Home BusinessRoad to development
Business Standard / New Delhi January 06, 2010, 0:03 IST
The demand for a separate state of Telangana has brought into focus the economic performance of small states. Data brought out by the Central Statistical Organisation do show that most of the reorganised states tend to grow faster post-reorganisation and smaller states such as Uttarakhand, Jharkhand and Chhattisgarh have grown faster after achieving state-hood than before, and at a rate higher than the average for the country. Moreover, we find that even UP and Bihar are showing growth rates significantly higher than in the past. However, economic growth is only one of the many issues and parameters that must inform serious thinking on the question of large versus small states. State-level growth figures for the 2000s are affected by many forces; reorganisation is only one of them. The improved economic performance of many of the poorly performing states, Bihar and Orissa included, could also be ascribed to economic convergence. That is, eventually the poorly performing areas tend to catch up with the rest in free and open economies. But economic convergence does not occur by itself, it requires a set of actions that enable the economies of the hitherto poorly performing areas to ramp up. The recent story of growth in eastern India is well known — basic industry, backed by mining activities and resource availability, has been one of the major successes for states such as Orissa and Jharkhand. The growing manufacturing centres in south and west required the output of these states — as the convergent growth hypothesis would suggest.
Oil rises on bullish US manufacturing data
But what about Bihar? There are little natural resources to speak of, and limited industry constrained by poor manufacturing environment and infrastructure. The one critical success in eastern and northern India since the early 2000s has been that of the Pradhan Mantri Gram Sadak Yojana (PMGSY). The PMGSY has been progressing steadily across the country, building all-weather roads across the hinterland. As per the programme objectives, every village of over 1,000 population or over 500 in hilly and tribal areas, has to be connected with an all-weather road. Consequently, both new roads are being built across the country and older, poorer quality roads are being upgraded. Rural roads have the potential to bypass many of the institutional factors that constrain agriculture growth specifically and rural progress in general. They enable easier access to markets, greater spread of technology, faster movement of critical resources and materials. They also enable those living in rural areas to access the infrastructure and services available in urban areas. A village with a motorable connection to a nearby town is better able to attract qualified manpower — whether it is an extension service worker, or a medical professional, or a teacher — into the rural area. This characteristic of roads helps both competitive and market forces become stronger as well as provides greater choice for the rural consumer. However, despite all the realised benefits, northern and eastern region states have not been at the forefront in building rural roads. Had they been as efficient as the southern and western states, the impact on growth could very well have been higher. Yes, India can have double-digit growth, and so can Bihar.