PROBLEMS OF REGIONAL

DEVELOMENT IN A GLOBALISED
ECONOMY : THE CASE OF INDIA

Prof. R.P. Misra

President
Sustainable Development Foundation, India
Email; sdf.misra@gmail.com
India’s Federal Structure till 1990s

UNION

STATES

DISTRICT

BLOCK / TALUKA

VILLAGE
 Federal Structure After 1992 Constitution
Amendment in India

Central Government

State Government

Local Government
Rural local Self-
Urban Local Bodies Governing Institutions

• District Panchayats
• Corporations (540)
• Municipalities • Intermediate
Panchayats (6096)
• Town Areas
• Village Panchayats
(2,32,000)
 Structure of the Indian Constitution

• Article 1 (1) of the Constitution: India, that

is Bharat, shall be a Union of States.
• There are
– 28 States; and
– 7 Union Territories.
• Neither ‘Federal’ in the classical sense
nor ‘Unitary’ in character.
• Some call it ‘quasi federal’
 Structure of the Indian Constitution
• Constitution of India follows a unique system
of three-tier polity - the predominant strength
of the Union is blended with the essence of
cooperative federalism.
• Several features have been designed to
institutionalize the concept of cooperation.
• The wide range of Concurrent jurisdiction and
intertwining of certain items in the State List
with several entries in the Union List are
examples.
 Legislative Relations between the
Union and the States
Extent of Laws made by Parliament and
by the Legislatures of State

• Parliament may make laws for the whole

or any part of the territory of India.

• Legislature of a State may make laws for

the whole or any part of the State.
 Division of Legislative Jurisdiction
• There are three lists in the Seventh
Schedule of the Constitution:
– List – I (Union List)
– List – II (State List)
– List – III (Concurrent List)
• Parliament has exclusive power to make
laws with respect to any matter contained
in List-I (Union List). [Article 246(1)]
 Division of Legislative Jurisdiction
• Parliament as also Legislature of any
State have power to make laws with
respect to any matter contained in List-III
(Concurrent List).
• Legislature of any State has exclusive
power to make laws with respect to any
matter contained in List-II (State List).
• Parliament can make laws with respect to
any matter contained in the State List for
any part of the territory of India not
included in a State. [Article 246(4)]
Financial Relations between the Union and
the States
• Financial arrangements have two main
aspects:
– Distribution of taxation heads (Articles
246, 248 and 265, read with the
Legislative Lists I and II); and
– Distribution of revenues and sharing of
resources between the Union and the
States (Chapters I and II of Part XII of
the Constitution).
Financial Relations between the Union
and the States
Distribution of taxation powers
• Separate heads of taxation for the Union and
the States are provided in Lists I and II.
• No tax can be levied unless it is related to a
specific head of taxation in List I or List II.
• There is no head of taxation in the Concurrent
List (Union and the States have no concurrent
power of taxation).
Financial Relations between the Union
and the States
Distribution of taxation powers
• Residuary power of taxation vests in the
Union.
• There are thirteen taxation heads
comprised in Entries 82 to 92B in the
Union List; and
• Nineteen taxation items comprised in
Entries 45 to 63 of the State List.
 Financial Relations between the
Union and the States
Broad Principle of Allocation of Heads
• Taxes which are location-specific and
relate to subjects of local consumption
have been assigned to the States.
• Those taxes which are of inter-State
significance and where the tax-payer can
gain or evade tax by shifting his habitat,
or where the place of residence is not a
correct guide to the true incidence of tax,
have been vested in the Union.
Financial Relations between the Union
and the States

Finance Commission
• Determination of shares of the States in the
aforesaid taxes and duties and their inter se
allocation as also of grants-in-aid of revenues,
is done on the recommendations of the
Finance Commission, constituted every after
five years.
• Every recommendation made by the Finance
Commission together with an explanatory
memorandum as to the action taken thereon
has to be laid before each House of
Parliament.
 Eleventh Schedule lists 29 matters to be
delegated to the local bodies
Agriculture, incl. Land
Landimprovement,
improvement, Minor irrigation,
Agriculture, incl. Minor irrigation, Animal husbandry,
land
landreforms,
reforms,consolidation
consolidation water management Animal husbandry,
extension water management dairying and poultry
extension soil conservation. watershed devpment dairying and poultry
soil conservation. watershed devpment

