Economic Challenges In Poll-bound States

The next government in these states may find it tough to push economic growth through long-term reforms, which would be necessary.

Growth took a hit in the five election-bound states mirroring the trend at the national level after the COVID-19 pandemic.

Chhattisgarh, Madhya Pradesh, Mizoram, Rajasthan, and Telangana grew between 4 and 6 per cent in the years after 2018-2019, compared to a 5 to 10 per cent growth rate prior to 2018-2019.

India's growth rate fell from 7.4 to 3.4 per cent in the same period (chart 1).

Some of the states going to the polls have struggled with higher poverty levels than the rest of the country.

Over 15 per cent of the population lives in poverty in the majority of the states, despite improvements since 2015-2016, according to data from the NITI Aayog's multidimensional poverty calculations, which measure deprivation based on factors such as health, education, and standard of living -- going beyond traditional poverty estimation, which relied mainly on income (chart 2).

The government's labour survey shows fewer people hold regular or salaried jobs in most of these states than was the case in 2018-2019, a measure of the employment problem.

The share of salaried workers among those employed has reduced after the pandemic in all states except Madhya Pradesh.

The lack of sufficient avenues for gainful work is also reflected in the fact that manufacturing accounts for less than a third of the economy even in the most industrialised of these states.

In some states like Rajasthan, agriculture drives 60 per cent of the economy (charts 3, 4).

Demands for guaranteed pensions have been encouraged despite adverse fiscal implications.

A tenth of revenue receipts for many governments already goes towards pensions (chart 5).

The ability of these states to spend on development is getting increasingly limited by the growth in their committed expenditures -- which include pensions, salaries, and interest payments.

The next government in these states may find it tough to push economic growth through long-term reforms, which would be necessary.

Committed expenditure takes away the majority of revenue receipts in both Rajasthan and Mizoram.

Other states also have a significant share of revenue receipts tied up in committed expenditure (chart 6).

Feature Presentation: Aslam Hunani/Rediff.com