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Achieving strong and balanced regional development in India

Author

Listed:
  • Isabelle Joumard

    (OECD)

  • Hermes Morgavi

    (OECD)

  • Hugo Bourrousse

    (OECD)

Abstract

While India’s per capita income is converging towards that of the richer countries, inequality has drifted up. Spatial inequality – across states and between urban and rural areas – is pronounced, with large differences in output per capita and in access to core public services, such as electricity, roads, and education. Implementing the GST will contribute to reduce trade barriers across states while recent changes in the federalism model are empowering states and promoting experimentation. Prompting states to modernise product and labour market regulations should allow firms in the organised sector to reach an efficient size, and promote job creation and rising incomes in all states. Raising the living standards in poorer states would also require increasing productivity in the agricultural sector by supporting farm consolidation and improving infrastructure in rural areas, particularly roads that connect villages to market towns, crop storage infrastructure and access to sustainable irrigation technologies. As working population moves out of agriculture, urbanisation will gather pace. However, exploiting cities’ potential for job creation, productivity gains and improvement in the quality of life would require better physical and social urban infrastructure. Local spending and regulatory competences should be clarified. Performance of local bodies should be assessed regularly to make them accountable. Municipalities should also be granted clear revenue-raising power (in particular property taxes and user charges for urban infrastructure) to enable them to fund better public infrastructure and services.

Suggested Citation

  • Isabelle Joumard & Hermes Morgavi & Hugo Bourrousse, 2017. "Achieving strong and balanced regional development in India," OECD Economics Department Working Papers 1412, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1412-en
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    File URL: http://dx.doi.org/10.1787/92fd16d9-en
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    More about this item

    Keywords

    agriculture; federalism; India; inequality; productivity; regional development; urbanisation;

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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