Gujarat, Madhya Pradesh and Haryana were the fastest-growing states between fiscals 2013 and 2017, while Punjab, Uttar Pradesh and Kerala were the slowest, according to rating agency CRISIL.
In a report titled ‘States of growth’, CRISIL said equitable economic development requires not missing the woods for the trees. In the context, India’s aggregated GDP and other vital statistics do not fully reveal how the states have been faring.
States of growth therefore gauges performance using a matrix of 3 key macroeconomic parameters – growth, inflation and fiscal health. For want of data, the analysis is restricted to the pre-demonetisation period.
Interestingly, inflation in the three fastest-growing states was below the national average of 6.8%, which means there was no growth-inflation trade-off for them.
These states have also acquitted themselves well in the labour-intensive sectors such as construction, manufacturing, and trade, hotels, transport & communication services. Gujarat and Haryana feature among the top 3 growing states in terms of gross value added (GVA) of labour-intensive sectors as well as overall GDP between fiscals 2013 and 2016.
Among relatively poor states, Chhattisgarh, Jharkhand, and Orissa were the top performers in labour-intensive sectors, recording growth higher than the all-India average during this period. These states, therefore, are likely to have been more successful than others in job creation.
Rajasthan, Telangana and Tamil Nadu saw the lowest growth in employment-intensive sectors.
States which had the lowest GDP growth in this period – Kerala, Punjab, Uttar Pradesh – unsurprisingly, also saw below-average growth in GVA of their labour-intensive sectors.
Gujarat was the top performer in construction and manufacturing sector growth, while Chhattisgarh and Haryana have been among the top performers in manufacturing and trade, transportation and communication services. In Gujarat specifically, the share of manufacturing has jumped from 28.4%to 34.4% of GVA – which is close to the levels seen in China.
CRISIL’s study also shows inflation fell in most states between fiscals 2013 and 2017. And in 11 major states, it fell faster than the all-India average.
As for fiscal health, Uttar Pradesh, Punjab and Rajasthan were the most indebted, while Chhattisgarh, Karnataka and Maharashtra were the least.
Further, by juxtaposing the fiscal position of the states with their respective GSDP growth rates, we observe that states which have successfully managed high growth levels while keeping their fiscal deficits below 3% include Chhattisgarh, Gujarat, Karnataka, Maharashtra and Telangana.
On the contrary, states which have lower growth rates despite their fiscal deficits overshooting the 3% target are Kerala, Punjab, Rajasthan, Tamil Nadu and Uttar Pradesh.