Economy Of Maharashtra And Tamil Nadu Economics Essay
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Published: Mon, 5 Dec 2016
The concept of Inter-district balanced growth is as important as the concept of inter-state balanced growth. In this context the present study compares the state of regional development of two leading states of India namely Maharashtra and Tamil Nadu using historical data on various relevant growth and development parameters. The study finds that Maharashtra is ahead of Tamil Nadu as far as the overall state domestic product is concerned and the top districts of Maharashtra do have much higher Net District Domestic Product as compared to the top districts of Tamil Nadu. The paper takes through various development projects undertaken in the two states to ensure growth and development. It is shown that regional disparity is much higher in Maharashtra than that of Tamil Nadu measured by coefficient of variation. The study concludes that better road transport coupled with more evenly spread population density across the districts of Tamil Nadu enabled it to reap the benefit of literacy, education and technology more than Maharashtra among other factors.
Regional Development- A Comparative Analysis of the States of Maharashtra and Tamil Nadu
Swaminathan A.M. & Sudarshan Bhatacharjee
Inter-state studies on regional development or growth in India are a regular feature. Such studies are of special interest for they help in understanding the reasons for superior performance of some states which could be spread from one part of the country to another (Montek S Ahluwallia (2000)). Besides, it also helps in seeing how far is the objective of balanced regional development achieved with the introduction of the economic reforms (Montek S Ahluwallia (2002)), how far are differences in income or infrastructural development between states in India, causes of inter-state disparities (Dasgupta et al (2000), Somik, V. Lall (1999), Ghosh and De (1998, 2004), Kurian, N.J. (2000), or how far do income converge across states in India (Rao et al (1999), Abler and Das (1998)). Added to these income disparities, studies also analyse sectoral development practices between states in India (Bhattacharya, B B and Sakthivel S (2004), Kalirajan K Shand R and Bhide S (2010), Shand, R and Bhide, S (2000)). A look into the latest data on leading state NDPs (Net Domestic Products) show that Maharashtra invariably has been one of the leading state of the country, followed by Uttar Pradesh, Andhra Pradesh, Tamil Nadu, West Bengal, Gujarat, Karnataka, Kerala, Haryana and Punjab. Though this order could change with the data on per capita net state domestic product, most of these states do prevail in the leading list. It is a known fact that many of these states have utilized the benefits of the reforms for their growth. However, just a high NSDP (Net State Domestic Product) cannot be said to be an indicator of growth of the state because growth is looked at with the objective of inclusiveness and sustainability. Though inclusiveness is a wide concept, in the simplest sense it could be taken as covering all regions with in a state. Taken this way it would call for development and growth in almost all districts/ talukas of each state. In other words, the need for balanced regional development is further stressed upon. This calls for broad based studies covering the smallest region possible through available data. However, intra-state disparities between regions and sectors within the regions due to inequitable distribution of infrastructural facilities done in the past for the state of Maharashtra (V.M. Dandekar (1984)) and an initial effort in the present (Swaminathan A.M. (2009)) helps in studying regions to a wider extent. A study in this direction and that too comparing two leading states in India with a time series data would help in studying broad based regional development and inclusive growth along with the effects of reforms on these regions. As such, this study attempts to compare two leading states both with their state wise, sector wise and district wise performance. The two states under reference are Maharashtra and Tamil Nadu. These two states have been selected because a time series data on district wise NSDP and per capita NSDP could be procured only for them.
Besides Maharashtra and Tamil Nadu, enjoy the privilege of being in the top ten states of the country in performance of the net state domestic products (NSDP) and also per capita net state domestic product. These two states are beneficiaries of the reforms in the country for the past two decades. In this process they have been competitors to one another in attracting foreign direct investment as well as claiming that they are leading states in the country. Maharashtra’s NSDP is seen to be in the top almost for most of the years, but Tamil Nadu’s NSDP which is among the top ten states, has regional leaders claiming that the state has reached top level and is almost the best state in the country. However, the factual figures do not indicate the same. Thus, the aim is to compare and analyse the performance of both the states as a whole as well as sector wise and district wise. The study finds that, though both the states have initiated efforts to reform their states, Tamil Nadu seems to have benefited more possibly because of its spread of habitat evenly throughout in most of the districts.
Approach to the Study
Like inter-state development, intra state development is also influenced by the presence of natural endowments, mobility of resources, specialization factors like scale economies etc. Therefore the concept of balanced growth is applicable to such disaggregated study too. Now this is possible so far as the growth trickles down from one region to another i.e. there are spillover effects of growth from one region to another. Added to this going by Hayami’s (1997) theory that for a suitable transmission and receipt of growth impulses it is necessary that regions are able to adapt their region specific institutions, it is clear that the success of growth in another region due to the spillover effects of growth in one region depends on the extent to which the regions are able to adapt their region specific institutions.
