NEW DELHI – It is a well-known fact that the South has been developing at a faster pace than the North. The northern states, particularly the populous ‘’Bimaru ‘’states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh haven’t made any significant progress since long. Corruption combined with lack of law and order is perhaps what’s holding them back.
Over the past few years, however, growth has picked up pace in the North. So much so that, in his book, Breakout Nations, Ruchir Sharma, Head of emerging markets at Morgan Stanley Investment, says that the North might just overhaul the South. He supports his argument by noting that “Between 2007 and 2010, the average economic growth rate of the southern states decelerated from 7 percent to 6.5 percent, while that of the northern states accelerated from 4.5 percent to 6.8 percent.”
The south may have achieved rapid economic growth over the past couple of decades. But times are changing. Sharma believes that the arrogant South will soon be humbled by the fast growing North. The reason for this shift is mainly because the Northern states have started electing better. The new leaders have started reforming the way the states are governed. And as a result, considerable developments have been made. To validate this claim, Sharma takes the example of Bihar. After Nitish Kumar assumed office as Chief Minister, he completely changed the way people looked at Bihar. From being a land thugs and goons, it has now become one of the fastest growing states in the country. “Bridges and roads got built; Bihar started to function, then to fly. Now its economy is growing at 11 percent, the second fastest in India, and Nitish is lauded as a model of what a straight leader can accomplish in a crooked state,” says Sharma.
He further pushes his argument by noting that in 2010, out of the six Indian states that grew faster than 10 percent, none of them was from south India. Growth has slowed down, even as south Indian states experienced a decline in the competence of their leaders.
Apart from electing better, the north has three other things going for them: The economic isolation, the global commodities boom and the demographic edge. The North remained isolated from the credit boom and hence remained unaffected during the credit crisis that followed it. They have large reserves of natural resources such as coal and iron, and most of the country’s steel and power plant projects. Half of the country’s youth reside in the North.
So, what does this mean to the South? Firstpost takes an interesting look at it. Having started very low, the North has nowhere else to go but up. Economies that start extremely low on the growth scale usually experience high growth initially. But, over time the pace of the growth decelerates. For instance, the growth rates of developed economies such as the United States and Europe – their long-term annual GDP growth rate is estimated at a mere 2-4 percent compared with India and China’s 6-8 percent.
Of course, it’s not that south India is highly developed and hence has little room for further growth. Sure, given its relative development, the South is likely to grow slower than upcoming north India. But, it does not in any way indicate the end of southern dominance once and for all.
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