Bridging District Level Heterogeneity for Developed India

INDIA'S ECONOMIC landscape is characterized by heterogeneity across states, districts and sectors.

- By Amit Kapoor & Sheen Zutshi

A few regions drive the country's economic activity and growth, while many regions lag behind. In 202223, five states, Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh, contributed around 47.85 per cent of India's GDP, with a CAGR of over six per cent in the last 18 years.

When we examine the factors behind the progress of the top five economic powerhouses, the common denominator we find is the pace of industrialization, a diversified service sector and strategic infrastructure investments have been the drivers of their advancement. In contrast, the eastern belt of the country, which is home to 27 per cent of its population, accounts only for 16 per cent of India's GDP despite being known for its abundant mineral resources.

This concentrated dynamism is evident because 100 out of 750 districts account for 85 per cent of India's GDP and 87 per cent of its exports. This poses a central challenge: how India's growth story can be spread more equitably? Indian states, for instance, exhibit significant heterogeneity in economic size, population, and development levels, with some states having GDPs comparable to that of entire countries. With a largely urban economy, Maharashtra has a per capita income over three times that of predominantly rural Uttar Pradesh, highlighting stark disparities. These variations extend to district-level contributions, export performance, and overall economic competitiveness, underscoring the need for region-specific growth strategies.

When we zoom into the growth drivers' story from the lens of the district level, we find an even more concentrated picture of economic activities. The top ten districts account for 12 per cent of the national payroll, while the top 10 per cent of districts generate 28.35 per cent of employment. Such concentration means that a select few districts are the primary engines of growth and innovation, leaving many districts behind.