The state of the economy will play some part in the upcoming state elections in Chhattisgarh, Rajasthan, Madhya Pradesh, Mizoram and Telangana, influencing at least some part of the voting decisions of some voters. Understanding the state of play in the upcoming elections requires us to look at changes in their economy in the past five years . The following four charts show this for four of the bigger states going to polls.
All four have grown faster than India average since 2018-19, but not all are equally rich
India’s GDP has grown at a CAGR of 3.4% up to 2022-23 compared to its 2018-19 levels, the year when the four states last went to polls. This number needs to be read in the context of a pre-pandemic slowdown and the pandemic induced contraction in 2020-21. The GDP of the four states has grown at a rate that is at least around a percentage point more than India’s growth rate. While Rajasthan was the second fastest growing state among 21 states for which Centre for Monitoring Indian Economy (CMIE) has compiled GSDP data (Maharashtra and Gujarat are two big states for which this data is not available with CMIE for 2022-23), Telangana, Madhya Pradesh, and Chhattisgarh are ranked seventh, 10th and 11th respectively. To be sure, this does not mean that that states such as Rajasthan, Madhya Pradesh, and Chhattisgarh have become rich in the past five years. Per capita GSDP of these states was ranked 13th, 18th, and 14th respectively and lower than the India average; while Telangana’s per capita GSDP was ranked fifth and higher than the India average.
Agriculture has a big share in output of Rajasthan and Madhya Pradesh, but not Chhattisgarh
A sector-wise breakup of the GVA (Gross Value Added, a producer-side measure of GDP) of the states gives some explanation for low per capita GSDP of northern states. Relatively low productivity sectors such as agriculture and mining have a higher share in the economies of northern states. The share of agriculture in the GVA of Madhya Pradesh and Rajasthan is around double its 15.1% share in India’s GVA in 2022-23. While the 16.9% agriculture share in GVA for Chhattisgarh is closer to the India average, it does not mean that Chhattisgarh is engaged in higher value services sector. In fact, in terms of the contribution of services sector to GVA, Chhattisgarh is furthest behind India among these four states, followed by Madhya Pradesh and Rajasthan at a distance of around five percentage points each. On the other hand, the share of services in Telangana is 61%, seven percentages points ahead of the India average. What explains the low share of both agriculture and services in Chhattisgarh? As expected, the mineral rich state has a high share of mining. The share of mining in Chhattisgarh’s GVA is almost five times its 2.2% share in India’s GVA, while this number is within a percentage point of the India figure in the other three states.
But all four states have a higher share of workers in agriculture than India average
A greater share of services or industries sector than agriculture in output is likely to increase overall GVA of a state as the products of these sectors have more value than agricultural products. However, the gains from such high value production may not always reach all workers in the economy. This is because high value services and industries are less labour intensive than agriculture. For example, the share of agricultural workers in even Telangana (47.3%) was higher than the national average of 45.8% in 2022-23. To be sure, the southern state was still far ahead of the northern states and its services employment was also higher than then national average. On the other hand, Chhattisgarh, Madhya Pradesh, and Rajasthan are ranked first, third, and fifth (only the small states of Arunachal Pradesh and Himachal Pradesh separate them) by share of agriculture in employment in 2022-23. More than half the workers in each of these states was employed in agriculture. While Rajasthan is significantly ahead among these four states in terms of employment in industries, it was ahead of Telangana on this metric largely because it had a higher share of construction workers than the southern state.
Not all agricultural workers make a farmer household
Not all workers in the agricultural sectors are farmers. Some such workers can also work as agricultural labourers and are not exposed to movements in farm prices. The Situation Assessment Survey (SAS) of agricultural households conducted in 2018-19 can help in making this distinction to some extent for rural households. It classified a rural household as an agricultural household if at least one member was employed in agriculture and produced output worth at least ₹4,000 in the year before being surveyed. Almost three-fourth of Rajasthan’s rural households fit those criteria while this number was around two-third in Chhattisgarh and Madhya Pradesh. It was roughly the same as the India average (54%) in Telangana.