Challenges and Issues in Sub-national Development in India

Travel from one Indian state to another and you can feel the difference. The roads change, the factories thin out or multiply, the schools and hospitals shift in quality, and the opportunities open to a young graduate look entirely different. India is one country, but development at the sub-national level – the level of states and districts – is anything but uniform. Some states have living standards approaching those of developed nations, while others continue to struggle with poverty, low literacy, and weak infrastructure. Understanding why these gaps exist, and why they persist, is one of the most important questions in the study of state politics.

What sub-national development actually means 🔗

Sub-national development refers to economic and social progress measured at the level of states and districts rather than the country as a whole. National averages can be misleading. India’s GDP may be growing rapidly, but that growth is not spread evenly across its territory. A single national figure hides enormous internal variation.

The clearest way to see this is through the Human Development Index (HDI), which combines income, education, and life expectancy. A sub-national HDI study found that Goa, Delhi, Sikkim, Kerala, and Chandigarh top the list, with Goa scoring above 0.799 – comparable to Eastern European countries with very high human development. At the other end, states like Bihar score the lowest. Around 70% of Indians fall into the medium human development category, and there is often a mismatch between a state’s economic growth and its actual human development outcomes.

The two Indias within one nation 🔗

Scholars have long described this divide. Researchers point out that India presents a picture of marked diversity, where some states have development levels resembling rich countries while others lag far behind. Western and southern states such as Maharashtra, Gujarat, Karnataka, and Tamil Nadu together contribute over 30% of national GDP, while several eastern states trail well behind. This is not a small gap that closes with time. It is a structural feature of the economy.

How the disparities took shape 🔗

The current map of winners and laggards was shaped by history, geography, and policy. Coastal states with ports, colonial-era industrial centres, and better irrigation had a head start. States dependent on rain-fed agriculture, with weaker infrastructure and higher population growth, fell behind. But the gap is not just inherited – it has been reinforced by the decisions states made over decades.

The rise and fall of the BIMARU label 🔗

In the 1980s, demographer Ashish Bose coined the acronym BIMARU – meaning “sickly” in Hindi – to describe Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh. Originally it pointed to poor demographic indicators like low women’s literacy and few institutional childbirths, but it quickly became shorthand for economic backwardness more broadly. The label stuck because these states consistently posted some of the lowest per capita incomes and weakest social indicators in the country.

The picture is not frozen, though. Economists disagree on whether the BIMARU framing still holds. Some argue these states are no longer “sick” because of high recent growth rates, while others maintain that the reforms of the 1990s actually widened the gap between richer and poorer states. What is clear is that these states still carry enormous demographic weight. A 2020 report projected that the BIMARU states would account for nearly half of India’s population increase between 2011 and 2036, which has serious implications for everything from public services to parliamentary seat delimitation.

1991 and the new autonomy of states 🔗

The single biggest turning point was the economic reforms of 1991. Facing a balance of payments crisis, the government under P.V. Narasimha Rao and Manmohan Singh dismantled the “License Raj” through a package of liberalisation, privatisation, and globalisation, known as the LPG model. This reduced central control over where industries could be set up and how much they could produce.

The consequence for state politics was profound. Once the centre stopped directing investment, states had to compete to attract it. With economic liberalisation, states were given greater autonomy to draw in capital, and the outcomes depended heavily on local leadership, policy choices, and the ease of doing business they could offer. States that streamlined approvals and built investor-friendly environments pulled ahead. Those that clung to older bureaucratic controls fell further back.

Why some states pulled ahead 🔗

The contrast is sharp. Gujarat, for example, streamlined its industrial approvals and aggressively courted investors through events like the Vibrant Gujarat summit. By contrast, states that retained heavy regulation and land ceiling laws deterred large-scale manufacturing. By the early 2000s, the BIMARU regions were capturing less than 10% of national foreign direct investment despite holding more than 40% of the population. Capital flows to wherever enforcement is predictable and approvals are quick.

This dynamic is now formalised as competitive federalism, where states compete with each other for investment, talent, and better governance rankings. Bodies like NITI Aayog actively encourage this through rankings on ease of doing business, health, and education. States also design their own welfare schemes – such as Telangana’s Rythu Bandhu income support for farmers – to complement central programmes. Healthy competition can spark innovation, but it has a darker side too.

The major challenges that remain 🔗

The freedom unleashed in 1991 created opportunities, but it also generated a set of stubborn problems that define sub-national development today.

Persistent regional inequality 🔗

The most obvious challenge is that the gap is not closing on its own. Several studies note that since the reforms, regional disparities appear to have increased significantly. Banking and financial development remain concentrated in already-prosperous regions, and the relative ranking of the top and bottom states has stayed remarkably stable over decades. Liberalisation rewarded states that were already well-positioned, which means the rich states often got richer faster than the poor ones could catch up. This is sometimes described as the double-edged nature of competitive federalism: it drives innovation in strong states while risking the widening of pre-existing gaps.