Besides, transportation is also said to play an important role in balanced regional development. This is highlighted by Sun (1995) by pointing out that improvement in transport link between regions would stimulate economic development in the less developed regions. Added to this, gains of economies of scale from the geographical concentration of large number of highly educated people is also said to help the development of a region. This is explained by (Rauch (1993)) where he points out that gain of economies of scale from the geographical concentration of large number of highly educated people helps in raising labour productivity.
Finally looking into all these it is felt that, when the regions are in an uneven terrain, the location of the important institutions like district headquarters plays an important role. Added to this, the spread of human habitat in a region also play an important role. Thus, the study aims at looking into the extent of disparity in the districts of Maharashtra and Tamil Nadu over a period of fifteen years beginning from 1993-94 and possibly analyzing the causes behind the differences in the disparity between the two states by using the results of the above empirical studies. Since the period is soon after the reform process, the study also looks into the effect of reforms on the development of the districts of the two states.
The different district, regional and sectoral data used for the different districts and regions of Maharashtra is calculated from the District Domestic Product of Maharashtra 1993-94 to 1998-99 ( base year 1993-94) and District Domestic Product of Maharashtra 1999-2000, 2000-01 and 2001-02, (base year 1993-94), both published by the Directorate of Economics & Statistics, Government of Maharashtra, Mumbai. Added to this the District Domestic Product of Maharashtra for 1999-00 to 2007-08 (base year 1999-2000) was directly collected from the same Directorate in CD form. All the data have been converted to form a single base year i.e. 1999-2000. These data at constant prices of 99-00 have been used to form the indices and coefficient of variation. The District Domestic Product of Tamil Nadu is collected from the government of Tamil Nadu site. The state wise NDP for Maharashtra and Tamil Nadu along with the sector wise data is collected from CSO India.
Comparative Study and Data Analysis
Economy of Maharashtra and Tamil Nadu
Maharashtra’s economy is larger than Tamil Nadu in almost all parameters, demographically as well as economically. Its area, population, GDP, NDP and also per capita NDP are far larger than the above said southern state. The literacy rate of Maharashtra (82.9%) is also marginally more than that of Tamil Nadu (80.3%) as per the 2011 census. However, the figures on sex ratio indicate that Tamil Nadu is better placed at 995/1000 as compared to Maharashtra which is at 925/1000 as per the latest census. Tamil Nadu at 555 per sq km is also more densely populated as compared to Maharashtra at 365 per sq km as per the current census. Observing Table 1 it is seen that economically a rich state Maharashtra has a NDP of more than 1.77 times than that of Tamil Nadu. The per capita net domestic product (PNDP) is also 1.15 times that of Tamil Nadu. However, the growth in the NDP & PNDPs, are far greater in the case of Tamil Nadu than Maharashtra for the period 02-03 and 06-07.
Table 1- Net Domestic Product and per capita NDP of Maharashtra and Tamil Nadu
Table 2 shows a sector wise picture of the two states. Here also Maharashtra’s dominance is seen. Instead in the case of the mining, electricity and banking & insurance sectors, Maharashtra’s NDP is more than 2.5 times that of Tamil Nadu.
Table 2- Sector wise1 Net Domestic Products of Maharashtra and Tamil Nadu
Ratio of the two states
Ratio of the two states
Ratio of the two states
TR & HTs
BK & INS
However, with the liberalization process at the centre, reform measures have been initiated by both the states and a look into these and their effects could highlight on the state of both the economies.
Maharashtra Initiatives and Progress
As a reform process the government of Maharashtra is said to have taken a number of measures to benefit the different economic sectors in each of the districts. The state’s economic survey reports highlight most of these. In the primary sector, measures seem to have been taken in agriculture, forestry, fishing, agriculture and allied activities. The prominent among them are the reforms in the irrigation sector, crop insurance scheme, agricultural policy 1997-98 to develop agricultural sector, distribution of improved variety of seeds, provision of subsidy for purchase of equipments under sprinkler and drip irrigation system, restriction on cutting of trees, etc. Most of these measures are in the agricultural sector. However, the district PCY in this sector, do not reflect the benefits of these measures (Swaminathan A.M & Sudarshan Bhatacharjee 2011). This is supported by the fact that even though there have been reforms in the irrigation sector, right from 1990-91 onwards till 2007-08 the percentage of gross irrigated area to gross cropped fluctuated between 15.18 % to 18.11% (Economic Survey of Maharashtra 2009-10, Annexure 7.3). Added to this the coefficient of variation between districts for this sector shows a worsening situation rather than improvement (Swaminathan A.M & Sudarshan Bhatacharjee 2011).
