Economic Development in the Indian States

The nature of convergence or divergence in the level of development across Indian states is re-examined using the Coefficient of Variation (CV) and classification of states into "green, (developed states)" "pink (middle-developed states)," and "red (less-developed states)" based on the average value of Multi-dimensional Index that comprises of social-economic and fiscal indicators between 2011–12 and 2017–18, unlike earlier literatures which explore using CV of either one or two of these indicators. Although disparity persists in the level of development among states, it lessens in the later period reflecting convergence. Development converges at a higher level due to a significant rise in the average level of development among less developed states. Convergence is attributed to fiscal and health indicators. It would have increased if economic and education indicators had not divergence. It is relatively more in special category states (SCS) than the general category states (GCS). While there is forward convergence in SCS, backward convergence is observed among GCS. Still, then the level of development in SCS is lower than GCS. States should manage public expenditure economically, efficiently, and effectively to raise revenue generation capacity which may ensure physical and human capital formation to increase the level of economic development. The Union Finance Commission should assign proper weight to fiscal discipline and equity criteria in the distribution of central shared taxes to provide due share to states, and grants to states under central ministries should be linked to performance so that the level of development converges at a higher level

Capital expenditure · Convergence (economics · Divergence (linguistics · Equity (law · Human capital · Index (typography · Inequality · Public expenditure · Revenue · Economic Growth and Productivity · Global Economic and Social Development · Social and Economic Development in India