The Best And Worst-Performing States Of India
A cut out of an Indian map and a mural depicting workers stands outside a blast furnace unit. (Photographer: Dhiraj Singh/Bloomberg)

The Best And Worst-Performing States Of India

Haryana, Gujarat, Karnataka and Telangana have emerged as the states with the highest growth in gross domestic product over the last four financial years, surpassing that of the nation as a whole.

Similarly, some of the state economies that grew significantly lower than the national average are Rajasthan, Jharkhand, Punjab, and Chhattisgarh, according to India Ratings and Research's report which assessed states’ performance in terms of financial performance, infrastructure and basic welfare indicators.

The report notes that the vast variation in performance is not healthy for the country’s overall development.

Performance based on infrastructure and social parameters is also disproportionate. Some of the states that stand out are Kerala, Tamil Nadu, Punjab, Himachal Pradesh and Maharashtra.

Kerala—known for its high literacy rate—scored highest in terms of human development index, while Chhattisgarh and Odisha scored the lowest. In terms of physical infrastructure, Tamil Nadu, Punjab, Haryana and Kerala scored the highest while Gujarat, Karnataka, Maharashtra, Andhra Pradesh and Telangana are still catching up with the leaders.

Odisha, Maharashtra, and Assam managed to maintain a low fiscal deficit between FY11-FY20 (2% or lower). However, Punjab, Andhra Pradesh, Rajasthan, Telangana and Kerala’s fiscal deficit ranged on the higher side of over 3.5%, according to the report, which attributes the poor discipline to the UDAY scheme.

“The improving fiscal health of states received a blow when they joined the UDAY to bail out state power distribution companies in FY16,” it said. Under UDAY, the states took over 75% of discoms’ debt on Sept. 30, 2015. (50% in FY16 and 25% in FY17) by issuing non-statutory liquidity ratio bonds. Besides increasing the fiscal deficit of states, this also put higher interest servicing liabilities on them as coupon rate on UDAY bonds were higher than the state development loan yield, the report said.

Another reason for higher fiscal stress is the commitment to expenditure. Some of the major states where committed expenditure was higher during FY11-FY20 budget estimate are Punjab, West Bengal, Himachal Pradesh, Kerala and Uttarakhand. Major states where committed expenditure was lower are Karnataka, Chhattisgarh and Madhya Pradesh.

States which had lower expenditure commitments showcased revenue-driven fiscal improvement, which is closely linked to growth performance, the report pointed out. “States with superior development indices/fiscal management practices will be able to withstand the downcycle with least damage to their credit profile.”

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