Economic Imbalances and the Rise of Regionalism in Modern India

India is one of the most economically diverse nations on earth – a country where a farmer in Punjab and a tribal community in Jharkhand can live in entirely different economic worlds, despite being citizens of the same republic. This is not a coincidence or an accident of geography alone. It is the product of decades of development policies that, intentionally or not, concentrated prosperity in some regions while leaving others behind. These economic imbalances have done more than widen income gaps – they have fuelled a distinct political phenomenon: the rise of regionalism. Across India’s states, feelings of neglect, unequal resource distribution, and the perception of central indifference have transformed into powerful regional identities and political movements demanding a fairer share of the nation’s growth.

What do we mean by economic imbalance? 🔗

Regional development disparity refers to the uneven economic achievement across different geographical regions of a country. In India, it is measured by indicators such as per capita income, the proportion of people living below the poverty line, levels of urbanization, infrastructure development, and the share of workforce engaged in agriculture versus industry. Despite making regional balance an explicit objective of economic planning, the gap between India’s developed and underdeveloped states has continuously widened over the decades. Prosperous states in the south and west, such as Maharashtra, Gujarat, Tamil Nadu, and Karnataka, have pulled ahead, while states like Bihar, Jharkhand, Odisha, and most of the Northeast have remained persistently behind.

This is not simply a product of geography or culture – it reflects the cumulative impact of colonial policies, post-independence planning decisions, and more recently, the uneven effects of economic liberalization.

Colonial roots and the inheritance of inequality 🔗

India’s regional imbalances did not begin with independence. British rulers concentrated investment and industrial activity in regions that served their commercial and strategic interests – port cities like Bombay, Calcutta, and Madras. These cities and their surrounding regions developed robust infrastructure, trade networks, and economic institutions. The rest of the country was largely left to subsistence agriculture. When India became independent in 1947, it inherited this deeply skewed economic geography. States that had benefited from colonial development had a head start; others were left to catch up with minimal base infrastructure. Agriculture had stagnated under colonialism, particularly in eastern India, where per capita income was already among the lowest at the time of independence.

The Green Revolution and its uneven harvest 🔗

One of the most defining moments in post-independence India’s economic story – and one of the most consequential for regionalism – was the Green Revolution of the 1960s. Launched in Punjab in 1966-67, the Green Revolution introduced high-yielding crop varieties, chemical fertilizers, and modern irrigation techniques with the goal of ending India’s recurring famines and achieving food security.

It succeeded – but selectively. States like Punjab, Haryana, and Western Uttar Pradesh, which already had access to irrigation networks, better infrastructure, and supportive state governments, became India’s agricultural powerhouses. By 1970, Punjab alone was producing 70 percent of the country’s total food grains. In contrast, Eastern India – including Bihar, West Bengal, and Odisha – saw limited benefits due to inadequate irrigation, poor infrastructure, and the smaller landholdings of farmers. Rain-fed dryland agriculture, which many eastern and central farmers depended on, was not suited to the new technology and received little investment.

Green Revolution technology affected only about 40 percent of India’s total cropped area, leaving 60 percent untouched. The regions it did transform became food-surplus zones with rising farmer incomes and improved living standards. Those it bypassed continued to face poverty, agricultural stagnation, and food insecurity. The perception that the central government had deliberately concentrated its resources in already-favored regions deepened resentment in the left-behind areas, planting the seeds of regional discontent.

Planning commission policies and the centralization problem 🔗

India’s post-independence development strategy relied heavily on centralized Five-Year Plans. While these plans officially aimed at reducing regional imbalances, in practice they often reinforced them. The government set up public sector enterprises in some backward areas – Rourkela, Bhilai, Barauni, Bongaigaon – but because ancillary industries failed to develop around these installations, these regions remained backward despite massive public investment.

The Planning Commission’s approach was largely top-down, focusing on national priorities and aggregate production targets rather than tailored regional needs. States with weak political representation at the centre struggled to advocate effectively for infrastructure and development funding. Regions in the North-East and Eastern India particularly suffered from inadequate roads, railways, and power supply, which hindered their industrial and economic development. Economic opportunities continued to gravitate toward regions that had already established industrial clusters – reinforcing the advantage of states that had industrialized first.

Federalism: designed to balance, often deepening divides 🔗

India’s federal structure was designed to share power between the central government and states, and to redistribute resources to poorer regions. The Finance Commission, established by the Constitution and appointed regularly by the President, plays a key role in determining how central taxes and grants are distributed to states. This mechanism was intended to close the economic gap between richer and poorer states.

Yet the results have been mixed. Although inter-state industrial disparity has decreased in some sectors, and social welfare indicators like life expectancy and literacy show less divergence than before, regional inequality in per capita income remains a persistent feature of the Indian economy. States have limited power to set their own economic agendas, and those with smaller political weight in coalition governments have historically found it difficult to secure resources proportional to their needs.