Social
Socialforestry
forestry Minor
Minorforest
forest Maintenance
Maintenanceof
of
Fisheries 
Fisheries  Fuel
Fueland
andfodder
fodder
farm forestry
farm forestry produce
produce community assets
community assets

Poverty
Poverty Public
Publicdistribution
distribution
Rural housing Drinking water
Rural housing Drinking water alleviation
alleviationprogramme
programme system
system

Education, Cultural
Education, Technical training Adult and non-formal Cultural
including primary
including primary
Technical training
vocational education
Adult and non-formal
education
Libraries
Libraries activities
and secondary schools vocational education education activities
and secondary schools

Social
SocialWelfare,
Welfare
Welfareof
ofthe
theweaker
weakersections,
sections, Welfare, Women
Womenandand
Welfare
Welfare lf handicappedand
lf handicapped and
in Child development
in particular of SCs andSTs
particular of SCs and STs mentally
mentallyretarded
retarded
Child development

Health and sanitation Roads, culverts,bridges, Non-

Health and sanitation Roads, culverts,bridges, Non-
hospitals. Primary health centers Family
Family
welfare
welfare ferries, waterways conventional
hospitals. Primary health centers ferries, waterways conventional
dispensaries other means of communication energy
dispensaries other means of communication energy

Rural electrification,
Markets
Markets Khadi,
Khadi,village
villageand
and Small
Smallscale
scaleindustries,
industries, Rural electrification,
distribution of
Fairs cottage industries food processing industries distribution of
Fairs cottage industries food processing industries electricity
electricity
 India on the March
• India is on the move. So say the India watchers. It is no
longer compared with the USA or West European
countries in matters economic growth. The only country
it can be compared with is China. All eyes are set on
which of these two global giants would make to the top
in the next two decades.
• Both have more than a billion people each;
• Both are huge countries in terms of area;
• Both have switched over from socialist to capitalist
mode of production during the last two decades; and
• The GDP of both is growing at the rate of around 9
percent per annum as compared to 1.8 percent for the
developed countries of the world.
• The speed at which India is advancing economically,
and technologically is phenomenal. Its economy rarely
grew at more than 3-4 percent from 1947 to 1970s or so
(THE HINDU RATE OF GROWTH), slightly above the
rate of population growth. 
• Then it increased to 5-6 percent during 1980s. And now
it hovers around 9 percent. This year (2007-08) it has
become a trillion dollar economy; and the per capita
income has crossed Rs. 3,000, which in dollars (PPP)
means   $300 per head. Foreign institutional investors
and rating agencies are upbeat on India’s future.
• India’s exports have gone up from US$ 18.1 billion in
1990-91 to US$ 52.8 billion in 2002-03. This is despite
the fall of American dollar vis-a-vis Indian rupee making
it far more difficult to export.
• The corporate results, by and large, have been
encouraging; and Indian companies mobilized a
staggering amount of $ 30 billion in 2007-08.
 India's Export and World Trade, 1990-
2002 (in $ billions) 

1990 1995 2000 2001 2002

Value of India's 17.969 30.630 42.101 43.3 49.25

Exports

World Trade 3438.6 5120.2 6310.1 6120.8 6138.9

(Exports)

