Do the states have the mettle?
ECONOMY & POLICY

Do the states have the mettle?

As intensity of crisis hits the Centre, the central command increasingly abdicates responsibility and decision-making ability to the states. This has been witnessed during the COVID crisis and now with the mounting disaster of its virulent second wave. As stated in this column in the past, stat...

As intensity of crisis hits the Centre, the central command increasingly abdicates responsibility and decision-making ability to the states. This has been witnessed during the COVID crisis and now with the mounting disaster of its virulent second wave. As stated in this column in the past, states hold the key to India’s economic growth. Dynamic chief ministers and their able finance ministers can do a jugalbandi like Narsimha Rao-Manmohan Singh and turn around the fortunes of their states. In the past, we have seen Nitish Kumar do this in Bihar as his government constructed roads in the state at breakneck speed and brought in prosperity. The state, which used to be notorious for its potholed roads or no roads in most areas, today boasts 27,000 km of state highways and district roads and 96,417 km of rural roads, all accomplished in the past 15 years. Bridges have enabled better access for people all over the state. Bihar is now a power-surplus state and villages have electricity supply. There is hardly any area in the state that does not get 20 hours’ power supply. ‘Har Ghar Nal Ka Jal’, the piped water supply scheme, has now provided further convenience to its citizens. Bihar was poised for double-digit growth if it had not been for the pandemic though as per the state’s estimates it is likely to increase its share in India’s GDP.Maharashtra (see exclusive report on CW Maharashtra in the June edition and watch the event here: https://bit.ly/33006hU) has the highest gross state domestic product (GSDP) among the 33 Indian states and Union Territories. It contributes 14.2 per cent of India's GDP at current prices, followed by Uttar Pradesh with a GSDP of Rs.19.48 trillion; Tamil Nadu was pipped to the third position with a GSDP of Rs.19.2 trillion, while Karnataka at Rs.18.03 trillion and Gujarat at Rs.17.4 trillion are at four and five. Last fiscal, Tamil Nadu was second and Gujarat third, while Karnataka was at the fourth slot. The top five states share 46.6 per cent of India's total economy. Five Southern Indian states together account for close to 30 per cent, while eight states of Northeast India share 2.8 per cent.Although all states are staring at deficits, some states like Uttar Pradesh, West Bengal, Madhya Pradesh and Rajasthan indicate an expansion in FY21. The speed with which a state can grapple and then normalise its healthcare, business and commerce will decide the fate of the next two years. Alacrity in decision-making and intensity of the crisis will be the two dominant factors in a state’s ability to bounce back.As per Care Ratings, in the capital goods segment, there has been recovery and positive growth for tractors, agricultural equipment and power-generating equipment. However, a sharp fall in production has been witnessed in air-conditioning systems, cranes, construction machinery, electronic conductors and wires and firefighting equipment between April and February 2021 over the same period in the previous year.Vaccination is the only armour that one can wield at this moment to fight this pandemic. States that deploy healthcare measures with determination and, at the same time, procure vaccines for their citizens will restore normalcy sooner than others. Those in denial or who continue to host religious mass gatherings with low vaccination cover will push back growth.The hard reality is that our economic trajectory has lost five years of momentum to demonetisation, state elections and COVID. Although the pandemic has been a handicap to global progress, those that have measured responses will bounce back earlier and better. However, we cannot exterminate the virus until the whole world has been vaccinated. And given that most of Africa and South America is still starved of vaccines, the mutations of this virus will continue to create waves around the world this year.Modular construction, prefab and precast, automation, digital technologies, drones, etc, are increasingly making economic sense. Commercial real estate, air-conditioning, factory layouts and design will need permanent makeovers too. Tighten your belts for a battle ahead as we cannot wish COVID away, not in 2021. But we can now battle it better.Follow me on twitter @PratapPadode

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