Ghosh, Prabhat, and Chirashree Gupta. "Political Implications of Inter-State Disparity". Economic and Political Weekly, Vol.44, No.26 (2009): 185-191.

Ghosh, Prabhat, and Chirashree Gupta. "Political Implications of Inter-State Disparity". Economic and Political Weekly, Vol.44, No.26 (2009): 185-191.

• At independence, the Indian economy was defined by very low rates of growth and intense regional disparities. These regional disparities were shaped by the different trade regimes and land tenure systems established under colonial rule for different parts of the country (186).
• During British colonialism, economic growth and industrialization in India has concentrated around the cities of Bombay, Madras, and Calcutta. There were also small areas of industrial development owned by British capitalists, like Ahmedabad (186).
• British economic, land tenure, and tax policies also heightened class disparities across India by both enforcing extremely exploitative landlord systems and protecting loan sharks and speculators from the wrath of rural communities. This allowed for the continuation of massive wealth inequality and pervasive poverty across the majority of India (186).
• The experience of intense wealth inequality and regional economic disparities under colonial rule informed the decision by the Indian government to have its first number of Five Year Plans focus on reducing regional inequalities. These Plans sought to target funds to alleviate rural poverty, provide all regions with equal coverage of government services and infrastructure, and encourage industrialization and investment in undeveloped communities (186).
• Regional wealth disparities in India have only increased since independence. Although there was an initial decrease from independence until the mid-1960s, since then regional inequalities have increased; with the total inequality being higher now than in 1947. These disparities have accerelated after liberalization in the 1980s, but have been steady growing since the late 1960s (186).
• This increase in regional economic disparity has not occurred despite state policy, but as a result of government planning. The government's decision to concentrate production -- and associated agricultural investment -- in specific high-yield areas following a food shortage in the 1960s led to large regional disparities in agriculture development. The government industrialization policy depended on 'piggybacking' on private capital, which usually choose to invest in areas which already had good infrastructure. Both of these economic strategies favored areas of wealthier areas of India with significant infrastructural, industrial, and irrigation investments from the colonial period (187-188). 
• The industrial orientation of Indian developmental policy in the 1960s and 1970s further failed to solve the regional disparities that developed in the aftermath of the Green Revolution. Investment in productive agricultural areas in the 1960s was predicated on the need to provide cheap food to Indian laborers to allow continued industrial growth. Once this had been accomplished, the Indian government was uninterested in providing the same agricultural investments for less productive areas of the country (188).
• Under the state-planned economic system prior to the 1980s, poorer states in India faced underdevelopment because the central government was willing to prioritize industrialization over the need to redress regional disparities. This same underdevelopment made poorer states unattractive locations for investment, exacerbating regional inequalities following liberalization (188).
• Liberalization has also led to exacerbated regional economic disparities because of the amount of fiscal independence devolved to Indian states. Indian states have enough control over taxation and other issues to participate in a competitive 'race to the bottom' for private capital, that advantages wealthier states, but states still depend on central government funds, which have shrunk due to liberalization (189).
• The nature of poverty has changed since the 1980s, with a general poverty becoming concentrated among certain social groups. The majority of rural poor are now landless agricultural laborers, and the majority of urban poor are now those in temporary and informal employment (187).
• Poverty is also concentrated along caste lines, especially in the Hindi Belt, where rates of poverty among Dalits and Advasi remain very high. Dalits and Advasi are less likely to be poor in richer states, since the overall level of economic development is greater, but the poor in these states are overwhelmingly Dalits or Advasi (187).
• India can be roughly divided into three areas based on level of economic development: a rich regions around Punjab, Haryana, Gujarat, and Maharashtra; a middle-income region across the south and east; and poor regions along the Gangetic Plain, Orissa, and the peripheral states of the Northeast. Contemporary regional inequalities usually mirror historical economic inequalities, with poor states remaining poor and richer states in 1947 getting richer (187).
• While the growth of coalition politics in India reflects the increase political salience of regional disparities, as these disparities propel voters to support regional parties, but does not provide a solution to the issue of regional inequality, as seen by the intensification of regional disparities despite several coalition governments (190).
• An actual solution to reducing the regional economic disparities in India requires both a massive increase in social and welfare spending to impoverished communities and intense and targeted investment in economic sectors -- like agriculture and industry -- whose growth is heavily constrained in poor states by an absence of resources (190-191).