GREEN SHOOTS AT THE GRASS ROOT LEVEL
Swapnil Misra
MBA-IT, IIIT-A

Indian economy has shown GDP growth of 8.49% per year in the five-year period 2004-09. The reason for this, as thought by most of us, could be assumed as New Delhi, the policies made and the accelerated growth of the developed states. But this time it is the so called ‘Poor States’ which are becoming the miracle economies. The development of these green shoots could be ascertained to a multiple of reasons. The analysis requires a better understanding of economic growth with regional dimensions under the implications of neoclassical growth paradigm. The State Domestic Product (SDP) as shown in the government website (mopsi.gov.in) shows staggering figures which leads one to ponder about the trends. The expected economic dynamos like Punjab showed lesser rate of growth as compared to Bihar (11.03%).

The reason for this could be the steady state framework. Under this framework, per capita growth rate varies inversely with the distance a state is from its steady state i.e. a stabilized state. In other words, a state which is ‘Poor’ and which has a low ‘Capital-to-Labour’ ratio enjoys higher rates of return on capital and hence achieves a higher growth rate. Finally it converges to a steady state which could be compared to a ‘Constant-Returns-to-Scale’ economic behaviour. Attributing to the political reforms in the state of Bihar, it has shown a dramatic increase in its growth rate. Moreover the greater fraction of the SDP comes from the people of Bihar origin who are working in some other place but contribute to the state income. The leader Gujarat, followed by Bihar with Kerala close behind leaving Madhya Pradesh at the bottom of the list. The rapid economic growth of these states has disillusioned the fact about the disparity in the growth of the Indian economy i.e. the rich states are growing richer and richer while the poor ones will become poorer. Though this may be initial observation but a closer insight may lead to some different conclusions.

There has been a growing concern about the fact that the economic growth is benefitting the richer states. There is a conflicting issue whether there is an economic divergence or convergence in these economies. Moreover Economic Inclusion has also become a burning topic among the economists after the current State GDP figures have been disclosed. Several fiscal supports and packages provided by the centre set up a complete stage for a debate on the matter. States differ greatly in their ability to attract investment and translate growth into more jobs and less poverty. One other prominent fact which was observed was that the states which had good industrial relations showed good signs of growth. These states attracted industrial investments and this led to a spur in growth. The rise in the number of new industrialized states had proved that the setting up of Special Economic Zones was a good policy decision though this could be again attribute to new series of debate among various economists.

Thus we can conclude that growth cannot take place without the growth of green shoots at the grass root level. These green shoots are our own states which used to be termed as ‘Poor’ states. In fact these economies are turning out to be the ‘Miracle Economies’ of today. There is a common saying that for a building to be strong and sturdy, its foundations must be very strong. Now it is the need of the hour for strong foundation building by India as these ‘Miracle economies’ are proving to be the building blocks of the India of today.