Economic Reforms and Reduction of Regional Disparities:

Another important objective of development is to reduce regional disparities. Government has been helping the backward states with higher allocations so that regional disparities could be reduced. 

But the reform process has been emphasising the use of market forces to attract investments. Experience reveals that the relatively developed regions are able to attract more resources - both economic and social - if markets are given a free play. The question of reducing regional disparities is sidelined. It would, therefore, be advisable to understand the impact of economic reforms on regional
disparities among the states. 

Data provided in Table 8.12 reveal that NSDP in forward states indicated a growth rate 6.0 per cent per annum during the period 1990-91 to 2000-01, but as against them, it grew in backward states at merely 1.4 per cent. This only underlined the fact that instead of reducing, it has further widened regional inequalities.

This can be observed by making a comparison of per capita NSDP. In case of Bihar, the per capita NSDP growth was negative to the extent of (-) 2.8 per cent during 1990-91 and 2000-01. In case of Uttar Pradesh, it was just 0.8 per cent. These two states account for 27 per cent of total population and thus, they pulled down the average all-India growth of per capita NSDP. If we compare the ratio of maximum and minimum NSDP, then it is revealed that this ratio was 2.7 in 1990-91 and increased to 4.6 in 2000-01. Obviously, the period of economic reforms has resulted in increasing regional disparities. This was due to the fact that approval of investment proposals and grant of financial assistance helped the forward states to further accelerate growth leaving behind the backward states which were not favoured by the market forces. Naturally, regional disparities in terms of growth of NSDP - both total and per capita - widened further.