TRICKLE UP EFFECT Posted by Prabhakar Srivastava on 02 Feb, 2010 | Total Comments: (0)

User Picture
Fast growth trickles up from states: Swaminathan S Alankesaria Aiyar Economic Times, Wed, 6th Jan.Mr Swaminathan has pointed out in the article that contrary to the usual trickle down effect, the theory holding on for long, quite the opposite has been happening and what we see now is the trickle up effect, as per latest data thrown up by CSO, where growth is taking place surprisingly fast starting from the poorest states with large population. The top performance came from Bihar which showed 11.03% growth rate( large credit goes to the Chief Minister Nitish Kumar who has provided largely good and peaceful governance to the state after coming to power in 2005) and other hither to considered as backward states like Jharkhand, Chattisgarh, Orissa, even UP showed tremendous results, together with regulars like Gujarat & Kerala (the exception being Madhya Pradesh which continues to be a laggard) , only Gujarat fared better than Bihar with 11.05% growth rate. These states are coming up to the forefront and contributing to the overall GDP of India. It will be the development of these earstwhile BIMARU states (Bihar, MP, Rajasthan & UP) + Orissa along with some regulars, say, Gujarat which will ensure that India has a decent growth rate of 8%+ going forward and who knows if these growth rates accelerate we may even surpass the growth rate of China some day, which any way is going to start decelerating soon! This reversal of roles, contribution of erstwhile poor states with large population in to the national kitty marks the real growth of India as a whole, which in largely an agrarian economy where 70% lives in villages and most of them most of them reside in these so called backward states only! This is what he describes trickle up effect- growth happening from below and moving up and contributing in the overall GDP and then its distributed downwards by the govt through various schemes to the poor. Many of the states growth resemble that of the miracle economy, (growth rate more than 7%). If the trend continues we can some day say that the fruits of liberalization post 1991 has gone largely to entire population.How come this growth happen? It did not happen overnight and many factors must have contributed to this spectacular performance and hopefully this becomes the trend. State-level political and policy changes may be one of the factors that accelerated local growth in some states, like say Orissa or Chattisgarh. In case of Jharkhand, though a corrupt state with Madhu Koda, late chief minister being latest example who along with his cronies cornered 20% of the state GDP in their name, single biggest factor may be due to distribution of state income and much of it going to the state kitty of Jharkhand after the division of state. For Bihar, as already pointed out credit goes to the Chief Minister Nitish Kumar who has given in four years a by and large peaceful state. Law and order being the single biggest factor contributing to the confidence in people of state and now the platform has been built to attract the businessmen to invest in Bihar. Bihar has dubious distinction of being the only state which did not get a worthy Chief minister after 1st Chief Minister, Sri Krishna Singh (Bhagwat Jha Azad was only for a brief period and was booted out soon). Just see the potential of Bihar. One Chief minister’ regime has made it possible in 4 years. Lalu’s social engineering may have also contributed it, we will talk later. Now let us see some other positive things also happening side by side which lead us to believe that further accelerated growth is expected out of these laggard states. Consider the BOTTOM OF THE PYRAMID THEORY of Prof CK Prahalad. Company after company, taking clue of this theory started spreading their wings in the hinterland, be it ITC, HLL, M&M, Other Branded consumer goods manufacturers, Trucks, Motor Bikes, as they saw the large unattended market where people had disposable income and waiting for good products. Not to forget the deep inroad in tele-density in these bottom of the pyramids markets (due to massive drop in call rates, making them cheapest in the world) owing to which we have 500 million mobile connections in India These phones itself are the medium for communication, spreading messages, sending tunes and other value added services and sometimes even getting tips on what are the weather predictions, the commodity rates in MCX or International markets, to mention a few. Success of NREGA and other governmental schemes too definitely have added to this spectacular contribution. Social engineering post Mandal Commission- Lalu and Mayawati effect has also made some contribution to overall figure (though the Law and order problem takes the shine off the Lalu regime and presently ruled state UP by Mayawati also). Then we had also IT companies in boom time increasing their penetration in Tier II & III and even rural areas. These itself had spin-off effect in the overall awareness and education standard of these states. Cheap broadband and internet has also contributed it, though penetration is still low but it will increase with further drop in bandwidth rates. Now going forward there is greater chances of the trend further continuing with the growing awareness due to increased media, cable density and TV activism. This will further penetrate the education deep down and include women also in a big way who were till the other day left largely uneducated or just given enough training to write their names. With more and more NGO taking up among themselves to spread the RTI provisions we will see further progress. More and more use of EVMs in elections, last election being 100% EVM led elections and largely free and fair general elections will also ensure further improvement (though participation of people in elections is low and some states are trying to use strict provisions to make voting compulsory as Gujarat has recently taken this step).Government’s firm resolve to find solution to Naxalism problem with the most worthy minister available with us for Home ministry, Mr Chidambaram, making it amply clear to lay top most priority to curb this menace soon. Slowly it will be seen that development becoming the election issue. All these are going to contribute massive way in overall Indian economy-a truly trickle up effect where the growth will start really from the bottom of the pyramid and move up to the top. Just like in any business the employees are the first to get benefits, then the taxation (govt is the beneficiary), then the debtors and shareholders are the beneficiary and in the year end the promoters are the beneficiary, if there is any- opposite of trickle down effect, the benefit moves from bottom and them moves up. Lets us hope the trend continues but the other tiger states like Maharashtra, Punjab etc should not slow down, if not grow more than these states. .

Articles by Prabhakar Srivastava Arrow

Come on, lets find opinion. Should we go for Privatization of Public sector units in a big way? Some...
Posted as blog on 6th Jan 2010Last night in Times now program News Hour Arnab Goswami anchored the s...
Fast growth trickles up from states: Swaminathan S Alankesaria Aiyar Economic Times, Wed, 6th Jan.Mr...