States are an integral part of India and as such, for India to do well, States must do well as well. This will call for reduction in large differences in economic development between them. This is referred to as “convergence” or reduction in relative disparities . This happens when State with a lower level of per capita GDP catches up with better-performing States through faster growth of per capita GDP.
As this year s Economic Survey also points out, in the 2000s, the increase in standards of living (in terms of Gross State Domestic Product or consumption) per capita in all the States is accompanied by increase in the disparities among them. Thus, instead of convergence there was divergence across the States. Through international comparisons, we find that in contrast to India, disparities are declining across countries. In India, instead of weakening, disparities within India has been strengthening over time. In India the less developed States are falling behind the richer States.
Its a cross-country puzzle that across countries where borders are thicker, convergence is dynamic but in India where borders are porous, convergence has failed. The possible reasons may be attributed to governance or institutional traps and the fact that has relied on growth of skill-intensive sectors rather than low-skill ones. Why aren t less developed States feeling the pressure to perform upto the level of successful States that are serving both as models and magnets?
Neither is the equalising forces of trade and migration nor is the competitive federalism working to dispel the divergence amongst the States is a deep puzzle waiting to be unravelled.