Southern States: The Unstoppable Economic Surge Post-1990

India’s economic liberalisation in 1991 marked a turning point, especially for the southern states. These states—now frontrunners in industrialisation, technological advancement, and governance—have consistently outpaced their northern and western counterparts. This article, based on data from the Economic Advisory Council to the Prime Minister (EAC-PM), offers a fact-based, reliable analysis of their extraordinary growth. For students, businesspeople, and policymakers, it provides essential insights into the forces shaping India’s economy.

As per data from the Economic Advisory Council to the Prime Minister (EAC-PM)—a credible source of government analysis—states like Tamil Nadu, Karnataka, Telangana, Andhra Pradesh, and Kerala have consistently outperformed their northern and western counterparts, revealing insights into how progressive policies and human capital investment can drive sustained growth.

The Liberalisation Effect: A Southern Advantage

The economic reforms of 1991, which dismantled the License Raj and opened India to global markets, acted as a catalyst for growth. While all states were given the same opportunity, the southern states were quicker to capitalize on it. What makes the southern states of India stand apart from the rest? How have they managed to consistently grow despite challenges that hindered other regions? The answer lies in a mix of visionary policies, focused investments in education and healthcare, and a drive to embrace change.

This rapid growth has largely been attributed to higher literacy rates, better healthcare, and an entrepreneurial culture that was already being nurtured before liberalization. As we explore individual states, the unique strengths that have driven their success become even clearer.

Tamil Nadu: The Industrial Dynamo

Tamil Nadu, with its diversified industrial base, quickly became one of India’s industrial powerhouses post-1991. As the data from the Economic Advisory Council to the Prime Minister (EAC-PM) shows, Tamil Nadu’s per capita income has seen consistent growth, making it one of the most prosperous states in India. By 2023-24, Tamil Nadu’s per capita income relative to the national average is among the highest, consistently staying above 150% of the national figure since the 2000s.

The state is renowned for its automotive sector, often referred to as the “Detroit of Asia.” Major global car manufacturers like Hyundai, Tata Motors, Ford, and BMW have set up production facilities in the state. Additionally, Tamil Nadu’s strategic location with ports in Chennai, Thoothukudi, and Ennore has made it a logistics hub, enhancing its appeal for multinational companies. According to the data from EAC-PM, Tamil Nadu’s share in India’s Gross State Domestic Product (GSDP) has been steadily rising, moving from 5.4% in 1960-61 to 8.4% in 2023-24.

Tamil Nadu has also become a leader in renewable energy, especially wind and solar power. The state’s focus on sustainable growth has earned it global recognition, further enhancing its economic stature.

Karnataka: The Tech Behemoth

Karnataka, and particularly its capital Bengaluru, has become synonymous with the IT boom in India. The state’s transformation into the “Silicon Valley of India” was driven by early investments in higher education and technology infrastructure. By the early 2000s, Bengaluru had established itself as a global IT hub, contributing more than 38% of India’s total IT exports. This has had a tremendous impact on per capita income, with Karnataka consistently registering high growth rates post-liberalisation.

As per the EAC-PM data, Karnataka’s per capita income relative to the national average has seen a steep upward trajectory since the 1990s, with the state now maintaining levels well above 150% of the national average. In addition to its IT sector, Karnataka has also made significant strides in biotechnology, aerospace, and manufacturing, further diversifying its economic base.

The state’s share in India’s GDP has risen from 5.3% in 1960-61 to 7.7% in 2023-24, underscoring its role as a major economic player in the country.

Kerala: A Unique Model of Development

Kerala’s growth story differs from its southern counterparts. Known for its high human development indicators, Kerala’s focus has always been on social infrastructure, particularly education and healthcare. The state has one of the highest literacy rates in the country, and its healthcare system is often cited as a model for other states to emulate. While Kerala’s industrial base is smaller compared to Tamil Nadu or Karnataka, the state has built a strong economy based on tourism, remittances from its large diaspora, and the service sector.

Kerala’s per capita income has grown steadily, and though it remains below the levels seen in Tamil Nadu and Karnataka, it is still higher than the national average. According to the EAC-PM, Kerala’s share in India’s GDP was 3.8% in 1960-61 and has remained relatively stable, standing at 4.1% in 2023-24.

Tourism has been a major driver of Kerala’s economy, with the state attracting millions of domestic and international tourists every year. Kerala’s natural beauty, Ayurveda tourism, and eco-tourism have made it a popular destination, further bolstering its economy.

Telangana and Andhra Pradesh: Rising Giants

Despite the bifurcation of Andhra Pradesh in 2014, both Andhra Pradesh and Telangana have charted impressive economic growth trajectories. Telangana’s capital, Hyderabad, is home to a booming IT and pharmaceutical industry, earning the city the nickname “Cyberabad.” The state has also made significant strides in sectors like biotechnology, aerospace, and defense manufacturing. Telangana’s per capita income relative to the national average has surged since its formation, with the state now boasting one of the highest per capita incomes in the country.

Andhra Pradesh, on the other hand, has focused on agriculture and industrialisation to fuel its economic growth. The state’s fertile land and favorable climatic conditions have made it one of the leading agricultural producers in the country. Andhra Pradesh’s per capita income has grown steadily, though it remains slightly below the levels seen in Telangana and Karnataka.

Gujarat: A North-Western Powerhouse

While the Southern states have led the charge post-liberalisation, Gujarat deserves special mention for its impressive contribution to India’s GDP. As per the EAC-PM data, Gujarat’s share in India’s GDP was 5.8% in 1960-61, rising to 8.3% by 2023-24. The state has become a manufacturing hub, particularly in chemicals, petrochemicals, textiles, and automobiles. Gujarat’s industrial policies, business-friendly environment, and excellent infrastructure have been instrumental in driving its growth.

The Decline of Punjab and West Bengal

Interestingly, states like Punjab and West Bengal, which had a head start in economic growth post-independence, have seen a decline in their relative per capita incomes. Punjab, once a leader due to the Green Revolution, has struggled to diversify beyond agriculture, resulting in stagnation. West Bengal, which was an industrial hub during the British era, has been unable to maintain its leadership due to political instability and a lack of industrialisation.

According to the EAC-PM data, Punjab’s per capita income relative to the national average has steadily declined from 132% in 1960-61 to 98% in 2023-24. West Bengal’s decline has been even sharper, with its per capita income relative to the national average falling from 105% in 1960-61 to 73% in 2023-24.

Key Takeaways for Policy Makers and Business Leaders

The success of the southern states provides crucial lessons for other states and regions. Their ability to combine economic growth with investments in social infrastructure has created a virtuous cycle of development. States like Bihar, Uttar Pradesh, and Odisha, which have lagged behind, can emulate the success of the southern states by focusing on governance, education, healthcare, and infrastructure.

For business leaders, the southern states continue to offer attractive opportunities for investment. Tamil Nadu, Karnataka, Telangana, and Andhra Pradesh have built ecosystems that are conducive to both domestic and international investments, thanks to their strategic locations, availability of skilled labor, and proactive state policies.

Conclusion

The Southern states of India have shown the way forward for the country, emerging as leaders in economic growth post-1991. Their focus on human development, industrialisation, and progressive policies has made them powerhouses of the Indian economy. The story of their rise is not just an inspiration for other Indian states, but also a valuable lesson in how regional economies can leverage reforms to build a prosperous future.

The southern states have laid out a blueprint for success, one that other states can follow. By replicating their focus on human development, industrial growth, and good governance, the rest of India can also rise to match this growth story. With the right policies and investments, India’s future promises even greater growth, led by the lessons learned from its most dynamic regions.