Liberalisation, introduced in India in 1991, marked a significant shift in the country’s economic policy, moving away from a state-controlled, protectionist economy toward a more market-oriented, open economy. While liberalisation has brought about higher GDP growth, increased foreign investment, and the emergence of a strong services sector, it has also deepened existing regional imbalances. Certain states and regions have benefited disproportionately from economic reforms, while others have lagged behind, thereby exacerbating inequality and uneven development.
1. Understanding Regional Imbalances
Regional imbalance refers to the unequal economic development of different geographical regions within a country. In India, these imbalances existed even before liberalisation, with western and southern states like Maharashtra, Gujarat, Tamil Nadu, and Karnataka showing relatively higher levels of industrialisation and infrastructure development. On the other hand, states like Bihar, Odisha, Jharkhand, Madhya Pradesh, and parts of the North-East remained economically backward.
2. How Liberalisation Exacerbated Imbalances
a) Skewed Investment Patterns:
Post-liberalisation, investment by both domestic and foreign private players tended to flow into regions with already-developed infrastructure, skilled human resources, and favorable industrial climates. These included metropolitan regions like Bengaluru, Mumbai, Chennai, Hyderabad, and Delhi. Poorer regions, lacking in such advantages, failed to attract significant investment, thus widening the developmental gap.
b) Disparities in Infrastructure and Connectivity:
The emphasis on infrastructure development in post-liberalisation India was largely skewed towards urban and industrial centres. Highways, IT parks, airports, and logistics hubs were primarily constructed in already prosperous regions, enabling further growth and making these areas more attractive for future investments. This created a feedback loop of growth for already-developed regions while leaving underdeveloped areas further behind.
c) Uneven Human Capital Development:
Regions with better educational institutions and skilled manpower were able to capitalise on liberalisation’s opportunities, especially in sectors like information technology, finance, and services. Southern states like Karnataka and Tamil Nadu, with a strong base of technical education, benefited disproportionately. Meanwhile, poorer regions with weak education systems could not fully participate in or benefit from the new economy.
d) Urban Bias in Growth:
Liberalisation fostered rapid urbanisation and the growth of cities, but mostly in selected regions. Cities like Bengaluru, Pune, and Gurugram became hubs for IT and manufacturing. In contrast, urban centres in backward states remained stagnant, failing to attract similar levels of economic activity or job creation. This led to massive rural-to-urban migration, putting pressure on city infrastructure and contributing to social tensions.
3. Impact on Agricultural and Traditional Sectors
Liberalisation also affected agriculture differently across regions. Regions with access to irrigation, technology, and markets (e.g., Punjab, Haryana, Western Maharashtra) benefited from agro-industrial linkages and cash crop cultivation. Meanwhile, rain-fed areas in central and eastern India, dependent on subsistence farming, suffered due to market volatility, reduced public investment, and competition from imports. This further impoverished already backward regions and deepened rural distress.
4. Government Policies and Regional Disparities
Although the central government implemented schemes such as the Backward Regions Grant Fund (BRGF), Special Category Status for some states, and subsidies for industrial development in North-Eastern states, these measures were often inadequate or poorly implemented. Moreover, with liberalisation reducing the state’s direct role in industrial promotion, the onus shifted to state governments. Wealthier states, with better governance and bureaucratic capabilities, outperformed poorer ones in attracting investments.
5. Rise of Regional Aspirations and Political Tensions
The accentuated economic divide has also led to political consequences. Increased regional disparities have fueled demands for greater autonomy, statehood (e.g., Telangana), and special status. Discontent with economic exclusion has led to the rise of regional parties advocating for the interests of specific states or linguistic groups. This has reshaped India’s political landscape in significant ways.
6. The Need for Balanced Development
To correct these imbalances, a multi-pronged approach is needed:
- Targeted infrastructure investment in backward regions.
- Decentralisation of industrial hubs and incentives for firms to invest in underdeveloped states.
- Focus on education and skill development in poor regions to enable their population to participate in the new economy.
- Strengthening of federal fiscal transfers to ensure equitable distribution of resources.
Conclusion
While liberalisation has undoubtedly accelerated India’s economic growth, it has also intensified regional disparities by disproportionately benefiting already-developed regions. To ensure inclusive and sustainable growth, policies must be designed to address the structural inequalities between states and regions. Balanced regional development is essential not only for economic efficiency but also for maintaining social harmony and national unity.