12 large states have registered a Gross Domestic Product (GDP) growth of above 6.7, which is the national average in FY18. With a GDP of 11.3, Bihar registered the highest growth rate in the country in the FY18 followed by Andhra Pradesh at 11.2, Gujarat - 11.1, Telangana - 10.4 and Karnataka 9.3 taking the top five spots. Jharkhand - 4.6, Kerala - 5.0, Punjab - 6.2, UP -6.4 and Chhattisgarh 6.7 were at the bottom of the list in terms of GDP growth in the same period according to a study by rating agency Crisil.

In fact, 12 out of 17 non-special states saw faster growth in fiscal 2018 compared with the previous five years despite the national trend of a slowdown in GDP growth in fiscal 2018.

But this growth hasn’t been equitable as low-income states have not sustained high growth long enough to meaningfully bridge the per capita income gap with the high-income states.

In fiscal 2008, 8 of 17 states had per capita income lower than the national average. Of these, only 4 grew faster than the all-India rate in the following 5 years.

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This means that only half of the low-income states started catching up with faster growth. These states were Bihar, Madhya Pradesh, Rajasthan, and Jharkhand. Uttar Pradesh, Chhattisgarh, West Bengal and Odisha continued to lag.

Among the 9 high-income states which had higher per capita income than the national average in fiscal 2008, 6 recorded faster growth in the following five years. These were Tamil Nadu, Telangana, Gujarat, Kerala, Haryana and Maharashtra.

The report also stated that the faster growth rate has however not translated into job creation.

BCCL

In the report titled States of Growth 2.0, which focused on how macroeconomic performance evolved in fiscal 2018, it showed that growth has also not quite been beneficial for job creation for the majority of states. Eleven of 17 states recorded lower than all-India growth in ‘employment-intensive’ sectors (namely manufacturing, construction and trade, hotels transport and communication services).

"Most states are not spending as they ought to, in areas such as health, irrigation, and education," the report said.

On the fiscal front, most states veered off the Fiscal Responsibility and Budget Management Act (FRBM) line.

BCCL

Despite this, due to little fiscal legroom for the Centre and increased share of states in central transfers, states are now the new engines of public spending.

“Indeed, states appear to have taken the baton from the Centre in terms of spending – especially capital expenditure – in recent years. This has become more relevant after the 14th Finance Commission increased the allocation of funds to states and gave them the leeway to prioritise spending as per need. Nearly two-thirds of the capex in the economy now is being incurred by the states,” Dharmakirti Joshi, Chief Economist, CRISIL said.