The data I'm using has been collected from reliable various websites, like data.gov.in and http://planningcommission.nic.in. Also, I have uploaded excel sheets containing data, both raw and refined.
Note: Amounts on the y-axis are in crore rupees everywhere.
A case study : Madhya Pradesh and Punjab
This case study will help illustrate the consistent growth rate of Madhya Pradesh's GDP. Punjab and Madhya Pradesh had quite similar GDP in 2001-02, while in 2014-15, the differences became quite notable.
The GDP difference started to widen in the late 2000s and the trend continued in the next decade. Now that we've established the growth, we will try to explain it.
We will look at two things. First, we will look at the formation of metropolitan centers in the state. Here we will also analyze the economic landscape of the state. Then we will look at contribution of various industries to the GDP. Finally, we will try to find a plausible explanation for the growth.
Economic landscape and Urban agglomerations
Lets first look at the economic landscape of Madhya Pradesh.
The state has 4 major districts - Bhopal, Indore, Jabalpur and Gwalior. Other than these, there are no large cities and remaining state consists of towns, villages and forests. A lot of population is tribal.
On the economic front, Indore is a prosperous city relative to the state average. The other three districts pale in comparison to Indore, but are still above the state average per capita GDP. There are many small towns and villages which aren't economically very sound but the growth rates are promising,though not at par with the major cities in the state. As you can see here, Dindori (included in India's 250 most backward districts, representative of backward economies of the state) also shows growth trends similar to (but not same as) Sagar (representative of average economies of the state), Jabalpur (representative of above average economies) and Indore.
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| Magnitude Of GDP, for estimating relative prosperity |
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This is because industrialization of major cities results in direct positive impact on nearby towns and villages, and indirect positive impact on isolated villages and underdeveloped towns.
The direct impact is on the nearby villages and small towns which are part of the urban agglomeration. These benefit from the employment opportunities as well as new opportunities for trade and commerce. The benefit for isolated settlements is less evident yet existent. They gain from the increase in ability of the government to spend on their education and necessary infrastructure. Hence, as the cities develop and industrialize, the benefits are reaped by all, but not equally so.
Industrial Growth
We have reached the conclusion that industrialization of cities leads to economic growth of the whole state. Now let's try and find out what the scenario was in Madhya Pradesh.
It is quite clear that the growth of GDP is not due to growth of agriculture or other primary sector activities, since they are growing very slowly compared to the GDP growth. Forestry, fishing, etc. see marginal growth. Substantial growth can be seen when it comes to manufacturing, construction, trade and transport. Hence, our conclusion that industrial growth, which in turn triggers trade, would have contributed to growth of the state, is validated.
What happened after 2005?
From what we've inferred so far, we may assume that new industries were set up in Madhya Pradesh after 2005. A little bit of research verifies that this is indeed the case. I present the following snippet from a wikipedia article to aid my claim-
Another less evident contributor to GDP is tourism. While it's contribution to the GDP is minimal for the time being, it is fast growing and may soon become a major part of the economy.
Until 2005, there was only one S&P CNX 500 conglomerate with its corporate office in Madhya Pradesh viz. Ruchi Soya Industries (2005 gross income Rs 49,661 million). Now there are many big industries having their base in the state. State-run NTPC will invest about Rs 20,000 crore to set up a 3,960-megawatt (Mw) coal-based power project in Madhya Pradesh. NTPC had signed a memorandum of understanding with the state government and MP Power Trading Company regarding this
Change in leadership
While looking at the growth from an economic perspective, we have completed ignored the political factors.In 2005, Babulal Gaur was replaced as Chief Minister by Shivraj Singh Chauhan. Coincidentally, this is was when the economic growth started. After completion of 10 years as chief minister, Shivraj Singh Chauhan talked about his achievements. But is the growth to be attributed to him? Can we establish any correspondence between the leadership change and leadership and economic growth?As it turns out, while the change in governance brought about many new industrial promotion policies, the seeds were laid out in 2004, an year before Shivraj came to power. Hence, while Shivraj Singh can be credited with progressive policies, we can't decisively say that he was the reason Madhya Pradesh's economy showed such promising growth. A bit more about the 2004 Industrial Promotion Policy.
Industrial Promotion Policy, 2004 document envisages the creation of an “industry friendly administration, maximizing employment opportunities,tackling industrial sickness, rationalizing rates of commercial taxes and bolstering private sector participation”
Thus, the new policy is aimed to provide industrial investment promotional assistance, concessions inallotment of land, concessions for project of special importance, land on confessional rates, for ware-housing, exemptions on stamp duty and registration charges, exemptions on electricity duty on captive power generation, exemption from entry tax,exemptions from 'mandi' tax, subsidy on interest of term loans, subsidy to industry under thrust sector, subsidy on capital investment, and special packages for scheduled caste and scheduled tribe entrepreneurs and special packages for revival of sick units at small,medium and large scales.
Source for excerpts :
Thus, the seeds of industrialization had been laid well before Shivraj came to power, and hence we cannot say that he was the only one who played a role in the growth. His contribution as a chief minister cannot be denied, he is not the answer we are looking for. Also, a look at his major policies would make it clear that he worked more towards social and cultural reforms than economic ones. He sought to stop female infanticide and to encourage girl's education. He made policies like "Ladli Laxmi Yojna", "Kanyadhan Yojna" and "Janani Suraksha Yojna" which does improve the society, but not economically (the economic rewards of education are not immediate).
Conclusion
By analyzing available data and searching online, we have been able to find a cause effect relationship for the GDP growth in Madhya Pradesh. Industrialization of the state had a clear and major role to play, and the government was only partly responsible for the promoting industries.Hence, we looked at two probably causes for economic growth and were able to differentiate between an actual relation between two events and an illusion of such a relation.
The excel sheets are attached below. Other sources were cited whenever the were used.
Processed Data
Industries GDP
Districts data
MP and Punjab
Raw Data
Industries GDP
Districts data
States Data
