China-like growth in the South: Economists explain why northern states failed to match up

Southern states have experienced economic growth at a pace comparable to China's for decades, but what made them stand out politically and economically? 

Arvind Subramanian, former Chief Economic Advisor, and Devesh Kapur, Professor of South Asian Studies at Johns Hopkins University, discussed regional disparities during a conversation on CNBC-TV18 about their book A Sixth of Humanity.

Kapur pointed to the distinct political setup in the south as a key factor in their success. "The politics is organised around both in the South and in the North around certain salient social cleavages which, for much of India, have been around caste. What happened in the South was that social movements around social justice took place in the first half of the 20th century, which then allowed a different type of politics to evolve," he said. 

In contrast, the social movements in the North were weaker and emerged much later, in the 1970s. This delayed political evolution, according to Kapur, made development in the north more challenging. He added that social transformations were largely driven by politics rather than a broader societal movement, making economic growth harder to achieve.

Subramanian, on the other hand, highlighted the commonality in the southern states' success: globalisation. "What is common to all these successes is that all of them actually were all globalised to a much greater extent than the Hindi heartland and the east," he said.

The former CEA pointed to Tamil Nadu, Maharashtra, and Gujarat as states that benefitted from exposure to manufacturing and exports. Meanwhile, Karnataka and Andhra Pradesh grew rapidly by exporting services, contributing significantly to India's economic growth.

Subramanian also mentioned Kerala as an interesting case, where growth didn't come from agriculture or manufacturing but rather from labor flows. "Kerala had neither agriculture nor manufacturing nor high-skilled services, but was globalised through labor flows. It sent out a lot of labor to the Gulf, got back these remittances, which in turn, although plowed back into the economy, mostly in non-tradable sectors, was enough to generate dynamism," he said.

When asked if the Hindi heartland states like Uttar Pradesh, Bihar, and Madhya Pradesh are showing signs of following the southern states' path, Kapur noted some encouraging signs. "We definitely see that initially in Madhya Pradesh and Rajasthan, now also in Uttar Pradesh, and somewhat less in Bihar. But even Bihar is quite different from what it was in the 1990s and early 2000s," he said. 

He pointed to improvements in law and order and infrastructure as crucial factors. "Bihar had just one bridge across the Ganga, much harder to integrate markets. So we see much better infrastructure relative to their past and better law and order. Both of these are fundamental to attracting private capital."

Kapur stressed that economic growth requires not just better infrastructure but also the attraction of private investment. "Unless you manage to attract private capital, it’s very hard to get growth," he concluded.