Economic Survey 2017 Series-6: Two India- White Tigers and Non-White Tigers

TWO INDIA: White Tigers and others

“….an India of Light and an India of Darkness………..Every place on map of India near Oceans is well off. But the rivers bring darkness to India.”  The White Tiger by Arvind Adiga

The above statement draws the real picture of India- one group represents developed states and the other represents the poor states.

White Tiger States

The White Tigers include Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu and Andhra Pradesh.  According to Economic Survey 2016-17, these states followed different development models to enhance their geographical capabilities. Such models are

  1. Traditional East Asia model based on manufacturing followed by Gujarat, Maharashtra & Tamil Nadu.
  2. Remittance reliant mode of development of Kerala
  3. “Precocious India” model based on specializing in skilled services followed by Karnataka, Tamil Nadu and Andhra Pradesh.

Non- White Tiger States

These states followed two models

  1. Development based on aid or special status of Himalayan States of north and North-East
  2. Development based on natural resources like coal, minerals, on shore oils and natural gas. However, forest is not considered as natural resource in this case as “Forest” leads to “Forest Curse”. These states include Jharkhand, Chhattisgarh and Odisha.

Why aids and grants discouraged development?

Aids and grants discouraged several of the economic activities which are considered the pre-requisite for economic progress. Such non- economic results include

  1. Since most of the revenue flow in the state is from outside, the recipient states failed to develop their own tax base or their institution.
  2. Aid could trigger Dutch Disease”, named after the impact that the discovery of natural gas in the North Sea had on the domestic economy of Netherlands. This windfall caused the real exchange rate to appreciate as the extra income was spent domestically, pushing up the prices. The higher prices eroded profitability in export as well as of import competing industries. This led to de-industrialization of the economy. Share of manufacturing fell sharply. Similar effects have occurred in Canada, Australia, Russia and some of the African states.
  3. Role of Redistributive Resource Transfer (RRT): RRT is defined as gross devolution to the state adjusted for the respective state’s share in aggregate GDP.

The top 10 recipients of RRT are Sikkim (top), followed in sequence by Arunachal Pradesh, Mizoram, Nagaland, Manipur, Meghalaya, Tripura, J & K, Himachal Pradesh and Assam.

But the data of RRT and economic parameters show striking features: The higher is the RRT

  • The lower is the growth
  • The smaller is the share of manufacturing
  • The lower its own tax revenue

Exception in this rule are Himachal Pradesh, Uttrakhand and Sikkim, probably due to a common factor i.e. tourism.

What is the relationship between natural resources and economic development?

The economies with abundant resources tend to grow less rapidly than resource scarce economies. This is termed as “Resource Curse

Mineral rich states are Jharkhand, Chhattisgarh, Odisha, Rajasthan and Gujarat. With the exception of Gujarat, other resource rich states show inverse relationship with the economic development.

However, it does not show such universal theme of  “Resource Curse” in Indian states. Such uniqueness of Indian theme is:

  1. Before 2000, the data certify “Resource Curse”, but post 2001 era data is not conclusive. Some states show rapid growth.
  2. At the same time such resource rich states confirm the existence of “Dutch Disease”, i.e. declining share of manufacturing in Gross State Domestic Product (GSDP).
  3. Own tax revenue declines and reliance on non-tax revenue from natural resources increased in resource rich states.
  4. On governance issue, some of these states are doing above average.

So, we may conclude that “Resource Curse” does not exist in India. However, if forest is considered as resource, then there is some inverse relationship with development. But this can be treated as “Forest Curse”, rather than “Resource Curse”.

Administrative and Judicial constraint and support

Sometimes, states and judiciary act according to Acts and to promote sustainability and protect environment, take some measures which may encourage or discourage resource utilization and so we can’t directly make absolute conclusions about “Resource Curse”. Such activisms of recent days are:

  1. Mines and Minerals (Development and Regulation) Amendment Act, 2015 was passed to create District Mineral Foundation (DMF) for the district affected by mining related operations.
  2. Recent SC judgment on Goa Mining: Natural resources are to be preserved for future generation. According to SC judgment, states are the trustees on behalf of people of all natural resources. SC also proposed creation of a Goan Iron Ore Permanent Fund.

River drained poor states

This group of states is resource rich because they have rich alluvial soil and better water resource but still they are poor. This is mainly due to

  1. High population density
  2. Mismatch between man-resource relation
  3. Long neglect of the region since medieval time
  4. Lack of literacy and dominance of customs and culture
  5. Failure to optimize Demographic dividend

So, we see a “Spotted and multi-faceted India” with mosaic of developed and poor collections, assembled to present a progressive India which can hide the dark face of India.

Please follow and like us:
100

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

error: Content is protected !!