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Growth rate declining in southern states: Report

The GDP growth rate in four southern states has been declining in recent years, with Andhra Pradesh and Tamil Nadu falling below the national average, a McKinsey survey report commissioned by the CII said.

business Updated: Mar 26, 2011 18:52 IST

The gross domestic product (GDP) growth rate in four southern states has been declining in recent years, with Andhra Pradesh and Tamil Nadu falling below the national average, a McKinsey survey report commissioned by the Confederation of Indian Industry (CII) said.

"In spite of its strong overall position, recent years have seen south India's GDP growth rate slowing down, and in the case of Andhra Pradesh and Tamil Nadu, falling below the national average," McKinsey partner Ananth Narayanan said Saturday quoting the report.

Presenting the survey's highlights at a day-long CII-southern region annual conference on "The Next Wave of Growth-South India" here, Narayanan told about 200 members that while the country's real GDP grew 8.7% during the past five years (2005-10), the combined growth rate of the four southern states was 7.85%, with Karnataka leading at 8.7%, Kerala 8.1%, and Andhra Pradesh and Tamil Nadu at 7.4% each.

The finding comes in the backdrop of an observation made by home minister P Chidambaram to US ambassador Timothy Roemer that "India's growth would have progressed better if it comprised its southern and western parts only", as contained in the WikiLeaks cables.

In contrast, Gujarat registered 11.3% real GDP growth during the same period (five years), followed by Haryana at 11 % and Bihar 9.6%.

"Industry leaders attribute several factors to the recent slump in South India's growth such as rising land prices, labour shortage, infrastructural bottlenecks, including port capacity and growing urban congestion in Bangalore, Chennai and Hyderabad and concerted efforts of other states in attracting investments in recent years," Narayanan mentioned.

Noting that several states have not only caught up with, but also surpassed south India's growth rate, the report pointed out the growth in other states have been across sectors due to concerted policy initiatives by state governments, investments in infrastructure and growth of specific industry clusters.

"Gujarat, for instance, has achieved leadership position in the chemicals industry, with 35 % share of all investments in this sector over the past five years. Similarly, states which lagged behind the national average for decades, like Bihar and Uttarkhand, have in the past three years shown impressive nominal growth of 16 % and 14 % respectively," Narayanan recalled.

Though south India starts off on a sound-footing in the new decade (2011-2020), its four states need to drive and sustain a growth path for the future, the report noted.

"South India can lead the growth of the country. Urbanisation rates in the region are higher than in the rest of India and will further sustain high growth to reach about $500 billion by 2016 and $650 billion by 2020," Narayanan said quoting the report.

Referring to the challenges faced by the four southern states in accelerating the growth rate, Narayanan said increasing physical infrastructure spanning power, roads, ports, logistics and housing, which in recent years has not kept pace with demand.

"Among the challenges are managing talent and its availability, which have become the primary concern across manufacturing and services sectors; time consuming approval processes and slow implementation of policies and projects and building capacity in industry to move up the value chain across sectors," Narayanan asserted.