Economic disparities

A critical problem facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of poverty, availability of infrastructure and socio-economic development. Six low-income states – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa and Uttar Pradesh – are home to more than one third of India's population. Severe disparities exist among states in terms of income, literacy rates, life expectancy and living conditions.

The five-year plans, especially in the pre-liberalisation era, attempted to reduce regional disparities by encouraging industrial development in the interior regions and distributing industries across states, but the results have not been very encouraging since these measures in fact increased inefficiency and hampered effective industrial growth. After liberalisation, the more advanced states have been better placed to benefit from them, with well developed infrastructure and an educated and skilled workforce, which attract the manufacturing and service sectors. The union and state governments of backward regions are trying to reduce disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism which, although being geographically and historically determined, can become a source of growth and develops faster than other sectors.

Economic trends and issues