India's most competitive states: Maharashtra beats Gujarat

What makes India a competitive nation? Well, India’s diverse and dynamic states contribute towards making India an economic power.  

A report by the Institute for Competitiveness (IFC) ranks India on various dimensions that are critical for growth of the economy. 

These are the demand conditions, factor conditions, context for strategy and supporting & related industries.

A state would need to improve all these factors to increase its competitiveness, states the report. These four pillars are interlinked with one another and are instrumental in determining the overall competitiveness of any economy.

The fifth edition of the India State Competitiveness Report 2013 is based on the Microeconomic Diamond Model by management guru, Michael E. Porter. 

State Competitiveness is the ability of a sub-national region to compete with other regions in a country based on created prosperity in contrast to the inherited prosperity, states the report.

Uttar Pradesh is No.1 among the top factor driven economies, followed by Bihar and Nagaland.

Rajasthan tops among the evolving states, followed by Madhya Pradesh, Orissa, Jharkhand, Jammu and Kashmir, Assam and Manipur.

Click NEXT to find out more about India’s most competitive states…

Delhi 

Rank: 1 (City-State)
Competitiveness Score: 65.18
GDP per Capita: $1,761

Delhi secured the top spot once again in the India State Competitiveness Report 2013, released by the Institute for Competitiveness (IFC).

Delhi continues to show strengths in factor conditions such as physical infrastructure, communication facilities, administrative environment, financial infrastructure and scope for innovation.

It also continues to lead in related and supporting industry pillars  and factors like supplier sophistication and institutional support that provides a positive environment for businesses to prosper.

Key service industries include information technology, telecommunications, hotels, banking, media and tourism. Delhi's manufacturing industry has also seen steady growth.

Construction, power, telecommunications, health and community services, and real estate form integral parts of Delhi's economy.

Institute of Competitiveness’ parameters

Demand conditions: Forces shaping consumer expenditure

Factor conditions: Factors of production

Firm strategy and rivalry: The market is a deciding factor in the success or failure of a product.

Supporting and related industries: Presence of clusters rather than isolated firms helps the economy

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Goa

Rank: 2 (City-State)
Competitiveness Score: 59.75
GDP per Capita: $1,901

A tourist hotspot, Goa has a stable agriculture sector as well. Rice is the main agricultural crop. Fishing industry is another big employment generator.

Goa scores high on financial conditions, business incentives and institutional support.

Other industries include the manufacturing of pesticides, fertilisers, tyres, tubes, footwear, chemicals, pharmaceuticals, wheat products, steel rolling, fruits and fish canning, cashew nuts, textiles, brewery products.

Goa was ranked the best placed state by the Eleventh Finance Commission for its infrastructure and ranked on top for the best quality of life in India by the National Commission on Population.

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Maharashtra
Rank: 1 (Innovation-driven economies)

Competitiveness Score: 69.34
GDP per capita: $996

A major contributor to the national industrial output, over 40% of India's national revenue comes from Maharashtra.

Maharashtra is the also second largest exporter of software products in India.

Besides this, the highly industrialised state generates revenues from Chemical and allied products, electrical and non-electrical machinery, textiles, petroleum and allied products are the main industrial sectors in the state.

One of India’s richest states, Maharashtra scores high on supplier & sophistication conditions, and diversity of firms and innovation.

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Gujarat
Rank: 2 (Innovation-driven economies)

Competitiveness Score: 63.60
GDP per Capita: $1001

One of India’s highly industrialised states, Gujarat has some of the biggest business conglomerates.

With an innovation-driven economy, Gujarat scores on supplier sophistication, supporting and strategy factors, innovation and communication.

The state’s top industrial products include cement and petrol. Reliance Industries operates an oil refinery at Jamnagar, in Gujarat.

The world's largest shipbreaking yard is in Gujarat near Bhavnagar at Alang.

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Haryana
Rank: 3 (Innovation-driven economies)

Competitiveness Score: 60.02
GDP per capita: $1,119

One of India’s prosperous states, Haryana is among the innovation-driven economies.

It scores high on income & distribution, spending and pattern, administrative and communication factors.

Manufacturing, business process outsourcing, agriculture and retail form the mainstay of the economy.

One of India’s most industralised states, the state has many Special Economic Zones (SEZs) and a well developed banking system.

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Kerala
Rank: 4 (Innovation-driven economies)

Competitiveness Score: 57.40
GDP per Capita: $990

Kerala ranks high on factor and physical conditions. It also scores fairly well in business incentives, institutional support and communication facilities.

Though the state is saddled with a huge fiscal deficit but its social indicators are on par with the developed world. It has the highest human development index in India.

‘God’s own country’ is driven by remittances. Besides tourism, agriculture, marine products and the service industry are revenue earners for the state.

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Tamil Nadu
Rank: 1 (Transition economies)

Competitiveness Score: 65.47
GDP per Capita: $844

The second largest contributor to India's GDP, Tamil Nadu is also India’s most urbanised state.

Tamil Nadu with a moderately high level of development is called a ‘Transition Economy’.

These transition economies have per capita GDP levels in the bracket of $800-925, according to the report. Tamil Nadu is among the best performers in this category.

Tamil Nadu ranks high on diversity of firms, supporting factors, supplier sophistication.

The second largest state economy in India, Tamil Nadu is ranked 6th in Human Development Index. 

A major software exporter, the state also has many heavy engineering and manufacturing companies, besides auto majors, which have established manufacturing plants in the state.

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Punjab
Rank: 2 (Transition economies)

Competitiveness Score: 58.55
GDP per Capita: $852

Hailed as the 'Granary of India', Punjab needs to focus on agriculture and farm implements, says the Institute of Competitiveness.

