2021 was a tough year for many Indian households, the national healthcare system, and the government due to the second wave of the COVID -19 outbreak. The ‘Delta’ variant outbreak dampened the country’s economic recovery. However, the impact of the second wave on economic growth was less adverse than the previous one. After contracting by 7.3 percent in 2020-21, India’s economy registered an increase of 20.1 percent YoY and 8.4 percent YoY in Q1 and Q2 of FY2021-22, respectively. India’s economic recovery post the second wave was underpinned by a strong rebound in the services sector, complete recovery in the manufacturing industry, and rapidly increasing vaccination coverage. The economy continues to show signs of recovery amidst uncertainties caused by repeated infection outbreaks and supply chain disruption.

In this edition of the Annual Sub-national Competitiveness Analysis of India, we conduct a comprehensive competitiveness analysis of the 36 Indian sub-national economies.

Key Highlights

• Maharashtra has been the most competitive sub-national economy over the last eight years. That said, there is still room for improvement across different pillars of competitiveness such as productivity, the standard of living, and technological infrastructure.
• Assam is the bottom-most sub-national economy this year due to its poor performance across several dimensions, including economic growth, business friendliness, employment, and standard of living.
• The Western region continues to be the most business-friendly as it attracts sizeable investments across industries. Its openness to trade and high export turnover make it an attractive destination for foreign direct investment. However, it still fails to provide an adequate health infrastructure.
• The North-eastern region performs well in terms of medical infrastructure and government expenditure on education, science, and technology, but still lacks the physical infrastructure required for the presence of private and public limited companies. This lack of economic opportunities in the region has restricted its growth and development.

Sub-national recovery during the COVID-19 pandemic.

The book also studies the recovery of the sub-national economies in India amidst the COVID-19 pandemic, given that the economy faced downward pressures during both the first and the second wave. All sub-national economies showcased a V-shaped recovery soon after the sharp economic contraction during Q2 2020, when the national lockdown was implemented to curb the spread of the first wave of COVID-19 infections. The second wave during Q2 2021 led to another fall, although its intensity was not as severe as that of the first wave. Also, the regions with high intra-regional disparities, such as the Western region, grew faster than the North-eastern and Eastern regions with low intra-regional disparities. There are many factors responsible for this disparity in the economic recovery of the sub-national economies.

By Rohanshi VAID