% Share of India in 0.52 0.60 0.67 0.71 0.80

World Trade
(Exports)
 BUT ALL THAT GLITTERS IS NOT GOLD

• Poverty in the Midst of Plenty

• Economy Is Growing, but Employment Is
Shrinking
• Widening Rural-Urban Divide
• Growing Regional Disparities
• Environmental Degradation
 Poverty in the Midst of Plenty
• India is shining but not the whole of India; one fifth of
the 1.2 billion people have become richer; they can be
compared with the rich anywhere else in the world.
Pretty soon we would have more billionaires than any
other country in the world.
• Another one fifth has improved its economic base and
is better off than earlier propelling consumerism to
attain new heights.
• But the remaining half of the population has gained
little or not at all. At least 15 percent has rather lost.
Below the veneer of shining India, is the India of
massive poverty, environmental degradation and
growing regional disparities.
• No scheme appears to work. People caught in the
whirlwind of globalization are unable to see the writings
on the wall.
• More than 60 percent of the people of India depend on
agriculture for livelihood, but the contribution of
agriculture of GDP has secularly declined from 56.6
percent in 1950s to less than 19 percent in 2004 it was
18 percent in 2006)
• Poverty Level has come down but the number of people
below the poverty line has not declined so fast.
• According to some it has gone up. The official figures
show that the percentage of population living in poverty
fell sharply from 56 per cent in 1973-74 to 26 per cent in
1999-2000 to 20 percent in 2006.
• The number of poor people declined steadily from 321
million in 1973-74, to 240 million in 1999-2000.
• In India, the poverty lines are described as permitting a
calorie intake of, say, 2400 calories in rural areas and
2100 calories in the urban areas.
 Employment Situation Has Worsened
• Since more than 90 per cent of India's employment is in
the unorganized or informal sector, there are no reliable
statistics on employment.
• According to a recent government report '…the
unemployment rate in India has increased significantly
since 1993-94 and was above 7.3 per cent in 1999-2000
compared to 6.0 per cent in 1993-94 on Current Daily
Status basis… .
• The present rising unemployment is primarily an outcome
of a declining job creating capacity of growth, observed
since 1993-94.
• The employment growth fell to 1.07 per cent per annum
(between 1993-94 and 1999-2000) from 2.7 per cent per
annum in the past (between 1983 and 1993-94) in spite of
acceleration in GDP growth from 5.2 per cent between
1983 and 1993-94 to 6.7 per cent between 1993-94 and
1999-2000.
• It means that the capacity of job creation per unit of
output went down about three times compared to that in
the 1980s and early 1990s.'
 Rural-Urban Divide Has Widened
• An equally disturbing facet of growing socio-economic
disparities is the growing rural-urban divide that is brought
out by the National Sample Survey Organisation's (NSSO)
household consumer expenditure surveys for recent years.
• According to the data complied by the NSSO, the average
monthly per capita expenditure (MPCE) by rural households
during 2000-01 (July-June) was Rs 494.90, which was just a
little over 54 per cent of the corresponding figure of Rs
914.57 for a typical person in urban India.
• Cities especially the large cities are the engines of growth.
The have the necessary infrastructure for manufacturing as
well as IT.
• Naturally then the large cities have more activities both in
the formal and informal sectors of the economy, and hence
more employment opportunities and income.
• This has led to massive distress migration from rural to urban
areas. As the youthful population from rural areas shifts to large
cities, agriculture is orphaned, and the cities become slums.
• There is hardly a large city in India which does not have at least 40
percent of its population in slums.
• While over 60 percent of the people of India depend on agriculture,
the contribution of agriculture to the national GDP ha come down
to less than 20 percent.
• No wonder then that the gap between the average per capita
expenditure for urban and rural areas has widened by over 8
percentage points between 1987-88 and 2000-01.
• The urban-rural gap is much more pronounced for non-food vis-à-
vis food items. An average urban resident's monthly expenditure
on food items during 1987-88 at Rs 139.73 was higher than the
corresponding non-food spending of Rs 110.18.
• But in 2000-01, the position had reversed, with average non-food
expenditure (Rs 514.01) exceeding that of food expenditure (Rs
400.57).
 Regional Disparities Have Widened 
• India is a land of contrasts. India is growing fast but base of its
economic upswing is narrow and fragile.
• Rural India is yet to benefit from economic reforms set in motion
during the last two decades.
• Agriculture, on which a vast majority of the population and a large
part of the industry depend, is not growing fast enough to keep
pace with the other sectors of the economy.
• In fact it often becomes a drag on the economy. More
industrialized and urbanized a region is more developed it often is.
• Regional disparities exist no matter at what administrative level
we look at: national, state, and district.
• At the national level the southern and western states (Kerala, Tamil
Nadu, Andhra Pradesh, Maharashtra, Goa and Gujarat) are far
more developed than the northern states (UP, Bihar, MP,
Chhattisgarh, Orissa, Jharkhand, together known as Bimoru
states).
• In between are the north-western states like Rajasthan, HP,
