ASSOCHAM ECO PULSE

States Performance in Per capita Income Growth

January 2008

Prepared by - Swati Gupta

Per capita income rises at highest pace in mineral rich states of Jharkhand and Orissa, says AEP Jharkhand and Orissa are growing at the fastest pace in terms of their per capita income, thanks to pick up in industrial activity in the two mineral rich states while Karnataka, Gujarat and Tamil Nadu have maintained leads among other states, an Assocham Eco Study has revealed. Jharkhand, with per capita income of Rs.14,990, has registered 16.6 per cent growth. With huge mineral and other natural resources, the state has been receiving investment proposals in steel, cement and power sectors, giving the necessary push to its economy providing employment opportunities. With influx of huge capex by the large industrial houses in the core infrastructure sector, Orissa is witnessing rapid rise of 11.5 per cent in income distribution (Rs. 14,795). Per capita income reflects on the purchasing power and standard of living of the people of each state. For inclusive growth, it is necessary for the states to put in efforts to raise the income attributable to each person, said Mr. Venugopal N Dhoot, President, Assocham. Buoyed by huge investment flow, rising employment opportunities, the increasing foothold of service-based sectors, the southern states of Karnataka and Tamil Nadu and industrialized Gujarat rank among the top states with per capita income more than the all India average of Rs. 20,734 (in FY06). Karnataka tops the chart of the well-to-do states with fastest growing income per person by 9.28 per cent at Rs. 21829 for the financial year 2006. Gujarats average income per person rose to Rs. 26,543 with growth of 8.92 per cent. Per capita income in Tamil Nadu was recorded at Rs. 24,308 with rise of 8.46 per cent. Noticeably, these best performing states are among the ten most populous Indian states with more than 54 million population each. However, Delhi and Goa, relatively smaller states, have highest per capita income at Rs. 49172 and Rs. 47507 but the rate of growth is relatively lower at 6.9 per cent and 6 per cent. The state of Chhattisgarh struggling at political, social and economic front, witnessed 8.8 per cent growth, though average income base remains very low at Rs.16,365. The development plans in the states of Madhya Pradesh, Uttar Pradesh and Bihar are yet to take off as they remain at the bottom of the pyramid with lowest per capita incomes of Rs. 12566, Rs. 10637 and Rs. 6610 growing at the slowest rates of 2.9 per cent, 3.1 per cent and 3.7 per cent respectively. The concern was expressed in the Study at the fact that the per capita income in seventeen states was growing below the national average of 8.4 per cent. The per capita income for the Indian economy grew to Rs. 22,483 in FY07 from Rs. 20,734 in FY06.

Maharashtra, with largest state domestic product and major recipient of foreign as well as domestic investment, has witnessed a healthy growth rate of 7.3 per cent in its per capita income (29,085). Another state to record above 7 per cent growth was Uttaranchal, though the income base was low at Rs.20, 328 per person in fiscal 06. Haryana, with prosperous farm sector and booming IT, real estates, engineering and construction activities, has the third largest per capita income of Rs. 29,887 , growing at 6.5 per cent. West Bengal, despite fourth largest population, has managed to raise its per capita income at the rate of 6 per cent, owing to massive investment plans in sectors like steel, real estate, power, retail and IT. The average income per person was recorded at Rs. 20,485 in the fiscal 2005-2006. There were states where the effect of overall economic boom was not reflected in their per capita income. While the state domestic product of Kerela and Andhra Pradesh grew by 8.8 per cent and 7 per cent respectively, the average income available to each person grew by 5.9 per cent each. The per capita income in scarcely populated Himachal Pradesh rose at the moderate growth rate of 5.34 per cent. As the state remains pre-dominantly dependent on tourism sector, the level of industrial investment remains low. The per capita income was recorded at Rs.27,162 in fiscal 06. Growth in the prosperous state of Punjab seems to have stalled as rise in per capita was estimated to be mere 2.9 per cent, even though it has fifth largest per capita income of Rs.28,605.