Peeling the onion on India's GDP growth

There are some misleading claims in Indian media regarding state-wise growth trends in India. One such claim has the northern states "pulling away" from the southern states, where growth supposedly "stutters." A closer look at the numbers shows this not to be the case.

The article linked above cites as its source the "Central Statistics Office." This office is part of the Ministry of Statistics and Programme Implementation, which publishes growth statistics online. An analysis of their data for the last seven financial years, beginning 2004-'05 (source data here) shows that the story is rather different.

For this analysis, we consider ten entities: India as a whole, and nine of its largest states: three from the south, one from the west, one from the east and four from the north. We use the time period between 2004 and 2012, when no changes occurred to the definitions of state boundaries. We compare growth rates in GDP at constant prices (i.e. normalized for inflation) between the several states and India as a whole. In order to discern any relatively recent trends, we look at two measures of growth: compounded annual growth rate (CAGR) over the last three years, and CAGR over the last seven years.

The chart below shows GDP CAGR over the last seven years.
This shows that far from northern states "pulling away" from the southern states, the northern states of UP, Rajasthan and the eastern state of West Bengal are the three worst-performing states. All southern states matched or beat the national average. Bihar was the real outlier from northern India, growing faster than other states.

Now, perhaps something has changed in these trends in the more recent past. Has growth accelerated in the north in more recent times while it stuttered in the south? Let us look at the three-year CAGR numbers to test that.
This picture shows that growth has indeed slowed for India as a whole. Growth has fallen significantly in Karnataka, making it the worst performer in this group. However, UP and Rajasthan continue to be the second and third-worst performers as in the longer-term view. West Bengal fares a little better in the last three years than in the previous four. But UP's growth rate for the three-year period is lower than in the longer term, as is the case with Karnataka and AP. Tamil Nadu and Maharashtra keep growing as before, while Bihar's growth accelerates.

This analysis does not focus on the actual GDP numbers or per-capita numbers; those have already been discussed in another thread. But this analysis shows that even going simply by GDP growth rates and ignoring the low base of the northern states compared to southern states, the northern states are still not "pulling away" in terms of growth. Far from "pulling away," as noted on the other thread, the northern states need much higher growth rates than the southern states in order to: (a) compensate for their higher population growth rates, and (b) to catch up to the south in terms of per-capita GDP. Apart from Bihar, and to some extent Madhya Pradesh, the other northern states are just not finding that higher growth rate just yet. If present trends continue, the gap in real per-capita incomes between north and south will keep increasing, and this poses great risks for the country as a whole.

For convenience, I have color-coded the states in both charts. Northern states are in red, southern states in green, east in blue and west in grey.

Here is an interesting exercise... if present growth trends continue, how long will it be before Bihar overtakes Uttar Pradesh in per-capita GDP terms? In other words, how many years before people make jokes like: "give UP to Pakistan and improve the literacy rate of both countries"?

Will Pakistan take UP?

I don't know. But I do know this. If present trends hold, the per-capita GDP of Bihar in 2019 will be higher than that of Uttar Pradesh. I hope Uttar Pradeshis can pull their act together and start growing their economy.

Bihar of all North Indian states has great zest to grow and move forward.
Bihar was way behind than all the rest NI, more from SI states and with Nitish Kumar providing decent enough (not great) governance, the state has the hunger to do better. Biharis could smell progress from his first term and brought Nitish back. He knows the space Biihar need to catch up and grow in. UP on the other hand does not have a Nitish and is stuck between looters Mayawati and Mulayam.