Diversity in Development: Inter‐state Differences in the India Growth Story

Abstract

In India, economic growth happens side by side with increasing regional inequality. Stagnant under‐nutrition co‐exists with high over‐nutrition rates and subsistence agriculture farms exist along‐side large farms. This story of development is the outcome of sub national differences in their experience of structural transformation. In this paper, we have proposed a new way to classify states to account for the heterogeneity in development outcomes using the principles of structural transformation. Based on our classification, we identify that there are 4 typologies of states. The first are those whose structural transformation has been stunted by a low productive agriculture sector. The second are resource led states whose non‐agriculture led economic growth is weighed down by a low productive agriculture sector. Between high income states in India are those whose development has been led by a high productive agriculture sector (agriculture led) and those whose development is led by other high growth sectors (rapidly transforming). Using this typology, we are able identify unique development challenges within each group that explains India's development conundrums. Finally, with a view to enable greater structural transformation within the country, we put forth policy recommendations that account for these unique typology specific development challenges.