Prosperous States for a Prosperous India – Speech by Dr. Poonam Gupta, Deputy Governor, Reserve Bank of India, delivered at the ‘Columbia Indian Economy Summit 2026’ at the Raj Centre on Indian Economic Policy at Columbia University on April 11, 2026
GST
Dated:- 12-5-2026
It is my pleasure to be here at the Columbia Indian Economy Summit, 2026. I would like to thank Prof. Arvind Panagariya for his kind invitation to me to speak on issues related to India's growth trajectory, both at the national and at the states' level.
My talk is in three parts. I will first present select salient features of the trajectory of economic growth of India over the past four decades, and what it bodes for the years to come. Then, I will present key characteristics of the states' respective growth trajectories. Finally, I will draw some inferences and implications from these observations for our quest to attain the status of a much more prosperous economy by 2047.
1. Salient feature
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
mentation (MoSPI). Back series with 2011-12 base has been taken from Economic and Political Weekly Research Foundation (EPWRF), https://epwrfits.in/index.aspx (last accessed on April 10, 2026).
The acceleration is even more pronounced in per capita income (Figure 1). From about US$ 274 in 1981 and US$ 306 in 1991, per capita income has risen nearly tenfold to around US$ 2700 in 2024. Importantly, while it took over two decades for per capita income to double initially, it has expanded by almost fivefold in the subsequent two decades, indicating a clear structural shift in growth momentum. As per the forecasts in October 2025 World Economic Outlook (WEO) of the IMF, per capita income is projected to increase to US$ 2818 in 2025, US$ 3051 in 2026 and US$ 4346 in 2030.
Decline in population growth, too, has contributed to faster per capita income growth. India's population growth, once significantly above the global average, has steadily moderated and has converged to glob
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ce sheet repair, banks today are significantly stronger and better capitalized, both historically and relative to their peers.
On the fiscal front, while deficit and debt levels rose during COVID-19, India has retreated to a path of consolidation, with a clear focus on reducing deficits and stabilizing debt over the medium term.^3 There has been a distinct focus on enhancing the quality of fiscal outcomes, with a notable shift towards capital expenditure, thereby strengthening the growth potential of the economy (Government of India, 2026).
These improved outcomes are attributed to robust policy frameworks and nimble policy responses. India's policy frameworks have steadily evolved and today reflect global best practices, while remaining well-anchored in domestic realities. In fiscal policy, the Fiscal Responsibility and Budget Management (FRBM) framework has provided a rule-based path for fiscal management, while retaining flexibility to respond to shocks such as COVID
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
well as in constant rupees terms, adjusted for inflation.
In the last two decades, average per capita incomes across states have surged nearly fivefold in current US dollar terms and more than threefold in constant rupees, underscoring the strength and sustained pace of India's long-term income gains (Table 2).
Table 2: Ratio of per capita GSDP in 2024-25 to 2003-04
States
Constant INR
Current USD
Sikkim
6.0
11.4
Telangana
4.5
7.9
Karnataka
3.9
6.7
Tamil Nadu
4.2
6.6
Uttarakhand
3.9
6.1
Andhra Pradesh
3.5
5.9
Arunachal Pradesh
2.7
5.8
Odisha
3.4
5.7
Haryana
3.3
5.6
Goa
3.3
5.5
Gujarat
4.0
5.4
Mizoram
4.3
5.3
Rajasthan
2.7
5.2
Madhya Pradesh
2.9
5.2
Bihar
3.0
5.1
Kerala
3.2
5.0
Tripura
3.9
4.9
Assam
2.8
4.9
Ma
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
s. Some states have become five to ten times more prosperous over the last two decades, while others have recorded more modest gains of around three times. One strong correlate of the relative performance is their initial prosperity levels. Per capita income levels in more prosperous states have grown faster than in relatively less prosperous ones. The fact that richer states have experienced greater prosperity than the poorer states in the past, and that this trend has not reversed, implies that income levels across states have not been converging.
Notwithstanding this, the extent of divergence has weakened considerably over time (Figure 2a, 2b, and 2c). In other words, the growth gap between richer and poorer states has narrowed in recent years. The association between initial income and subsequent growth was positive and statistically significant (at 5 per cent level) during the decade of 1990s (Figure 2a). It became numerically smaller and less significant statistically in
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
1.4
Above median
7.7
1.1
Notes: 1. Due to data unavailability, 2023-24 values are used for 2024-25 for Sikkim, Goa, Gujarat, Mizoram, Nagaland, and Manipur. 2. Based on real per capita GSDP in 2003-04, states were classified as above or below the median. Above-median states include Andhra Pradesh, Arunachal Pradesh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Punjab, Sikkim, Tamil Nadu, Telangana and Uttarakhand. Below-median states comprise Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan, Tripura, Uttar Pradesh, and West Bengal. 3. The unweighted average is presented. 4. Data for Telangana from the year 2003-04, including backcasted series, was sourced from EPWRF.