Regional Disparities in India
• Development is not uniform within the states. Even
advanced states have poor districts, and less developed
states have developed districts.
• A Recent World Bank Report on India (Sustaining
Reform, Reducing Poverty, 2003) as also the UNDP's
Human Development Report 2003 have expressed grave
concern over the widening inter-state disparities and the
growing urban-rural divide in India.
• The World Bank Report says that development has been
uneven and, as a result, poverty is getting concentrated
in the slower growing states of Uttar Pradesh, Bihar,
Madhya Pradesh and Orissa.
• The report adds: "Accelerating growth and poverty
reduction in India cannot be achieved without also
accelerating growth in India's lagging states."
• The UNDP's Human Development Report (HDR)
bemoans that India contains regions of intense poverty
relieved little by overall national growth. It points out the
enormous disparities across India's states with
extremely high gaps in literacy between low social
classes and the rest of the population.
•  Census 2001 revealed disturbing disparities in the
demographic indicators such as population growth
rates, literacy levels and sex ratio.
• For instance, Bihar, with a dismal record of human
development indicators, recorded a much higher rate of
population growth at 28.3 per cent during the decade of
the 1990s against 23.3 per cent during the previous
decade.
• Similarly, Uttar Pradesh, the most populous state in the
country, recorded a higher population growth of 28.3 per
cent against 23.38 per cent during 1981-91. Rajasthan
also recorded a high rate of population growth at 28.33
per cent during 1990s (28.44 per cent).
• More than half of India's poor live in just four states.
Over two-thirds of poor live in rural areas and depend
largely on agriculture.
• The highest incidence of poverty is found among people
of scheduled castes and scheduled tribes, who face
major social barriers that exclude them from
opportunity.
• It is evident that if this trend of widening regional
disparities and growing rural-urban divide is not
arrested and reversed soon, it will not only continue to
pull down the overall growth rate of the economy, but
will lead to serious social strife in the country.
• It is, therefore, time the policy-makers viewed the
situation with a new sense of urgency and initiated
measures to contain the damage.    
 Uttar Pradesh (UP): A Case Study
•  U.P. is the 6th largest ‘country’ of the world in terms of
population. As in 2008, it has 180 million people.
• The gangetic Plain, that spans the state, has been the
ancient seat of Hindu religion, learning and culture, the
birth place of the Indo-Islamic syncretic culture of
medieval period, a center of nationalism during the
colonial period and has continued to play a prominent
role in Indian political and cultural movements.
• The state has a rich heritage of traditional crafts and
cottage industries of various types that require highly
skilled craftsmen and artisans.
• It was one of the most developed provinces of India in
1950s and continues to determine the political colour of
the country.
Study Area: State of Uttar Pradesh
 Regional Structure
• The state comprises of five distinct regions. These are: 
– Rohilkhand in the north (better developed);
– The Doab (land between two rivers) region (well
developed agriculturally);
– Awadh (Oudh) in the centre (better developed
industrially);
– The Eastern UP or Poorvanchal, (very poor); and
– Baghelkhand and Bundelkhand in the south
(Poorest).
• It has 70 district grouped into seventeen divisions; and
403 state legislative constituencies. Kanpur Nagar is
the largest district of the state.
• As per 2001 Census of Population, male literacy rate
was 70.23 percent and a female literacy rate was 42.98
percent. But far more is needed especially because the
primary education in the state has deteriorated in
quality.
• The major economic activity in the state is agriculture
engaging around 70 percent of population of the state.
• 46 percent of the state income was accounted for by
agriculture. UP has retained its pre-eminent position in
the country as a food-surplus state.
• The production of foodgrains has increased from 14.5
million metric tons in 1960-61 to 42.5 million tons in
1995-96, showing an average annual growth rate of 3.1
percent, which is much higher than the population
growth rate.
 National share of major food
commodities from Uttar Pradesh
Commodity National Share
Potato 47%
Sugarcane 45%
Wheat 38%
Rice 32%
Groundnut 34%
Molasses 34%
Sugar 30%
Tobacco 20%
• UP has witnessed rapid industrialization in the recent
past, particularly after the launch of policies of economic
liberalization in the country.
• As of March 1996, there were 1,661 medium and large
industrial undertakings and 296,338 small industrial units
employing 1.83 million persons.
• The per capita state domestic product was estimated at
Rs 7,263 in 1997-98 and there has been visible decline in
poverty in the state. Yet, nearly 40 percent of the total
population lives below the poverty line.
• Uttar Pradesh's gross state domestic product for 2004
was $339.5 billion by PPP and $80.9 billion by Nominal,
making it the second largest economy in India after
Maharashtra and a bigger economy than many of the
world's big economic players like Israel, Switzerland and
Hong Kong. The state does not lag behind in IT.
• It exports of software is only mext to Karnataka in South
India.. But the industry is concentrated in just three
districtz around the National Capital, Delhi, and Lucknow-
Kanpur Corridor.
 Reasons for UP’s Backwardness

