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Majority of states have consistently performed better than all India GDP growth in the 11th Five-Year Plan (2007-12), a study by Assocham said today.
The chamber submitted the study titled 'An Appraisal of Finances of States', to the Finance Ministry and the Planning Commission.
The study said many states considered in the 'Bimaru' category are also now coming forward.
While 'forward' states like Maharashtra, Gujarat and Haryana have consistently performed above 10 per cent growth in nominal GDP, the study highlighted consistent rise of normally considered laggard states like Bihar, Madhya Pradesh and Rajasthan.
"One strong indication is that across-the-board there is a support for a liberal approach towards investments, despite political parties' differences in the rising states," Assocham Secretary General D S Rawat said.
India achieved an average 7.9 per cent growth in the 11th Five-Year Plan period despite the fact that there were two global crises during this period.
Prime Minister Manmohan Singh today said that states that used to grow slowly in earlier periods have done much better.
"The average growth rate of the five poorest states exceeds the national average for the first time in any Plan period. I think we may be reaching the stage when the term 'Bimaru states' can be relegated to history," he said.
The term 'Bimaru' was coined in the early 1980s, whereby Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh were classified as laggards struggling to keep up in comparison with growth rates set by other states.
The study said that under performing states like West Bengal and Andhra Pradesh have to search for their shortcomings, despite their favourable geographical positioning and natural resources.
Further, it said the positive indicators in the state budgets are reduction in states' deficits and improvement in revenues, both locally generated and devolution from centre.
Also, it said the decentralisation of economic investment decisions has given rise to competitive spirit among states to unlock their growth potential. The net result of this was evolution of healthy competition among states for attracting private investments.
"The government policy, bureaucratic efficiency, infrastructure endowments and work culture of states were decisive in allocation of investments across states. The process has eventually placed the Indian economy on high growth trajectory," Rawat said.