According to the Economic Survey of Maharashtra (2009-10), reform measures, also seems to have been taken in the industrial sector in Maharashtra. To mention some we have the adoption of Special Economic Zones, Tourism Policy 2006, Information Technology & Information Technology Enabling Services Policy 2009. Added to this there have been measures related to provision of fiscal and financial incentives so as to attract industries. Even with these measures, the secondary sector analysis show that only four districts are the major contributors in this sector (Swaminathan A.M & Sudarshan Bhatacharjee 2011). Except Thane, all the districts are below 20% of Mumbai contribution. Excluding Mumbai, it is seen that 6 districts produce at least 20% of Thane’s production. This is not surprising because this is reflected in the Maharashtra Development Report (2007) which says that industrial activity in Maharashtra is concentrated in four districts viz. Mumbai, Mumbai Suburban, Thane and Pune. No doubt, Raigad and Nashik appear as minor contributors but, this could be taken as upcoming districts in the secondary sector for it is said in the same report that with the liberalization process Maharashtra has had rapid development activities related to investment projects in different parts of the state and of these 40% of the proposed investment is to be in the Konkan, 36% in Pune region and 13% in Nashik region.
According to the Maharashtra Development Report (2007), infrastructure development is also given a special place. There have been power sector reforms. However, the infrastructure power is a big short fall. Except Mumbai and Mumbai Suburbs all other districts of the state experience load shedding which is regarded as a proxy to short fall in supply of power. Maharashtra State Electricity Board (MSEB) supplies electricity to all the districts other than Mumbai and Mumbai Suburbs. Much of its supply is neither metered, nor monitored which gives chances for pilferage. The use of old equipments in transmission and distribution adds to further losses to this body. Besides, only half of the power supplied by it is billed. Again, only 80% of the value of the supply is collected. Electricity usage in agriculture is highly subsidized and the brunt of this is on the industry and domestic users.
In the case of development of roads, the Maharashtra Development Report (2007) says that though, Maharashtra did not get benefits from NS (North South) and EW (East West) corridors, the GQ (Golden Quadrilateral) helped in building some of national highways. The rural road development has been through the Pradhan Mantri Gram Sadak Yojana (PMGSY). But, still Maharashtra has unconnected inhabited villages. The Maharashtra State Road Transport Corporation (MSRTC) which is a public sector unit incurs heavy losses due to concessional travel provided on the directions of the governments and the obligatory trips to the rural areas. Thus, this sector in no way benefits the people using them because, though there is road connectivity between districts, there is no sufficient number of bus services nor are the roads maintained well.
Tamil Nadu Initiatives and Progress
As per the Tamil Nadu Development Report 2005, though, globalizing agriculture through liberalization has the scope of commercializing agriculture and exporting value added farm products, the Tamil Nadu government does not seem to have taken much reform measures in this sector. So far as manufacturing is concerned, Tamil Nadu is counted as a dominant state. This sector is said to have had problems in adapting itself to the liberalization process in the early 1990s. However, it is said to have overcome them by late 1990s. Though, the coefficient of variation between districts for the secondary sector is high as per data2 for the year 2006-07, this is better than Maharashtra, because at least 6 districts of Tamil Nadu produce more that 45% of Coimbatore’s production (highest producing district) in this sector. Added to this 7 districts produce at least 20% of Coimbatore’s production.
Besides, the Tamil Nadu Development Report highlights that though significant investments in infrastructure sectors like power and road transport seems to have been made, it did not ensure performance efficiencies here. Added to this, Tamil Nadu is said to have attracted multinational companies like Ford & Hyundai. This is believed to be due to the availability of skilled labour force added to this the prevalence of a well developed supply chain for small components needed in the industry.
The Development report further emphasizes that Tamil Nadu has a good road network and this is said to give connectivity to all habitations and modes of other transport system in the state. Both government and private sector buses operate on these roads. Since the state owned buses could not cater to the needs of people living in remote villages the mini bus scheme was started. The Impact assessment report on Pradhan Mantri Gram Sadak Yojana (PMGSY) for three districts of Tamil Nadu justifies the quality of the rural roads in Tamil Nadu. This could possibly be expected to follow in other districts too.
The state of Tamil Nadu is also said to have flourished in the information technology sector. The state development report points out that the government has taken number of measures to develop this sector and spread the use of it all through the state. This according to it was possible with literacy, development of human capital by spread of higher education far and wide in the state, e-learning etc. The government has also started e-governance making work easy. Besides all these the government has started the Sustainable Access in Rural India (SARI) to show that viable markets exists for information and communication services in rural areas by spreading out technologies. Ultimately these measures are done to link these activities to the objective of sustainable human development. SARI was to involve universities, non-profit organizations and the private sector which was to link 1000 villages in two districts. SARI is re designated as Rural Access to Services (RASI) and is expected to cover all districts in the phased manner.
