SSC Selection Post 2024 PYQ — Question 25

Read the given passage and answer the questions that follow.
An economic theory backed by considerable evidence is that incomes of countries and
regions tend to converge over time. The underlying logic is that areas with low-hanging fruit end to attract capital and other resources that allow them to catch up. India’s region might be an exception to this trend. A national survey on incomes by economic thinktank ‘Price’ shows that the gap between states in southern and western India and many of those in the north, central and east is wide. The worrying part is that it’s diverging. Consider the per capita incomes of Bihar and Karnataka in 1989-90, the eve of economic liberation. Karnataka’s per capita income at ₹2,055 a year was almost two times that of Bihar.
In 2019-20, the last pre-pandemic year, the gap had widened to over five times with Bihar’s
annual per capita income at ₹29,794 and that of Karnataka at ₹1,55, 869. This trend generally holds across states, with the west and south of India pulling away from eastern and central Indian states such as UP and MP. A 2016 paper by IDFC institute observed that India is the only major economy bucking the trends of subnational convergence.
India’s fiscal architecture and related institutions such as Finance Commission are designed to mitigate the fall out of the gap by allocating the divisible pool of taxes in a manner that brings about a degree of equity between states. However, a combination of economic and fertility divergences makes for an explosive mix. Government of India has projected a national population increase of 311 million between 2011 and 2036. Of this increase, only 9% will come from the five southern states, which the Price survey shows, currently contribute 30% of national income with 20% of the population.
These trends are playing out in the backdrop of an impending delimitation of political
constituencies that can widen fault lines. India’s subnational economic divergence is a trend that deserves more study and policy attention. A lopsided economic structure usually has consequences that ripple out into other areas. Convergence is the only answer to it.