Margins to Mainstream: Unlocking Regional Growth Potential

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India’s Economic Revolution Will Be Written in Bhagalpur, Koraput, and Dumka

By PALLAVI DAS

BHUBANESWAR, May 21, 2025 – India’s economic story is frequently told in aggregate — fastest-growing major economy, rising middle class, digital revolution. But zoom in, and the picture fractures. India is not a monolith; it is a mosaic of states with wildly different development trajectories.

Maharashtra and Tamil Nadu buzz with industrial dynamism, while Bihar and Odisha still grapple with structural poverty and underdevelopment. The paradox of India’s growth lies not in its pace, but in its uneven spread.

India’s challenge, and perhaps its greatest opportunity, is to unlock the latent economic potential of its lagging regions. The path forward lies in smarter, context-sensitive regional policies that go beyond GDP numbers to focus on inclusive, place-based development. This is not just good economics — it is a political and moral imperative.

The Numbers Tell the Tale

India’s economic divergence is not anecdotal—it is empirical. According to the Reserve Bank of India (2023), Maharashtra’s per capita Net State Domestic Product (NSDP) stands at ₹2.4 lakh, while Bihar’s is less than half at ₹1.1 lakh.

Tamil Nadu boasts an industrial share of over 30% of GSDP, but in Jharkhand, that figure stagnates below 20%, despite rich mineral endowments.

Human development metrics paint an equally stark picture. The latest NITI Aayog SDG Index (2023) shows Kerala scoring 80+ on composite indicators of health, education, and income, while Uttar Pradesh and Bihar hover below 50. In literacy, Kerala leads at 94%, while Bihar trails at 70%. These aren’t just statistics—they are structural signals of opportunity lost.

Such disparities have persisted despite decades of fiscal transfers and centrally sponsored schemes. Clearly, money alone does not equal meaningful development.

Why Regional Disparities Persist

Several structural and policy-level factors reinforce India’s regional economic divide:

Path Dependence and Historical Inequities: Colonial infrastructure investments disproportionately favoured port cities and urban centers, laying the groundwork for regional imbalances. Post-independence industrial policy largely reinforced this trend.

Weak State Capacity: Lagging states often suffer from poor administrative capacity, weak enforcement, and fragmented governance. This directly undermines the effectiveness of even well-designed policies.

Lack of Context-Specific Interventions: National schemes frequently adopt a “one-size-fits-all” approach, ignoring the granular socio-economic and geographic realities of individual states.

Inadequate Infrastructure: Poor roads, electricity, and internet connectivity impede private investment. According to the Ministry of Road Transport (2023), Bihar has only 37 km of highway per lakh population, compared to 90 km in Gujarat.

Skill Mismatch and Education Deficit: According to the Periodic Labour Force Survey (2022), over 40% of youth in eastern India are either not in employment, education, or training (NEET). This locks millions out of productive economic activity.

The Economic Costs of a Split Economy

Regional disparity is not just a social injustice — it is a macroeconomic inefficiency. Lagging regions act as a drag on national productivity. A 2020 World Bank report estimated that eliminating regional income disparities could add nearly 1.5 percentage points to India’s annual GDP growth.

Worse, economic migration from underdeveloped regions to urban centers creates pressure on housing, public services, and urban infrastructure, leading to informalisation and slum proliferation. This is not development — it is displacement disguised as opportunity.

Persistent disparities also carry political consequences: growing alienation, regionalism, and in some cases, civil unrest. India cannot afford a growth story where large parts of the population remain structurally excluded.

Global Lessons, Local Applications

International experience offers important lessons. The European Union’s Cohesion Policy focuses on targeted, data-driven investments in lagging regions—investments backed by strong regional institutions.

In China, the “Go West” strategy combined massive infrastructure spending with fiscal incentives to rebalance regional development.

India has initiated efforts like the Aspirational Districts Programme (ADP), targeting 112 districts on health, education, agriculture, and financial inclusion. According to NITI Aayog’s own data (2023), some districts under ADP have shown a 15–20% improvement in key health and education indicators within five years.

But these programmes remain fragmented and need institutional deepening, better data feedback loops, and greater autonomy for local governments to design area-specific interventions.

Smart Policy is Context-Aware Policy

So, what does “smart” regional policy look like in the Indian context?

Tailored Industrial Strategies

Instead of blindly chasing IT or manufacturing, regions should build on comparative advantage. Odisha has a natural edge in minerals and agro-processing; Bihar in food processing and handloom; Jharkhand in forest-based industries. This requires an ecosystem approach—linking raw materials to MSMEs, finance, logistics, and export facilitation.

Infrastructure as Equalizer

Connectivity is not just physical—it’s digital and financial. Andhra Pradesh’s comprehensive digital infrastructure reforms, including real-time land records and e-governance portals, boosted public service delivery and increased rural incomes by 15% (World Bank, 2022).

Investment in rural roads (PMGSY) added ₹11.6 to rural GDP for every ₹1 spent, according to an IFPRI study (2021). Imagine scaling that impact across eastern India.

Strengthening Human Capital

Education, particularly for women, is the most transformative regional investment. Districts with female literacy above 70% show a 25–30% higher female labour force participation rate (PLFS, 2022). Health infrastructure, especially in tribal belts, must be made resilient, tech-enabled, and locally staffed.

Empowering Local Governance

Decentralised planning must become meaningful. Kerala’s People’s Plan Campaign shows that when local bodies control budgets and planning, they deliver better. States need to devolve real fiscal and administrative powers to Panchayats—not just token functions.

Urban-Rural Linkages

Small towns are the missing middle of Indian growth. Targeting “rurban” clusters with infrastructure, enterprise incentives, and skill training can stem distress migration and boost local demand.

From Margins to Multipliers

Regions on the margins today can be the multipliers of tomorrow. Bihar, for instance, has seen 10%+ annual growth in agricultural GSDP in recent years, driven by crop diversification and rising productivity. Jharkhand is India’s largest producer of forest produce but lacks processing infrastructure. The raw material is there—the policy architecture is not.

To unlock regional potential, India needs to shift from redistribution to regeneration, from subsidies to systems, and from Pan-India schemes to state-specific strategies. This also means holding states accountable—linking central assistance to measurable outcomes on health, education, and infrastructure.

Imagining A United Growth Story

India’s journey from a low-income to a middle-income country will not be complete unless its eastern and central states are full participants in the story. Smart regional policy is not about charity — it is about unleashing demand, investment, and talent that remain bottled up due to geography and governance gaps.

The next economic revolution in India will not be televised from Bengaluru or Mumbai. It will be written in Bhagalpur, Koraput, and Dumka—if we choose to invest wisely. It’s time to move from managing disparity to engineering convergence.

(This is an opinion piece; views expressed solely belong to the author)

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