AP & WB only states behind all-India GDP growth: ASSOCHAM

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SME Times News Bureau | 28 Dec, 2012
Apart from Andhra Pradesh and West Bengal rest of the states in India have consistently performed better than all India GDP growth and many states considered in the "BIMARU" category are now coming forward, according to a released ASSOCHAM study on Thursday.

The study titled "An Appraisal of Finances of States," released by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has also been submitted to the Ministry of Finance and the Planning Commission of India same day.

While "forward" states like Maharashtra, Gujarat and Haryana have consistently performed above 10 percent growth in nominal GDP, the ASSOCHAM paper has highlighted the consistent rise of the normally considered laggards like Bihar, Madhya Pradesh, Odisha and Rajasthan.

While releasing the paper D S Rawat, Secretary General ASSOCHAM said, "One strong indication is of across-the-board support for a liberal approach to investment and recognition of its importance despite the political differences of the parties in power in the rising states and that at the centre is the states leadership going out of the way to invite private investment from all quarters within the country."

The underperforming states like West Bengal over the same period have to search for their shortcomings despite their favourable geographical positioning, natural resources, historical exposure to industrialization and elevated levels of literacy among the population. State like Andhra Pradesh have in the first three years of the seven year period grown well above national average and then went down, reveals the ASSOCHAM study.

The positive indicators in the state budgets are reduction in states deficits and improvement in revenues both locally generated and devolution from the Centre. The RBI study forecasts that "2012-13 onwards the consolidated revenue surplus is budgeted to increase in revenue receipts coupled with a reduction in revenue expenditure", highlights the paper.

However, ASSOCHAM fears that this may upset by the large number of promises made by various winning parties in the states in the elections in the last two years. The key issue is how the expected larger revenue surplus would be used whether to provide sops to the electorate or for capital expenditure that could build long lasting assets.

While the RBI study says that revenue surplus would "enable a reduction in the GFD-GDP ratio" and that 26 of the 28 states met the ratio set by the thirteenth finance commission, ASSOCHAM believes that the tendency would be for these surpluses to be squandered in popularity contests.

The decentralization of economic investment decisions has given rise to competitive spirit among states to unlock their growth potential. The realization that public resources are insufficient to meet the developmental needs hence they are to be complimented with private resources has acted as the catalyst in the process of development.

The net result was evolving of a healthy competition among states for attracting private investments. "Government policy, bureaucratic efficiency, infrastructure endowments and work culture of the states were decisive in allocation of investments across states. The process has eventually placed the Indian economy on high growth trajectory," said Rawat.

The whole process of development essentially based on states maintaining sound fiscal health. Over the past two decades, in the wake of widespread fiscal deterioration, states have attempted to phase out fiscal imbalances and improve revenue productivity and efficiency. By and large, fiscal imbalances have been reducing across states owing to the enactment of FRBM Act, mentioned the paper.