Speed up development in states that need to catch up with others

India's lagging states have little space for fiscal expansion but could make public spending on social schemes more efficient

- SUDIPTO MUNDLE

Earlier this month the Institute of Economic Growth and India's ministry of finance hosted the fourth Kautilya Economic Conclave. In my presentation in a session on the state of state finances, I addressed the question of how to accelerate development in states that are lagging behind.

I first classified 20 states that account for the bulk of India's population (and for which relevant data was available) into four broad groups based on their level of economic and social development. These are a group of 'balanced development states,' with higher than median levels of both economic development and social development; a group of 'growth oriented states' with higher than median levels of economic development but below median social development; a group of 'social development oriented states' with higher than median levels of social development but below median economic development; and a fourth group of 'lagging states' where economic and social development are both below the median level. Comparing the economic and social development of the 20 states with their fiscal performance underlines the development dilemma of lagging states: namely, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Rajasthan and Uttar Pradesh.