Economic performance of the states: post-liberalisation

Liberalisation has reduced the control exercised by the central government in directing investments to desired locations and thus left a larger scope for state-level initiatives, making the states more competitive in attracting investments. Ahluwalia (2002) has noted that investors perceive a 30 per cent cost advantage in some states over that in other states because of the availability of infrastructure and the quality of governance. In the post-reform period, private investment has become more mobile and is likely to flow to the states that have a skilled labour force, good work culture, good infrastructure and good governance. This is particularly important in light of the fact that at the national level, three-fourths of the investment is by the private sector. Post reforms, much policy action takes place at the state level, shaping the economic outcome.

The aggregated gross domestic product (GDP) at the national level does not reveal the economic performance of individual states. The contribution to GDP, the growth rate of gross state domestic product (GSDP), the per capita GSDP and the sectoral composition of the GSDP are cited as the most important parameters to measure economic performance across the states (Shetty, 2003; IFMR, 2011). The economic performance across the major states of India is analysed in the following sections. The objective is to select an economically developed state, with its industrial sector having a major share in the state domestic product (SDP) and to then analyse the environmental performance of that state with a focus on water pollution. This is very important in the current global and Indian context because the global agenda of sustainable development goals (SDGs) needs to be localised for action. In the pursuit of promoting industrial development, the states concurrently need to address environmental degradation arising from the discharge of industrial effluents into the water bodies. This is critical from the perspective of sustaining such development efforts.

Data and methodology

The GSDP has been considered for the post-economic reforms period in India, i.e. from 1992—93 to 2016—17. The data used in this chapter is from the Economic and Political Weekly Research Foundation (EPWRF) unless otherwise stated. The data has been analysed at constant prices, with 2004 as the base year. The data is available at different base years at current prices and has been converted to constant prices at the 2004 base year using conventional statistical tools. The wholesale price index (WPI) has been used to convert current values to constant values at the 2004 base price. The values of WPI for the various base years have been taken from the Reserve Bank of India (RBI) website. From 2004 onwards till 2014—15, the data is available at constant prices at the 2004 base and has been used as it is. For the financial years 2015—16 and 2016—17, the data at constant prices is available at a 2011 base year, which is deflated to the 2004 base year to maintain uniformity in comparison. All these conversions from different base years do introduce some errors but they will be the same across the board and, therefore, not likely to impact interstate analysis.