Though the two states have put in efforts to develop the district/regions within their state, it is observed that there are disparities in the development of these districts/regions within each of these two states. Analysis of these district level data would help in getting a clear picture of the balanced regional development of the two states.
District Economies of Maharashtra and Tamil Nadu
Mumbai’s contribution cannot be compared with Chennai or Coimbatore which are the top most producing districts of Tamil Nadu. These can be observed in Table-3 below It is also observed that the contributions of Thane and Pune are also sufficiently large as
Table -3 District wise NDP (Rs Crores) for Maharashtra and Tamil Nadu
Tamil Nadu Districts
compared to the second and third ranking districts of Tamil Nadu. In fact, every single ranked district in Maharashtra is contributing more than their corresponding ranking district in Tamil Nadu except for one or two exceptions. All these indicate the bigger size of Maharashtra economy. However, Maharashtra is unable to show the same dominance in balanced regional development.
It is seen from Table – 4 that the coefficient of variation between districts of Maharashtra over the years from 1993-94 to 2007-08 show an increasing trend. The same is the case of Tamil Nadu over the years 1993-94 to 2006-07. But, the coefficient of variations between the districts of Maharashtra are more than double that of Tamil Nadu indicating the disparity level to be higher in Maharashtra than Tamil Nadu. The differences in disparity, is also obvious from the share of the contribution by the leading
Table -4 Coefficient of Variation between districts of Maharashtra and Tamil Nadu
districts of the two states. While the share in state NDP of the top 10 districts of Maharashtra are between two third to almost three fourth, the share in state NDP of the top 10 districts of Tamil Nadu are just more than half for the period 1993-94 to 2006-07. These indicate that disparity is high in Maharashtra as compared to Tamil Nadu. Therefore it could be said that Tamil Nadu seems to more balanced in regional development as compared to Maharashtra.
Now that disparity is obvious, the question arises as to what could be the cause for this disparity being higher in Maharashtra than Tamil Nadu.
Rauch (1993) study shows that just investing in physical or human capital would not lead to absorption or creation of technical progress in a region but it is determined by the regions institutional environment where there is a collective learning process within which a number of individuals interact with each other, exchange ideas and information ultimately creating a knowledge rich environment. In such an environment he says that knowledge passes from one economic agent to another resulting in the creation of wide variety of new ideas. Thus with the proximity of educated people there is a rapid transfer of knowledge and ideas resulting in gaining economies of scale from the geographical concentration of large number of highly educated people. This according to Rauch (1993) helps in raising labour productivity. Following this it could be said that only when people are in close proximity to one another i.e. spread of habitat are balanced and not sporadic, could you have the benefits of education developed.
Further, it is believed that the development of one region helps the neighbouring region to develop through the trickledown effect (Hrishman, 1958), or spillover (Somik Lal 2007) effects. Following this it could be said that when Mumbai develops, it should help in the development of districts around it or when Pune develops the districts around it should be able to take the benefit of this and develop themselves and pass it on to their neighbouring districts. However, it is not necessary that these effects should always be positive. They could be positive or negative depending upon the influence of development (Somik Lal 2007). To explain this, let us consider the availability of a good transport and communication system in Pune. Surely, this will help the neighbouring districts in having trade and commerce, because this infrastructure may be passed to the neighbouring districts i.e. transport links, telecommunication links etc. This in return will help in the increase in output and productivity in the districts that are benefitted by this infrastructure facility in Pune. On the other side, when infrastructural facilities are available in Pune, there could also be the possibility that the capital from the neighbouring districts move to Pune rather than get invested in their districts itself.
Besides, going by the Central Place theory which points out that settlements simply functioned as central places providing services to surrounding areas, it could be said that location of development plays an important role in spread of development effect for example: – if the district is developed at the centre the benefit to the greater extent goes only to the respective district. This would continue till when the district on the whole is fully developed till its periphery. But, if a district is developed at some of its periphery, then the adjacent district gets the advantage of these developments. The spillover effects to neighbouring districts would be larger here.
The review on both the economies has made it clear that the development of roads in Maharashtra is bad as compared to Tamil Nadu. Tamil Nadu has good connectivity of roads deep up to the village levels as well as the bus services are both from the government as well as private sector. Instead it could be said that the private sector is more dominant. Added to this there is an expected good connectivity of information technology through SARI. In Maharashtra it is only the Maharashtra State Road Transport Corporation (MSRTC) which runs to the remotest village. Lack of competitor affects services results in inefficiency, ultimately affecting the movement of people from one place to other. This leads to obstruction in exchanging or spreading ideas among educated persons thereby affecting their development in productivity.
In the case of Maharashtra it seen that the population in most of the districts is sporadically spread by which linkage becomes difficult. From Table 5, it is seen that in each of
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