Why in the News?
Economic growth in southern states lagged behind India’s overall growth in 2023-24. Despite a large working population, unemployment rates in these states remain a major concern, as seen in their Budget and Economic Surveys.
What are the key reasons behind the economic growth of southern states lagging behind India’s overall growth in 2023-24?
- Lower Growth Rates Compared to National Average – While India’s economy grew at 9.2%, southern states like Tamil Nadu (8.2%) and Telangana (7.4%) recorded slower growth, with Karnataka, Kerala, and Andhra Pradesh growing at over 6%.
- Regional Income Disparities – Economic advantages are concentrated in select districts, limiting broad-based growth. For example, only 8 of 38 districts in Tamil Nadu and 3 of 33 in Telangana had higher per capita income than their state averages.
- Unemployment and Labour Force Challenges – Despite a significant working population, labour force participation rates (LFPR) in Tamil Nadu (58.8%), Karnataka (56.8%), and Kerala (56.2%) were below the national average of 60.1%, affecting economic output.
- Shift Towards Self-Employment – There is a decline in casual labour and an increase in self-employment, often in household enterprises, leading to a lack of stable wage employment. Example: In Telangana, self-employment rose by 8% to 55.9%, while casual labour fell by 5.7% to 18.7%.
- Slower Industrial and Manufacturing Growth – Despite industrial pushes, manufacturing contributes less than 20% of southern states’ economies, limiting their overall economic expansion.
Which southern state has the most equitable distribution of per capita income across its districts?
- More Even Income Spread: Kerala has 7 out of 14 districts with a per capita income above the state average, making it the most balanced among southern states. In contrast, Tamil Nadu (8 out of 38), Telangana (3 out of 33), and Karnataka (4 out of 31) show higher income concentration in a few districts.
- Unlike Telangana, where Rangareddy district’s per capita income is more than three times the state average, Kerala’s income distribution is less skewed, ensuring better regional development and social welfare across the state.
Why is this significant?
- Reduced Regional Disparities: A more balanced income distribution ensures that economic benefits are spread across districts, preventing excessive wealth concentration in urban centers. Example: Unlike Telangana, where Rangareddy dominates income levels, Kerala’s development is more uniform, reducing economic inequalities.
- Better Social and Human Development Indicators: Equitable income distribution translates into better education, healthcare, and infrastructure across all districts, improving overall quality of life. Example: Kerala consistently ranks high in Human Development Index (HDI) due to its statewide access to education and healthcare.
- Sustainable and Inclusive Growth: A well-distributed economy supports long-term stability by ensuring that no district lags significantly behind, leading to lower migration pressures and balanced urbanization. Example: Unlike Tamil Nadu, where Chengalpattu’s income is double the state average, Kerala’s economy avoids overburdening specific urban hubs, leading to sustainable development.
Why is unemployment still a pressing concern in southern states?
- Higher Labour Force Participation but Fewer Job Opportunities – While more people are seeking work, the availability of stable, well-paying jobs remains limited. Example: In 2023-24, Tamil Nadu (58.8%), Karnataka (56.8%), and Kerala (56.2%) had labour force participation rates lower than the national average (60.1%), indicating fewer employment opportunities relative to job seekers.
- Shift from Casual Labour to Self-Employment Without Formal Jobs Growth – More people are moving away from casual labour towards self-employment, but the growth of regular salaried jobs remains stagnant. Example: In Telangana, the self-employed workforce increased by 8% (to 55.9%), while casual labour declined by 5.7%, reflecting a lack of structured employment.
- Dominance of the Services Sector with Limited Manufacturing Growth – The services sector contributes over 50% of economic output, but it often lacks the capacity to absorb large numbers of workers, especially in lower-income groups. Example: In Tamil Nadu, despite an industrial push, manufacturing has not significantly increased its share in the state economy, limiting job creation in this sector.
What role does the services sector play in the economies of southern states?
- Primary Driver of Economic Growth – The services sector contributes over 50% of economic output in most southern states, making it the main engine of economic expansion. Example: In Karnataka and Telangana, the IT and software services industry significantly boosts state GDP, with Bengaluru and Hyderabad being major global tech hubs.
- Uneven Job Creation Across Skill Levels – While the services sector creates high-value jobs in IT, finance, and healthcare, it does not generate enough employment for lower-skilled workers, contributing to persisting unemployment. Example: Kerala, despite its strong service-driven economy (tourism, healthcare, remittances), struggles with high unemployment rates due to a lack of blue-collar service jobs.
Way forward:
- Diversify Economic Growth Beyond Services – Strengthen manufacturing and industrial sectors to create stable, large-scale employment opportunities, especially for lower-skilled workers. Example: Expanding MSMEs and industrial corridors in Tamil Nadu and Karnataka can boost job creation.
- Enhance Skill Development and Labour Market Reforms – Improve vocational training and upskilling programs to align with industry demands, ensuring better job-market absorption. Example: Kerala can integrate its educated workforce into high-value sectors like healthcare and renewable energy.
Mains PYQ:
Question: What is regional disparity? How does it differ from diversity? How serious is the issue of regional disparity in India? (UPSC 2024)
Reason: This question’s demand is directly linked with the regional inequality, which explains why economic growth is concentrated in certain parts of a state. Understanding this helps us see why some districts develop faster than others.
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