Gupta: India's states drive national economic prosperity

India's economic growth has consistently accelerated since the early 1980s, with average real GDP growth increasing from 5.7 percent in the 1980s to 7.7 percent in the most recent four-year period (2022-2026).

Per capita income has risen nearly tenfold to around US$2700 in 2024, projected to reach US$4346 by 2030, aided by moderating population growth.

This acceleration has fostered a virtuous cycle of growth and macroeconomic stability, reflected in declining inflation, a moderate current account deficit (0.5-2.2 percent of GDP), and a structurally stronger banking sector.

Fiscal consolidation efforts have shifted towards capital expenditure, enhancing the economy's growth potential.

Robust policy frameworks, including Flexible Inflation Targeting (FIT) since 2016 and GST reforms, have underpinned these improved outcomes, anchoring expectations and reinforcing system resilience.

India's growth story extends to broad-based prosperity across its states, with every state recording a significant increase in per capita gross state domestic product (GSDP) over the past two decades.

Average per capita incomes across states have surged nearly fivefold in current US dollar terms.

However, the pace of income growth has varied, with more prosperous states growing faster than less prosperous ones, indicating a lack of income convergence.

Despite this, the extent of divergence has weakened considerably over time, with the growth gap between richer and poorer states narrowing.

Welfare indicators, such as per capita consumption expenditure, show more decisive convergence, with historically lower-consumption states now recording faster consumption growth.