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Examining the convergence in the economic growth of Indian states.

In seventh five-year plan, Indian economy has crossed the Hindu growth rate (The term coined by Prof. Raj Krishna as the stagnated rate of growth of Indian GDP up to 1980 at 3.5 percent). After the economic and political instability of 1990-92, in eighth plan the great economic reforms had implemented by the policy makers. This resulted in the high economic growth of the economy and Indian economy became the one among the highly growing economy in the world. The economic development taking place in India especially after 199394 is a great matter of interest for the researchers as well as for the common people of India. Undoubtedly there are indicators of growth like increase in per capita income and others. However this will also be interesting to find out that weather there is a convergence in the economic development of the Indian states or not. Nation level data indicates that the growth rate of the country is over eight percent in eighth, ninth and tenth five years plans expect some bad years and it is expected that the annual growth rate will go even further in eleventh plan. But whether this growth is for all or it is just for some states this what is the objective of the present study. This has been done by taking the state domestic products (SDP) of Eighteen Indian states under study. We have calculated the growth rate of all the eighteen states for the period of 1980-81 to 2004-05. The entire period has been divided in two parts 1980-81 to 1990-91 and 1991-92 t0 2004-05. The period 1980-81 to 1990-91 can be referred as the pre LPG (Liberalization, Privatization and Globalization) period, whereas the period 1991-92 to 2004-05 can be referred as the post LPG period. This bifurcation has been done for checking out the differences in the convergence of growth rate between pre and post LPG. In the pre LPG period the nation level as well as the state level growth rate in per capita GDP was less than the post LPG period. So it will be interesting to see that the increase in the per annum growth rate of the country has lead to the convergence or divergence in the growth rate of SDP (State Domestic Product). This will be the fact for claiming that the growth rate what has been achieved by the country especially after LPG has resulted in a positive way for all the states in India. The present study is in line with many other studies in order to trace the impact of GLP policies at disaggregating level. The Data up to the year 1999 has been changed according to the base year 1999-2000.

The following Table-1 indicates the per capita SDP of Eighteen Indian states for three trienniums 1982-83, 1991-92, and 2004-05.

As it is evident from the below given table that the per capita SDP in different above mentioned states are varying with a large amount in all the three triennium endings. For example it is Rs 4885.25 in Bihar for the triennium ending 1982-83 whereas it is Rs 15387.39 in Punjab for the same triennium ending. The figures have the same variation for other two trienniums also.

Method

The growth rates in the state domestic products has been calculated by taking the log of base triennium's SDP (average of three consecutive years) and by subtracting it from the log of last triennium's SDP.

SDP Growth rate = ln SDP ([Y.sub.1] + [Y.sub.2] + [Y.sub.3]) - ln SDP (Yb1+Yb2+Yb3)

Where;

[Y.sub.1], [Y.sub.2], and [Y.sub.3] are the SDP of destination years [Y.sub.b1], [Y.sub.b2], and [Y.sub.b3] are the SDP of base years

Result and Discussion

The growth rates calculated with the above mentioned model have been presented in Table-2 below. For the period of 1982 to 2004-05 the SDP growth rates in states like Bihar and Assam are as low as 0.13 and 0.11 accordingly whereas these are as high as 0.44 and 0.42 in Goa and Tripura accordingly. For the period of 1982-83 to 1990-91 it is as low as 0.04 and 0.08 in Assam and West Bengal accordingly whereas it as high as 0.14 and 0.16 in Haryana and Goa. For the period of 1990-91 to 2004-05 the SDP growth rates are as low as 0.03 and 0.07 in Bihar and Uttar Pradesh accordingly whereas it is as high as 0.34 and 0.28 in Tripura and Goa.

It can be see that some of the interesting findings from the Table-2; the growth rates in the state domestic product for the period 1982-83 to 1990-91 are lesser than the growth rates for the period 1990-91 to 2004-05. This is understandable because this was the fact which leads to the LPG policies implications. In fact, during this period nation level growth rates were recovering from the past stagnated growth or in other word something called the Hindu growth rate. After 1980-81 government of India has decided for some structural changes in the policy of economic growth for the nation. This change in the policy implication has resulted in the respectively faster growth rates of some states like Goa, Rajasthan. However the real feasible increase in the growth rates of state domestic products has been noted out after 1990-91. For example, states like Tripura, Maharashtra have shown a rapid increase in the SDP growth rates.

The growth rates of some states like Bihar, Assam, Uttar Pradesh are still very low even during the period of 1990-91 to 2004-05. In fact the SDP growth rates of these states remain the greatest worry for the country and therefore these states have been listed as so called BIMARU Indian states.

The standard deviations of the growth rate of state domestic product in three above mentioned period has been reported in the Table-3 above. The table also contains the standard deviations of the sum of triennium SDP log values. As it is evident from the table above the standard deviations are statistically significant which proves a variation in the SDP growth rates of different states. This is also evidence showing the sign of divergence in the SDP as well as in the growth rates of SDP.

The growth rate for the two bifurcated periods have been plotted in order to see the convergence in the growth rate of major states. The figures one, two, and three below depicts the SDP on the x-axis and growth rates in different period on y-axis. As evident from the figures we could not any presence of the convergence in the growth rates of SDP during the periods of 1983-84 to 2004-05, or during the period of 1983-84 to 1990-91 or even during the period of 1990-91 to 2004-05. These periods depicts some kind of divergence in the SDP growth rates eighteen Indian states.

