Why in the News?

The Standing Committee on Finance recommended Centre to come up with action plan to evenly distribute industries across States to reduce regional imbalances in India.

More on the News

• The Standing Committee on Finance, in its 26th Report, 'Roadmap for Indian Economic Growth in Light of Global Economic and Geopolitical Circumstances', noted that industries is a State subject. 
  • However, it emphasized that the Central Government's initiatives are vital for industrial development.
• Economic Survey 2024-25 also highlighted significant disparities in industrial development across states.
• Regional imbalances refer to the differences in economic development and uneven economic growth in different geographical regions. 

Reasons for Regional Imbalances in India

• Historical Factors: Regional imbalances started during the British regime, concentrating development in areas like West Bengal and Maharashtra. 
• Geographical Factors: Difficult terrain (e.g., Himalayan and North-Eastern states) raising administration and project costs.
• Political factors: E.g. Relocation of Tata Nano project from West Bengal to Gujarat due to protests.
• Policy Disparities: The Green Revolution benefited a few states like Punjab and Haryana, exacerbating imbalances.
• Lack of Growth of Ancillary Industries: Despite developing public sector industrial enterprises in backwards areas like Rourkela, Barauni, Bhilai, etc.
• Location Specific: E.g. Development of commercial hubs, residential complexes in National Capital region (Gurugram, Noida) due to proximity to the capital Delhi.
• Infrastructure Deficit: Poor transportation, banking services etc. limits growth. E.g. Industrial growth is low in north-eastern states due to poor road/rail connectivity, weak banking penetration, and power shortages.

Consequences of Regional Imbalances in India

• Security: E.g., Insurgency in North-east and left-wing extremism in large parts of central and eastern states.
• Political fragmentation: E.g., Creation of Telangana State and demand for separate Vidharbha State in Maharashtra, Bodoland in Assam, etc.
• Economic:
  • National growth: Regional imbalance slows the growth of the entire national economy.
  • Economic Gap: Difference in Per Capita Income, e.g. Rs 2,04,605 in Karnataka and Rs 70,434 in Madhya Pradesh.
  • Reinforcing Imbalances: Prosperous areas attract more investments. For example, cities like Chennai and Bangalore grow faster than others.
• Environmental: Concentrated industrial development causes air, water, and noise pollution. For example, pollution in Delhi.
• Social: Frustration among youth and vulnerable sections like SC, ST, OBCs, women, etc.
• Disparity in Human Development: According to the UNDP, in Human Development Index, Goa occupies the top spot, with Bihar scoring the lowest.
• Health Inadequacy: One doctor serves a population of 28,391 in Bihar, whereas in Delhi, one doctor serves 2,203, both greater than the WHO standard of 1:1000.
• Other: Housing & Water Problem in Metropolitan cities like Mumbai, New Delhi, Chennai and Hyderabad.

Way Forward

• Promoting New Financial Institutions in Backward Regions: The Government can see that these Institutions function well for all-around development of the backward areas.
• New Regional Boards: Regional Boards with necessary legal powers, funds can be instituted to remove regional imbalances.
• Growth Corridors: Comprising education zones, agricultural zones, and industrial zones should be operationalised for the rapid development of backward areas in the states.
• Performance-Based Funding: A system may be introduced to reward States, including developed ones, that significantly reduce inequalities within their borders.
• Additional funds for Infrastructure: Additional funds need to be provided to build core infrastructure at the inter-district level in less developed States and backward regions.
• Strengthening of Good and Local Governance in backward states: Effective administration helps states raise revenues, attract investment, and improve resource use, especially in backwards regions.
• Other: Deregulation, R&D and innovation, and improving skill levels of the workforce.

Conclusion

For removing regional imbalances focus should be on creating an environment that fosters innovation, attracts investment, and ensures efficient utilization of resources. Strengthening governance, improving infrastructure, and promoting healthy competition between states through cooperative and competitive federalism are essential for balanced development.