Investment and Economic Opportunities: Urbanization, Infrastructure and Governance in the North and South of India

There are substantial disparities across the southern Indian and northern (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) states in terms of fundamental economic phenomena, such as per capita net state domestic product, rural and urban poverty rates, and investment flows, with the southern states taking a lead over their northern counterparts. In this paper, we make an attempt to understand what factors have caused some states to grow faster than others. We examine human capabilities, skills and awareness, resources and the efficiency of their utilization, extent of urbanization, good governance including law and order, and infrastructure across the two group of states. We conclude that the upward shift in per capita income, downward trend in poverty reduction and investment flows that occurred in the south relative to that in the northern states can be explained partly by the advantage the former had in terms of human capabilities, infrastructure, urbanization and some law and order conditions and partly by the economic liberalization of 1991.