Some political scientists view India’s rising regionalism not as a threat to democracy but as its deepening – a demand by previously marginalized regions for genuine representation in economic and political decision-making. The demand for statehood by regions like Jharkhand, Chhattisgarh, Uttarakhand, and Telangana was, at its core, a demand for development. Intra-state economic disparities drove the formation of these new states, all carved out between 2000 and 2014.

Liberalization in 1991 and the new geography of inequality 🔗

The economic reforms of 1991 – liberalization, privatization, and globalization – fundamentally restructured India’s economy. They dismantled the License Raj, opened India to foreign investment, and led to rapid growth in services, especially IT. India’s GDP grew from approximately $266 billion in 1991 to $2.3 trillion by 2018, and extreme poverty fell significantly during this period.

But the gains were unevenly spread. States with better infrastructure and governance attracted far more investment, while others lagged further behind. The IT boom, for instance, concentrated largely in Bengaluru, Hyderabad, Pune, and Chennai – cities in southern and western states. According to the Annual Survey of Industries, higher-income states account for roughly 75 percent of factories, fixed capital, and employment, and 87 of the wealthiest 100 Indians reside in high-growth states.

The income share of the top 10 percent of India’s population rose from 35 percent in 1991 to 57.1 percent by 2014, while the bottom 50 percent’s share fell from 20.1 percent to 13.1 percent. Regions without trade connectivity or infrastructure – such as Bihar, Jharkhand, and the Northeast – found themselves increasingly disconnected from the national growth story. The result was a sharpened sense of economic exclusion, which in turn intensified political regionalism.

Economic grievances and the rise of regional political movements 🔗

There is a direct line between economic imbalance and political regionalism in India. When people in a region persistently experience lower incomes, fewer jobs, inadequate infrastructure, and the perception that their resources are being extracted for others’ benefit, regional identity becomes a vehicle for political demands.

The Telangana movement is a clear example: the region felt economically and politically marginalized by the more prosperous coastal Andhra region within the combined state of Andhra Pradesh, and demands for a separate state grew out of deep dissatisfaction with uneven resource distribution. The movement eventually succeeded, with Telangana becoming India’s 29th state in 2014.

The Khalistan movement in Punjab during the 1980s also illustrates this dynamic – even a Green Revolution success story generated its own economic discontents, as rising agricultural prosperity created new stratifications, debt among smaller farmers, and a backlash against central government policies on resource sharing and religious autonomy. Regional parties such as the Telugu Desam Party, Shiv Sena, and the Trinamool Congress gained electoral power by directly addressing these regional aspirations, establishing that regional economic grievances were a durable and politically mobilizing force.

According to political scientist Atul Kohli, regional movements in India tend to follow an inverted U-curve – they rise, reach a peak, and then fade – with the height of the movement determined by the breadth of popular support and the responsiveness of the government. This pattern suggests that timely political and economic concessions can de-escalate regional tensions, but persistent neglect can radicalize them.

Government responses: what has worked and what hasn’t 🔗

The Indian government has introduced numerous programs to address regional imbalances. The Backward Region Grant Fund covers 272 identified backward districts to redress regional imbalances, while special policies like the North East Industrial and Investment Promotion Policy offer tax incentives to attract industry to the Northeast. The Aspirational Districts Programme targets 112 of the country’s most underdeveloped districts for focused intervention. Connectivity projects such as the East-West Corridor, the Special Accelerated Road Development Programme for the Northeast, and ongoing rail expansion have aimed to reduce the infrastructure deficit in lagging regions.

Yet these programs have faced serious implementation challenges. India’s growth hubs are not well-connected to each other geographically or economically, and there is limited spillover from prosperous regions into poorer neighboring states. Without a robust manufacturing sector to absorb labor – services growth alone cannot do this – workers from poor states migrate rather than develop local economies. Research suggests that balanced regional development requires decentralized industrialization and a network of well-connected small towns with diversified growth engines suited to local conditions, rather than replicating large-city-centered models in regions with different resource bases.

The ongoing struggle for equitable development 🔗

India’s regional imbalances are not simply an economic problem – they are a political and social challenge that goes to the heart of what kind of democracy India wants to be. Economic factors are among the most significant drivers of regionalism, with states and territories that have better infrastructure and employment opportunities naturally experiencing more robust development, exacerbating inter-regional disparities. When this gap becomes entrenched, it generates a sense of relative deprivation that regional identity politics can harness.

The story of economic imbalance and regionalism in India is, in many ways, a story about the limits of top-down development planning and the political consequences of those limits. From the uneven reach of the Green Revolution to the concentrated gains of post-1991 liberalization, each phase of economic transformation has left some regions further behind – and each time, those regions have found political voice through regional movements, regional parties, and demands for greater autonomy and a fairer share of national resources. Addressing this requires not just more redistribution, but a fundamental rethinking of how development is designed and delivered across India’s extraordinarily diverse regions.

What do you think? Should India move toward greater fiscal federalism, giving states more control over their own revenue and spending decisions, as a way of reducing regional imbalances? And do you think the rise of regional political parties ultimately strengthens or weakens India’s democratic fabric?

References

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