India Today has published a study that shows Madhya Pradesh to be the most powerful growth engine of the country among the big states between 2003 and 2006. But has MP actually emerged as the “big hitter” among Indian states?
For one, a three-year period is too short for a consistent trend to emerge. Every state has its economic ups and downs. MP’s inflation-adjusted Net Domestic Product (NDP) grew at 3.15 percent in 2004-05 over a whopping 17.78 percent in 2003-04. Similarly, in 1999-2000, the state grew at 10.50 percent over a 6.60 percent growth in 1998-99.
Thus, every state has some very good, good, average and bad years and it is very difficult to make definite conclusions on the basis of these yearly “performance swings”.
Two, a low statistical base also explains some of this surge made by the state between 2003 and 2006. The upswing has come on the heels of a particularly disastrous year for MP as the state’s NDP had dipped by a – 6.62 percent in 2002-03. In fact, the state reeled under a severe drought for three consecutive years — 2000, 2001 and 2002.
Till the drought hit MP, the statee’s economy had grown by 6.16 percent between 1993 and 2000 during the Digvijay Singh years. Thus, statistically speaking, the current acceleration in the state’s performance has come about as a result of a poor base year.
The authors of the India Today study has claimed that this growth buoyancy has occurred because of agricultural prosperity and infrastructure development. Does the state’s record support the aforesaid claim?
As regards the former, latest state government figures reveal a deceleration in the primary or farm sector during 2004-05 (at minus 3.46 percent) that followed a phenomenal 40.9 percent growth in 2003-04.
This huge leap had followed an exceptionally poor year of 2002-03 when the primary sector had dipped by minus 23.04 percent. Clearly, there is no consistent trend of farm sector growth in the state yet. Moreover, there are also no concomitant signs of rural affluence to buttress these claims of rapid farm growth in the state.
However, the BJP government in the state has taken a keen interest in infrastructure development. Public investment in irrigation infrastructure has been stepped up. During 2004-05, the plan outlay for irrigation was 1652 crores, it increased to 1758 crores in 2005-06 and has touched nearly Rs 1910 crores in the latest 2006-07 budget.
Similarly, plan outlays for power and roads have also shown an upward trend in the last three years.What then are the state’s economic prospects in the medium term?
There are at least two encouraging signs. The private sector investment in the state is showing some buoyancy. During 2004-05 and 2005-06, there were sizeable investment proposals in the industrial and service sectors. If these were to fructify, growth would take off in the state.
Another promising indicator is the step-up in the state’s plan capital outlay in recent years: From Rs 3568 crores in 2004-05 it rose to Rs 4491 crores in 2005-06 and has touched nearly Rs 4800 crores in the 2006-07 state budget. This increase in the state’s productive investment expenditure would obviously bolster the state’s growth prospects in the near future.
Meanwhile, MP has got a lot of catching up to do before it becomes India’s consistently fast performing state. But surely there are some faint yet encouraging signs as the state begins to get its act together.
(The writer teaches at the National Law Institute University, Bhopal)