[FIGURE 1 OMITTED]

[FIGURE 2 OMITTED]

As evident from the figure above it could not find any evidence of convergence in the SDP of eighteen Indian states, and more or less we can say that this is the story for all the Indian states. But if looked at the figures with a deeper view it could find that the divergence is at least lesser in the period of 1980-81 to 1990-91 comparatively to the period of 1991-92 to 2004-05.

[FIGURE 3 OMITTED]

Conclusion

Here it can be concluded that the hypothesis that there is a convergence in the growth rates of SDP has occurred after the LPG could not be accepted as per the evidence we got from the data analysis in the present study. However, there is the limitation of the model used in the present study for calculating the growth rates, although the findings what we have got in the present study is more or less in the line with the other studies made in this area (Nayyar, 2008, Virmani, 2007). In fact they had used other model for calculating the growth rates of state domestic product. However the same findings can also be reached out by using the present model which is simple and doesn't required any advanced mathematical tool and so the software's for calculating the growth rates of state domestic product.

Reference

Goyal A Krishn, (2006): "Impact of Globalization on Developing Countries", International Research Journal of Finance and Economics, Issue 5.

Government of India, Planning Commission, (1992): Eighth Five Year Plan, 1992-97, New Delhi.

Government of India, Planning Commission, (2002): Tenth Five Year Plan, 2002-07 New Delhi.

Government of India, Economic Survey, 2002-03.

Government of India, Economic Survey, 2003-04.

Nayyar Gaurav, (2008): "Economic Growth and Regional Inequality in India", Economic and Political Weekly, Vol. (43) 6, pp. 58-67.

Rajaraman Indira, (1974): "Poverty, Inequality, and Economic Growth: Rural Punjab 1960-61 to 1970-71", Journal of Development Studies, pp. 278-90.

Virmani Arvind, (2007): "The Sudoku of Growth, Poverty, and Malnutrition: Policy for Lagging States", Planning Commission. Working Paper No. 2/2007-PC.
Table 1: Per Capita State Domestic Product in Rs.

States               SDP/for TE 82-83   SDP/for TE 90-91

Tripura                      7039.96            8569.44
West Bengal                 11224.06           13630.92
Uttar Pradesh.               6933.00            8588.88
Tamilnadu                    8717.75           11806.80
Rajasthan                    6987.57           10064.84
Punjab                      15387.39           19993.60
Orissa                       7386.77            9158.04
Maharashtra                 10940.62           14719.87
Madhya Pradesh.              7713.83            8919.94
Kerala                      10444.15           12017.09
Karnataka                    7734.45           10015.69
Himachal Pradesh.           10998.12           13946.59
Haryana                     13309.16           18437.66
Gujarat                      9490.71           12621.76
Goa                         15483.33           22439.95
Bihar                        4885.27            6058.15
Assam                       10534.00           11515.09
A.P.                         8204.44           10871.98

States               SDP/for TE 04-05

Tripura                     18710.33
West Bengal                 18306.67
Uttar Pradesh.              10036.67
Tamilnadu                   21045.00
Rajasthan                   14128.33
Punjab                      26957.00
Orissa                      11951.67
Maharashtra                 25414.67
Madhya Pradesh.             11606.00
Kerala                      22921.33
Karnataka                   19001.00
Himachal Pradesh.           24554.67
Haryana                     28536.00
Gujarat                     21885.67
Goa                         42734.00
Bihar                        6521.00
Assam                       13632.00
A.P.                        18772.67

Table 2: Growth Rates of SDP in three Periods

States             Growth rate for         Growth rate for
                   TE 82-83 to TE 04-05    TE 82-83 to TE 90-91

Tripura                    0.42                    0.09
West Bengal                0.21                    0.08
Uttar Pradesh.             0.16                    0.09
Tamil Nadu                 0.38                    0.13
Rajasthan                  0.30                    0.16
Punjab                     0.24                    0.11
Orissa                     0.21                    0.09
Maharashtra                0.37                    0.13
Madhya .Pradesh.           0.18                    0.06
Kerala                     0.34                    0.06
Karnataka                  0.39                    0.11
H.P.                       0.35                    0.10
Haryana                    0.33                    0.14
Gujarat                    0.36                    0.12
Goa                        0.44                    0.16
Bihar                      0.13                    0.09
Assam                      0.11                    0.04
A.P.                       0.36                    0.12
VAR                        0.011                  0.001

States             Growth rate for
                   TE 90-91 to TE 04-05

Tripura                    0.34
West Bengal                0.13
Uttar Pradesh.             0.07
Tamil Nadu                 0.25
Rajasthan                  0.15
Punjab                     0.13
Orissa                     0.12
Maharashtra                0.24
Madhya .Pradesh.           0.11
Kerala                     0.28
Karnataka                  0.28
H.P.                       0.25
Haryana                    0.19
Gujarat                    0.24
Goa                        0.28
Bihar                      0.03
Assam                      0.07
A.P.                       0.24
VAR                        0.008

Table 3: Standard Deviations of Growth Rates and Triennium
sums Log SDP Values

Variables                                        Standard Deviations

Growth rate for the period 1980-81 to 2004-05           0.105
Growth rate for the period 1980-81 to 1990-91           0.033
Growth rate for the period 1990-91 to 2004-05           0.088
SDP/capita for TE 83 (Avg. of in values)                0.13
SDP/capita for TE 91 (Avg. of in values)                0.14
SDP/capita for TE 05 (Avg. of in values)                0.19
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Author:Kumar, Mukund
Publication:Political Economy Journal of India
Geographic Code:9INDI
Date:Jan 1, 2014
Words:1957
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