"Connecting communities, empowering nations: Unifying the Regional and Global Economy ."

In recent years, the complexity and rigidity of bureaucratic processes have increasingly impacted governance and economic efficiency in India. Persistent administrative hurdles, even in routine functions, often result in unintended disruptions, such as officials unable to travel for urgent work due to last-minute flight cancellations tied to delayed permissions. While procedural checks and balances are essential, particularly for transparency and accountability, excessive or poorly managed bureaucratic controls can inadvertently create bottlenecks that harm productivity and slow down decision-making. Many experienced policymakers acknowledge the improvements over past decades; however, the incremental addition of new procedural requirements, without careful consideration of cost-benefit analyses, contributes to what we call “administrative friction.”

One area where friction becomes apparent is in economic data analysis, as exemplified by a recent study on the relative economic performance of Indian states from 1960 to 2023. This study, stretching over six decades, provides crucial insights into how India’s states have contributed to the national economy and their per capita income in relation to the national average. By evaluating long-term data, it offers a unique perspective on regional economic dynamics and highlights the disparities that have evolved over time.

The Decline of Uttar Pradesh and West Bengal in India’s Economic Landscape

In 1960, Uttar Pradesh (then undivided) was the largest contributor to India’s GDP, making up 14% of the national economy. Known for its fertile agricultural lands and industrial hubs like Kanpur—often dubbed the “Manchester of the East”—Uttar Pradesh enjoyed a significant economic presence. However, by 2023, its share had dwindled to around 8%. The reasons for this decline are complex and multifaceted, involving decades of suboptimal policies that affected investment, law, and order. For instance, a lack of support for industrial growth beyond traditional hubs and the failure to advance Kanpur up the value chain resulted in lost opportunities for economic diversification and growth.

Similarly, West Bengal contributed 10% to India’s GDP in the 1960s, but this has decreased to roughly 5% today. Historically, the state was a powerhouse, with Kolkata serving as an economic hub. However, over time, a mix of policy missteps and political instability led to economic stagnation. This decline underscores how state policies and governance styles can have long-term consequences on economic standing and regional prosperity.

The Economic Constraints of Agrarian Dependence

An interesting trend noted  is that states heavily dependent on agriculture tend to stagnate unless they diversify into industry or services. While agriculture remains vital, its growth potential is inherently limited compared to sectors like manufacturing or services. Punjab is a striking example of this pattern. The state saw rapid economic growth during the Green Revolution in the 1960s and 1970s, resulting in per capita income above the national average. However, as agriculture hit growth limits, Punjab’s economy slowed. Today, its per capita income barely surpasses the national average, and its GDP contribution has been on a downward trend.

This phenomenon, often referred to as the “Dutch disease,” describes economies that become overly reliant on one prosperous sector, which can discourage the growth of other sectors. In Punjab’s case, an overemphasis on agriculture seems to have restricted industrial and service sector growth. As a result, while agricultural success was initially beneficial, it ultimately constrained Punjab’s ability to diversify its economy and become more resilient.

Lessons for Economic Policy and Development Strategy

This data reveals several insights for policymakers. First, economic resilience requires diversification. States overly reliant on agriculture, like Punjab, or those that failed to advance industrial sectors, like Uttar Pradesh, demonstrate the risks of a single-sector focus. Diversifying into industry and services not only creates more jobs but also ensures more stable growth over time. Additionally, states with successful industrial hubs—such as Maharashtra—highlight the importance of fostering industry-friendly policies and providing stable infrastructure.

Second, continuous monitoring and adaptation of policies to address regional disparities are essential. Economic data should guide decisions on resource allocation and development initiatives to help underperforming regions catch up. For instance, recent improvements in Uttar Pradesh’s Noida area as an industrial hub underscore that progress is possible with the right investments in law and infrastructure.

Removing Bureaucratic Friction to Unlock Growth

The economic evolution of Indian states is a story of both progress and missed opportunities. States that adapted policies to encourage diversification have fared better than those that remained dependent on agriculture. Equally important is the recognition that bureaucratic inefficiencies and frictions hinder growth and responsiveness. Effective governance will require not only addressing long-standing regional economic disparities but also tackling the day-to-day administrative frictions that slow down progress. By focusing on streamlined, outcome-oriented governance and supporting balanced regional development, India can better harness the potential of each state for a more equitable and prosperous future.