India's Path to Developed Nation Status by 2047

Prime Minister  has called for India to achieve developed country status by 2047. This goal hinges on the state governments' ability to drive future reforms, but questions remain on the best strategies to accelerate growth.

Axes for Accelerated State Growth

An analysis of GDP growth across 20 major Indian states over 30 years highlights two key factors for growth: growth attributes and specialised key economic centres (KECs).

• Growth Attributes: Include physical capital (e.g., road density), social capital (e.g., tertiary education enrollment), and governance quality (e.g., labor market flexibility).
• Key Economic Centres (KECs): Defined as districts with million-plus urban agglomerations and capital cities, accounting for 35% of India's GDP by 2020, up from 30% in 2000.

No One-Size-Fits-All Strategy

Strategies should be tailored to each state's performance on growth attributes and KECs. A singular focus on either can lead to suboptimal outcomes.

Case Studies

• Maharashtra: Despite strong attributes, had average growth due to 7% growth in KECs. Needs to improve KEC performance.
• Gujarat and Uttarakhand: Similar attributes to Maharashtra but achieved faster GDP growth due to double-digit KEC growth.
• Haryana: Fast growth driven by Gurugram's 10% annual growth; needs improvements in social and physical capital for sustained momentum.

State's Role in Growth

The state's control over six growth attributes (crime, fiscal deficit, healthcare, T&D losses, labor reforms, land policies) is crucial. KECs, governed by urban local bodies, also fall under state purview.

Comparison with China

China's growth centers like Shanghai and Beijing have outpaced India's best KECs, signaling a need for improvement in even strong Indian states.

Importance of Specialisation

• KECs experienced faster growth by 1-3% annually from 2000 to 2020 due to sector specialization.
• Examples include Bengaluru (computer services), Uttarakhand (auto hub), and Himachal Pradesh (pharmaceuticals).
• Specialisation tends to occur organically due to natural endowments or incentives rather than through orchestration.

Capital vs Labor in Growth

Capital-intensive specialisation has a stronger growth association than labor-intensive. Key labor-intensive centers haven't achieved double-digit growth.

Risks of Diluting Growth

KECs are evenly spread across India, unlike China's concentrated growth hubs. A highly distributed growth model risks diluting agglomeration benefits.

• The focus should be on improving existing and emerging centers rather than creating new ones from scratch.
• Example: Gurugram took 15-20 years to mature into a central business hub.

Conclusion

To achieve Viksit Bharat @ 2047, state governments must enhance foundational growth attributes while nurturing key economic centers.