• Locational Disadvantages
• Unimaginative Political Leadership
• Lack of Technology
• Neglect of education
• Misallocation of resources
• Population pressure
• Low level of Urbanisation
• Corruption
 TOWARDS SARVODAYA
• If the ultimate goal of economic growth is improvement
in the quality of life of the people as reflected by higher
level of income, higher level of human development, and
higher level of human dignity, peace and harmony, then
economic growth must be accompanied by higher level
of HDI, distributive justice, and inner development of
man as a human being.
• Unfortunately, the modern growth proponents lay too
much emphasis on income and consumer goods and
too little on family ties, social solidarity and
advancement towards HIGHER LEVEL OF
CONSCIOUSNESS.
• We need outer development as much as inner
development. The widening gap between the two has
created a situation in which no one is at peace: rich or
the poor; all are dissatisfied. Some have even chosen to
commit suicide both in the developed and developing
parts of the world
•  “There is enough on this earth to meet everyone’s need
but not everyone’s greed’ said Gandhi long ago. The
greed must give place to caring and sharing.
• Economic growth must take place within the threshold
limits of nature; and it must be distributed equitably not
equally) so that all can have the privilege to lead a good
quality of life. The present distributional system we
have adopted is not necessary ideal.
• As gender inequality was built in our thinking and doing
things, so is the economic inequality between man and
man, region and region and nation and nation.
• There is no way to create a society imbued with love,
peace, justice, equality and high quality of material life
without changing the way we have been managing our
affairs from times immemorial. 
• Gandhi advocated the concept of Sarvodaya i.e.
development of all, not just the development of
the majority, or maximum number of people,
from all perspectives.
• In his model there is no place for any kind of
poverty: material or spiritual. Those who are
rich need spiritual development so that they
can share their riches with others and those
who are poor need material development first.
• Bread is the God of the poor. The material-cum-
spiritual developments would lead to a society
that is balanced, sustainable and worth living.
• If material advancement alone can give
happiness to people, why is it that the rich
commit suicide, and kill each other.
• So long as the present of mode of development
tilted as it is towards material welfare of some
(not all), unmindful of the spiritual side of man,
there would neither be peace within or outside,
nor equality among peoples, and regions
whether they live in cities or villages; whether
they have higher income or lower.

• Further, the pursuit of the present mode of

development is likely to lead to more violence
against fellow human beings and against
nature.
• We thus need a new model of development
which takes care of economic and
technological development without neglecting
the human development.

• Human development has however to be refined

not only in terms of social development but
also in terms of spiritual (not to be confused
with religious) development.

• In my view the Gandhian concept of Sarvodaya

offers the basic principles on which this model
can be built.
THANK YOU