The politicisation of development 🔗

Development is never purely a technical matter – it is deeply political. Which projects get built, which regions get prioritised, and which welfare schemes get launched are decisions shaped by electoral calculation. Competitive federalism has, in some readings, slid toward “competitive freebies,” where states engage in populist spending and reckless subsidies rather than competing on efficiency. This carries real fiscal risk. States like Punjab and West Bengal have become heavily indebted, with debt-to-GSDP ratios crossing 40% and 38% respectively, partly driven by populist spending and loan-funded projects.

Politicisation also shows up in how the BIMARU label itself became an electoral weapon – a pejorative hurled across party lines and then claimed as proof of turnaround by whichever government wanted credit for progress.

Land acquisition and the displacement question 🔗

Perhaps the most explosive challenge is land. Industrial development requires land, and in a densely populated agrarian country, acquiring it means displacing farmers. The conflict between development and displacement has repeatedly turned violent and reshaped state politics.

The clearest example is the Tata Nano controversy at Singur in West Bengal. In 2006, the Left Front government led by Buddhadeb Bhattacharjee acquired 997 acres of fertile farmland in Hooghly district for a factory to build the Tata Nano. The government invoked the colonial-era Land Acquisition Act of 1894, a law meant for public purposes like roads and railways, to hand land to a private company. The site was among the most agriculturally productive in the region, and roughly 15,000 people depended on that land for their livelihoods. Compensation was widely seen as inadequate, and promised rehabilitation was delayed.

The protests, led by Mamata Banerjee’s Trinamool Congress, escalated into bandhs and a 25-day hunger strike. In October 2008, Tata Motors pulled the project out of West Bengal and shifted it to Sanand in Gujarat on the invitation of then Chief Minister Narendra Modi. In 2016, the Supreme Court ruled the acquisition illegal and ordered the land returned to its 9,117 owners. Years later, an arbitral tribunal awarded Tata Motors over ₹766 crore in compensation for its losses.

Nearby Nandigram followed a similar pattern. A proposal to set up a chemical hub over 14,000 acres triggered fierce resistance, with villagers organising under a committee against land evictions. The episode became a defining moment in West Bengal politics and contributed to the fall of the long-ruling Left Front. The lesson for every state was unmistakable: industrialisation that ignores the people on the land can collapse politically, no matter how attractive the investment looks on paper.

The governance gap 🔗

Underlying all of this is the quality of governance. The same investment opportunity produces wildly different outcomes depending on administrative capacity, law and order, and political stability. Bihar offers a stark illustration: during the period of caste-based politics often labelled “Jungle Raj,” the state’s average annual growth reportedly fell from over 5% in the 1980s to negative territory in the following decade, and its share of national GDP shrank. Investors avoid places where contracts are uncertain and security is weak, regardless of how cheap the land or labour might be.

Why uniform development is so hard 🔗

Put all these factors together and the difficulty becomes clear. India is a quasi-federal system in which states now hold real power over their own development paths, but they start from vastly unequal positions. The 1991 reforms handed states autonomy, but autonomy rewards those already equipped to use it. Land conflicts, fiscal stress, and the constant pull of electoral politics complicate every project. Centrally sponsored schemes and finance commission transfers try to compensate lagging regions, yet the structural advantages of the leading states are hard to overcome.

Achieving balanced development is not simply about pumping money into poorer states. It requires targeted infrastructure, stronger local governance, fairer land laws that respect those displaced, and performance-based funding linked to actual outcomes. The challenge of sub-national development is, at its heart, a challenge of managing a vast, diverse, and unequal federation where each state writes part of its own story.

What do you think? Should the central government intervene more forcefully to lift lagging states, even if that means reducing the autonomy that lets stronger states thrive? And was the resistance at Singur and Nandigram a defence of vulnerable farmers, or a roadblock to the industrial jobs those regions badly needed?

References

1. https://www.downtoearth.org.in/economy/subnational-disparities-70-indians-in-medium-human-development-category-mismatch-with-states-economic-growth
2. https://www.cambridge.org/core/journals/journal-of-institutional-economics/article/regional-financial-disparity-in-india-can-it-be-measured/E5908C272FD0B8F0363A9FE147C3806C
3. https://www.kamarajiasacademy.com/current-affairs/the-concept-of-bimaru-states
4. https://vajiramandravi.com/upsc-exam/new-economic-policy-1991/
5. https://vajiramandravi.com/upsc-exam/competitive-federalism/
6. https://encyclopedia.pub/entry/30047
7. https://www.business-standard.com/india-news/tata-motors-wins-singur-land-case-against-wb-govt-here-are-case-details-123110300489_1.html
8. https://knowledge.wharton.upenn.edu/article/west-bengals-nano-impasse-a-roadblock-for-tata-and-for-investment/