Development Performance across Indian States and the Role of Governments

In the context of balanced regional development, drawing on the East Asian model of industrial development recently discussed in Sonobe and Otsuka (2006), a relevant point that needs to be made at the outset is that less equitable spatial development is not necessarily an indicator of constraints to overall growth of the economy. Yet, if large and populous spatial segments of the economy remain backward while the other regions move ahead for long periods of time, the overall national development strategy becomes unsustainable (World Bank, 2009). The crucial questions in this context are about how to bring spatially equitable development in a country, and which institution has the primary responsibility for bringing such equitable development. Conventionally, an economic system is comprised of state and market, which means the primary responsibility for spatially equitable development rests with either state or market, or both. While a federal framework provides for allocation of state resources in an equitable manner, the market operates based on business perspectives that may not aim for spatially equitable development. In contrast to the conventional method of assigning factors contributing to socioeconomic development either to the state or to the market, Hayami (2004) introduced another relevant entity: “community.” Communities are expected to maintain benefits for their members in a sustainable manner at the local level, a strategy that may again not have spatial equity as an objective.