Revisiting Development Disparities across the Indian States: In Quest of Evidence of Resource Curse

Despite a large number of studies going into the issue of income and developmental disparities across states in India, the possibility of resource curse being at the root of some states persistently lagging in development has rarely been probed. The present paper is aimed at filling this void in the literature. Economic common sense and writing of some eminent development economists suggest that regions endowed with resources should be in the advantaged position to grow fast and develop quickly. In reality, however, regions endowed richly with natural resources have often tended to lag– a phenomenon that has given rise to the resource curse hypothesis. Countries/regions rich in natural resources can be cursed if the easy and abundant resource revenue breeds moral hazards causing institutional weaknesses that allow rent-seeking and other anti-developmental processes to flourish. In the Indian context, persistent lagging behind of the resource-rich states of Odisha, Madhya Pradesh, Chhattisgarh, Assam, Jharkhand, and Bihar hints at resource curse casting a spell over these states. Using panel data on 17 major Indian states at decennial intervals from 1981 to 2011, evidence for probable resource curse has been explored while controlling for some common determinants of development. Results confirm evidence in support of resource curse dragging overall development attainment in most of the resource-rich states. On a positive note, however, it has been found that development attainment across India has advanced progressively, especially in the post-reform decades. &nbsp