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In September 2024, the Prime Minister’s Economic Advisory Committee released a paper titled *Relative Economic Performance of Indian States: 1960-61 to 2023-24*. This study goes beyond mere growth rates, providing a comprehensive analysis of the economic performance of Indian states over nearly 65 years. To evaluate each state’s economic standing, it examined their share of the national GDP and relative per capita income.

The study uses 1960-61 as the starting point for comparison, coinciding with the availability of comparable state-level data. The Gross State Domestic Product (GSDP) of each state was calculated as a proportion of the total GSDP of all states. Relative per capita income was determined by expressing the per capita Net State Domestic Product (NSDP) of each state in terms of the all-India per capita Net National Product (or Net National Income) during the selected period. Adjustments were made for states that were newly formed or underwent boundary changes, ensuring data comparability and reliability over time. Results are presented in Tables 1 and 2.

Table 1 reveals that India’s economic liberalization in 1991 significantly altered states’ relative economic performance. Previously average-performing states like Karnataka and undivided Andhra Pradesh became top performers. Overall, states such as Maharashtra, Gujarat, Delhi, and Haryana continued to excel, while West Bengal and Punjab experienced declines. Southern states, which had underperformed prior to liberalisation, began contributing significantly to India’s GDP, reaching 30% by 2023-24. In the west, Maharashtra and Gujarat maintained strong performance, with Maharashtra holding the highest GDP share at 13.3%. In the north, Delhi and Haryana thrived, while Punjab’s economy weakened post-1991. West Bengal’s GDP share dropped from 10.5% in 1960-61 to 5.6% in 2023-24. Central states like Uttar Pradesh and Madhya Pradesh also saw declines. These regional trends underscore the economic diversity within India and the need for targeted development policies.

Table 2 illustrates the economic disparities across India’s regions. Once lagging in per capita income, the southern states have now emerged as leaders, surpassing the national average since 1991. Telangana, Karnataka, Tamil Nadu, and Kerala reported relative per capita incomes of 193.6%, 181%, 171%, and 152.5% of the national average, respectively, in 2023-24. In the west, Gujarat and Maharashtra have consistently outperformed the national average since the 1960s, with Gujarat’s per capita income reaching 160.7% of the national average in 2023-24. Goa’s relative per capita income has tripled since 1970-71, soaring to 290.7% in 2023-24.

In contrast, northern states present a mixed picture. While Delhi and Haryana prosper, Punjab’s per capita income has fallen to 106.7% of the national average. The divergence in economic trajectories between Punjab and Haryana raises questions about Punjab’s agricultural focus and its impact on industrialization.

In the eastern region, West Bengal’s per capita income has decreased from 127.5% in 1960-61 to 83.7% in 2023-24. Bihar’s situation is more dire, stagnating at 33% since 2000-01. However, Odisha has seen a revival, increasing its relative per capita income from 54.3% in 1990-91 to 88.5% in 2023-24. Madhya Pradesh has also made strides, with its relative per capita income rising from 60.1% in 2010-11 to 77.4% in 2023-24. The northeastern states have shown impressive growth, particularly Sikkim, which saw its per capita income soar from 100% in 1980-81 to 320% in 2023-24. Assam, after a decline, improved to 73.7% of the national average by 2023-24.

This analysis highlights that while western and southern states have emerged as economic powerhouses, the stark contrast between Haryana and Punjab warrants further investigation. The eastern region, particularly West Bengal, remains a concern.

In summary, the study indicates that Punjab and Haryana, both of which experienced agricultural booms after the Green Revolution in the 1960s, have taken divergent paths. While Punjab’s growth has plateaued and declined since 1991, Haryana’s GDP share continues to rise. Punjab’s per capita income has fallen from 169% of the national average in 1970-71 to 106.7% by 2023-24, significantly below its 1960-61 level.

The authors attribute Punjab’s decline to corruption, low investment, and the adverse effects of the Green Revolution, leading to environmental degradation and increased regional disparities. Similarly, West Bengal’s economic decline is linked to the unraveling of industrialization that began around independence, resulting in reduced economic share and per capita income.

In conclusion, the economic challenges faced by Punjab and West Bengal are intertwined with their failure to sustain industrial growth, stifling new investments and manufacturing. Contributing factors include political issues, labour unrest, inadequate infrastructure, rising debt, and over-reliance on agriculture in Punjab and past industries in West Bengal. To escape this economic quagmire, both states must adopt proactive measures to revive their industrial sectors, promote innovation, and attract new investments.

West Bengal should diversify its industrial base beyond traditional sectors and invest in infrastructure to attract fresh investments, particularly in emerging industries like IT, biotechnology, and renewable energy. Streamlining regulatory frameworks and providing incentives for entrepreneurs can further support industrial growth.

In Punjab, the focus should be on developing agro-processing industries. As India’s “Breadbasket,” Punjab has vast opportu-nities for value-added processing and manufacturing. By expanding beyond primary agriculture, the agro-industrial sector can unlock new revenue streams, generate employment, and enhance rural incomes. Punjab can leverage its agricultural strengths to transition from a predominantly agrarian economy to a diversified, industry-driven one, ensuring sustainable growth and prosperity.

This analysis highlights the urgent need for state-specific economic policies aligned with central strategies to stimulate sustainable growth across regions.