Source: MoSPI (Sourced from EPWRF) and staff calculations.
While income convergence across states remains gradual, several other welfare indicators, most notably per capita consumption exp
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
oward greater parity across states, irrespective of their initial income levels. This broad-based convergence is likely driven by sustained policy efforts, saturation levels in the richer states where further gains are numerically not feasible or are inherently harder to achieve, and rising demand in the poorer states that have been experiencing increases in their income levels.
Figure 4 (4a to 4h) illustrate these trends across a selection of key outcome indicators. Women's literacy rate (literacy rate per 100 women) has risen steadily over the decades while fertility rate (number of births per female) has declined sequentially (Figures 4a and 4b). Percentage of children who are not underweight has improved meaningfully, increasing from around 62 per cent in 2005-06 to close to 70 per cent in 2019-21 (Figure 4c). Infant survival rate, too, has also improved sequentially over the decades (Figure 4d).
Access to basic services has strengthened considerably across states with a
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
are many other indicators where similar phenomenon is prominently visible.
It is equally important to note that convergence has not been universal across all enablers of growth and development. Data limitations make it difficult to establish this with full empirical precision, but interstate convergence appears limited for some of the structural variables, including the share of agriculture in state economies, the pace of movement out of agriculture, productivity growth, capital formation, FDI inflows, and bank credit growth. As per the patterns in these indicators, some of the drivers or correlates of growth are still showing divergence across states.
If the past rates of growth are maintained, many states will become or come close to becoming “rich” by 2047 (as per the prevailing international thresholds of prosperity). As a simple thought experiment, we calculate each state's average annual growth rate in per capita GSDP (in USD terms and again in constant INR) over
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
, planned urbanization, attracting global and domestic talent, expanding market share both domestically and internationally, and actively taking part in shaping national frameworks on trade, FDI, and finance. For below-median states, priorities could include unlocking productivity in agriculture and reimagining the sector; building skills; integrating more in the national and international labour markets, complementing more advanced states, particularly in labour-intensive activities, emulating proven best practices nationally and internationally while developing niche strengths, and strengthening fiscal capacity to support faster growth.
Accelerating growth would require a clearer acknowledgement and more effective use of the distinct policy roles available to the centre and the states respectively.
Many macro policies are formulated at the national level. These include monetary policy; financial sector regulation covering banks, non-bank financial institutions; development of e
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
y, and how equitably that prosperity would be shared across its states and its people.
The pace of income divergence has weakened considerably with the growth gap between richer and poorer states narrowing over successive decades. Meanwhile convergence has been faster and more decisive across a wide set of welfare and development indicators: per capita consumption expenditure, literacy, nutrition, access to basic services, financial inclusion, and a range of health and gender outcomes. Lagging states are catching up, and the distribution of wellbeing across India is becoming more equal.
Looking ahead, if growth trajectories of the past two decades are sustained, the average state per capita income could approach high-income thresholds by 2046-47. Crucially, below-median states are projected to contribute substantially to this expansion, reinforcing the broad-based nature of India's growth story. Realising and accelerating the path to this potential, however, would require moving
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
tudies).
International Monetary Fund (2025). World Economic Outlook, October.
Panagariya, Arvind (2010). India on the growth turnpike: No state left behind, Columbia Program on Indian Economic Policies Working Paper No. 2010-1.
Reserve Bank of India (2025). Financial Stability Report, December.
–
^1 Speech by Dr. Poonam Gupta, Deputy Governor, Reserve Bank of India, delivered at the 'Columbia Indian Economy Summit 2026' at the Raj Centre on Indian Economic Policy at Columbia University on April 11, 2026. Inputs provided by Asish Thomas George, Somnath Sharma, and Shivam are gratefully acknowledged.
^2 This section draws on Gupta (2026).
^3 India's public debt remains sustainable. As noted by Eichengreen, Gupta, and Ahmed (2024), its structure-predominantly domestic, long-term, and rupee-denominated-mitigates rollover and currency risks, and under most assumptions, the debt-to-GDP ratio is expected to decline gradually.
^4 See Panagariya (2010
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