Punjab scores well as a transition economy.  Punjab scores high on factor conditions, business incentives, strategy, physical conditions income distribution and spending pattern.

Besides agriculture, industries include manufacturing of scientific instruments, electrical goods, machine tools, textiles, tourism, sewing machines, sports goods, starch, fertilisers, bicycles. 

Punjab also has the distinction of the largest number of steel rolling mill plants in India.

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Himachal Pradesh
Rank: 3 (Transition economies)

Competitiveness Score: 57.28
GDP per Capita: $917

One of India’s fastest growing states, Himachal Pradesh is ranked third among transition economies. 

The state scores high on institutional support, physical and financial factors, communication, supporting factors and supplier sophistication.

Hydroelectric power, tourism and agriculture form the mainstay of the economy.

Himachal Pradesh is ranked the second-least corrupt state in India.

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Andhra Pradesh
Rank: 1 (Investment driven economies)

Competitiveness Score: 63.61
GDP per Capita: $738

The rice bowl of India, Andhra Pradesh has topped among the investment driven economies.

Rice constitutes more than 71 per cent of the agriculture sector. 

Innovation, diversity of firms, institutional support, factor and physical conditions are the highlights of Andhra Pradesh.

In terms of GDP, Andhra Pradesh is ranked third among Indian states and fifth among industrially developed states.

A state endowed with mineral wealth, Andhra Pradesh is also a hotspot for the booming IT sector.

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Karnataka
Rank: 2 (Investment driven economies)

Competitiveness Score: 62.82
GDP per capita: $753

Karnataka, IT hub of India has recorded the highest growth rates in terms of GDP and per capita GDP in the last decade.

An innovation driven economy, Karnataka ranks high on supplier sophistication, related and supporting factors, supplier sophistication, communication and physical conditions.

Besides being the hub for many public sector manufacturing companies, Karnataka has nearly 2,000 IT companies.  The state also leads in biotechnology and floriculture.

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Uttarakhand
Rank: 3 (Investment driven economies)

Competitiveness Score: 56.63
GDP per Capita: $684

One of the fastest growing economies in India, Uttarakhand’s gross state domestic product (GSDP) more than doubled from Rs 24,786 crore (Rs 247.86 billion) in FY2005 to Rs 60,898 crore (Rs 608.98 billion) in FY2012.

Agriculture, tourism and hydropower form the mainstay of the economy.

Uttarakhand ranks high on institutional and support factors, physical conditions, income & distribution and spending pattern.

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Sikkim
Rank: 4 (Investment driven economies)

Competitiveness Score: 55.24
GDP per capita: $704

An investment driven economy, Sikkim ranks high on financial, administrative, business incentives and institutional support. 

Agriculture and tourism drive the economy. Sikkim has the only open border between India and China for trade.

The state is rich in natural resources and has a huge potential for hydel power.

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Mizoram
Rank: 5 (Investment driven economies)

Competitiveness Score: 55.14
GDP per Capita: $546

Mizoram is ranked fifth among investment driven economies. 

Agriculture forms the mainstay of the economy, which is among the least industrialised in India. Lack of a proper surface transport system and accessibility are the drawbacks.

The states scores high on institutional & support systems, and demographics.

The state has good potential for economic growth in the areas of agriculture, horticulture, tourism and handicraft. Around 70 per cent of the population is engaged in agriculture.

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Chhattisgarh
Rank: 6 (Investment driven economies)

Competitiveness Score: 53.99

Chhattisgarh, ranked 6th among investment driven economies, could focus on mining for better economic prospects says the report.

Chhattisgarh is known for being one of the largest producers of steel and electricity. The states accounts for 15 per cent of the total steel produced in the country.

The state rich in minerals, accounts for 20 per cent of the country's total cement production. It ranks first in terms of coal production and third in iron ore production.

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Arunachal Pradesh
Rank: 7 (Investment driven economies)

Competitiveness Score: 53.10
GDP per Capita: $576

The ‘land of the rising sun’, Arunachal Pradesh is ranked among the investment driven economies. 

The states scores high on financial factors, demographics, physical and demand conditions.

Agriculture drives the economy. Forest products account for a significant part of the state’s revenues. The state has the potential for hydroelectric power production.

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Meghalaya
Rank: 8 (Investment driven economies)

Competitiveness Score: 51.70
GDP per Capita: $599

Meghalaya has an agrarian economy. It is rich in natural resources and minerals.

The state scores high on business incentives, human capacity, innovation and physical conditions.

Meghalaya has the largest hydro-electricity potential in North East India. However, infrastructural constraints have dampened the state’s growth prospects.

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Tripura
Rank: 9 (Investment driven economies)

Competitiveness Score: 51.69
GDP per Capita: $561

Tripura scores high on business incentives, demographics, administrative factors and human capacity.

The state’s economy is mainly dependent on agriculture. Though Tripura has a huge potential, the industry sector is underdeveloped. 

Brickfields and tea sector are the only organised business sectors. Tripura is ranked second in the production of natural rubber in the country. It also has a growing handicrafts industry.

High poverty and low per capita income have marred Tripura’s growth prospects.

Lack of irrigation facilities and infrastructure have added to the state's burden.

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West Bengal
Rank: 10 (Investment driven economies)

Competitiveness Score: 51.58
GDP per Capita: $646

West Bengal is the sixth-largest contributor to India's net domestic product.

West Bengal's growth was faster than India as a whole in per capita terms until 2004-05, after which it deteriorated.  

Agriculture and service sector contribute to the state's economic growth. Besides this, the state manufactures engineering products, electronics, electrical equipment, cables, steel, leather, textiles, jewellery, frigates, automobiles, railway coaches, and wagons. 

West Bengal ranks high on administrative, human capacity, demographics, supplier sophistication and demand conditions.