same level. There are shining performers and there are laggards also. There are interludes of ups and downs in the performance of stars and laggards.

At a point of time in the history of the nation, when the approach of even economically deprived voters is undergoing transformation in that they now prefer economic well-being to social fragmentation, and also when the so-called proletariat promote capitalistic propensities, it may be worthwhile examining which parts of India are emerging as islands of prosperity and which continue to be buried under the debris of anachronistic thinking.

The Indian sub-continent comprises 29 states and six union territories and to cover all the sates may be difficult in a single article or two. Hence, it is desirable to pick a state or two and focus on them.

Uttar Pradesh (UP), now nicknamed Uttam Pradesh, is naturally the first candidate. The temptation stems from the fact that with 166.2 million people, accounting for one-sixth of the country's population, it is the most populous state in the country. Further, I was born in that state and have some emotional bond with it. UP can push up or pull down the national esteem. If UP had grown at the country's average rate, India's economic growth rate would have equalled China's.

UP has the largest arable acreage in the country. It has the benefit of the highest number of perennially running rivers like the Ganga, Yamuna, Gomati, Ghaghara, Gandak, etc. The Indo-Gangetic plain was (not sure if it is still valid) supposedly the most fertile land in India. As a child, I have seen farmers just throwing seeds while walking around the ploughed field and harvesting fairly rich crops. No wonder the feuds over the ownership of the land were very frequent, and grievous. Right up to the middle of the 70s, UP was considered to be one of the most industrialised states in the country. In India's share of 24.4 per cent of world GDP in 1700, the contribution of what is now UP was the largest, substantial and more than proportional.

This is the state which has given eight Prime Ministers, who have ruled the nation for more than 80 per cent of the time after Independence. With 80 members (after Uttaranchal was made separate), UP accounts for 15 per cent of the strength of the Lok Sabha. However, all the economic parameters indicate that UP is one of the poorest states in the country. Its per capita income is 54 per cent of the all-India average and less than 36 per cent of the highest per capita income state.

While the nation was going on a high economic growth trajectory, UP was declining steadily. The net state domestic product (NSDP) of the state was growing at around 4 per cent during the period from 1993-94 to 2003-04, against the national average of over 6 per cent. Consequently, per capita income, as from the nineties, grew below 2 per cent. In the last two Five-Year Plans, the eighth and ninth, while the country's GDP was rising at 6.7 per cent and 5.5 per cent, respectively, UP was expanding at 3.2 per cent and 3 per cent, respectively""just over half the national average. In the first year of the Tenth Plan (2002-03) the growth rate was merely 0.3 per cent.

All this means UP's per capita income declined from 65.9 per cent of the national average in 1992-93 to around 50 per cent in 2004-05. And UP's per capita income has declined from 53.3 per cent of that of the highest per capita income state in 1980-81 to 42.6 per cent 1996-97 and further to around 36 per cent in 2004-05.

Apparently, the state has been losing its sheen. There is a serious mismatch between the potential of the state and aspirations of the people, and its level of economic development. What happened and why will be analysed in the next piece.

The author is a former chairman of Sebi and LIC.