In the intervening 40 years, much has happened. First, these four states have become seven states, with Jharkhand, Chhattisgarh and Uttarakhand having been carved out in 2000 from Bihar, MP and UP respectively.
Since birth, Uttarakhand has been a well-performing state in terms of state GDP per capita (GSDP per capita) as well as HDI. Having broken away from the pack, Uttarakhand ranks in the middle of the all-states charts on GSDP-per-capita, in the bottom-third on population growth and in the top quartile on GSDP growth, while it is below the national average on its fertility rate and well above the same on its literacy rate.
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Rajasthan has moved up from the bottom of the chart to a lower-middle level in terms of GSDP-per-capita and in terms of its fertility rate, but still lags on some indicators like its literacy rate, on which it is about 8 percentage points below the national average of 78%. Its proximity to Delhi and focus on tourism have helped the state greatly. On current trends, it seems likely that Rajasthan will gradually rise above the ‘BIMARU’ acronym by the end of this decade.
MP too has grown its GSDP significantly, particularly on the back of strong agricultural production. However, because that has not been balanced by manufacturing and service sector growth, its relative performance remains in the bottom quartile of Indian states.
Even though government policy has not been dictated directly by that acronym, the label seems to have stuck. This can present problems of developmental emphasis on various states. Uttarakhand, for example, needs no priority, while laggards do.
A recent report on the relative performance of states by the Economic Advisory Council to the Prime Minister (EAC-PM) concludes that since the economic reforms of 1991-92, India’s eastern, north-eastern and central states have lagged western and southern states. While the comparison methodology is simple (some might even say simplistic), with relative rankings taken into account across the years, the trend points to a sharp deterioration in West Bengal, Bihar and UP and a modest one in Punjab. The big gainers have been the southern states, Delhi and Haryana, and to a less extent also Rajasthan.
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Beyond state GDP and HDI, one could use a lens of debt and capital expenditure (as a percentage of state GDP) to assess the relative health of states. Here too, north-eastern states fare poorly and are joined by Punjab and West Bengal. Punjab’s debt is nearly 44% of GSDP and West Bengal’s is around 37%.
The capital outlay of states, at 0.4% of GDP, has increased because of 50-year interest-free loans offered by the Centre, but is still remarkably low. The ratio of state capex to revenue expenditure has remained in the same band for about two decades, with a median of about 20%. It seems unlikely that states will find new sources of revenue to boost their capital expenditure, which would put them on a path to better health.
After the central budget that was presented on 1 February, the scene of reform action is expected to shift to Indian states. Taken together, Indian states spend 150% of the total amount that the Centre spends.
The state of Indian states matters and will likely matter even more in the years to come. At a state-by-state level, governments need to focus on reducing revenue expenditure and increasing capex, selling off unproductive assets and reforming those aspects of the state that keep them chronically unhealthy, such as an over-emphasis on government consumption and their perpetual losses from state-owned power distribution companies (discom losses, i.e.).
Also Read: India’s BUB challenge: Why Bihar, UP and Bengal must industrialize rapidly
It is time to retire the term ‘BIMARU.’ At an aggregate level, the locus of India’s developmental efforts must shift eastward to the northeastern states, West Bengal, eastern UP, Bihar, Odisha and Jharkhand. This new developmental priority is better described by the Hindi word ‘purab,’ which means ‘east’ or ‘in front.’ These states will require greater central assistance and a more carefully thought-through economic development strategy.
Several states, like UP, Bihar the northeastern states and Jharkhand, are land-locked, while others like Odisha and West Bengal have coastal access. It is this set of states that has exported a lot of workers in recent times to urban locations around India. Security service personnel, construction labour, workers in beauty parlours and many other industries have come from Purab states.
If this surplus of labour is to find gainful employment within the eastern region, we’ll need job-generation in cities (for service-sector jobs), industrial clusters (for manufacturing jobs) and innovation clusters around universities.
Also Read: The eastern states have a big role in India’s development aim
The states outside the Purab group that require special developmental attention are Punjab and MP. MP’s challenge is to promote manufacturing and services, while Punjab needs to get its past mojo back. Crony capitalism has put paid to its reputation as an entrepreneurial state with thriving small and medium enterprises.
P.S: “If I play well and win, then the ranking will take care of itself,” said tennis legend Pete Sampras.
The author is chairman, InKlude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand
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