Development and Finance from issue 2011/1

Beáta Udvari

Regional Differences and Growth Poles in India

- Abstract -

International organisations – emphasising the positive role of trade in economic development – generally are in the opinion that developing countries have to take part more efficiently in international trade in order to speed up their economic development and improve living standards. Empirical evidences, however, are far from being supportive to this idea without doubts. The relation between openness and regional differences is also on the research agenda.

In this article I analyse these problems in India’s case. First, the country is an increasingly important economy in the global economy due to its size, population and the role it plays in international trade. It has several competitive industries with developed export structure that make it different from the majority of developing countries. Second, the country became internationally open due to the reforms introduced at the beginning of the nineties, and since then regional differences increased further. Third, India elaborated a development strategy for smoothing regional differences. Fourth, India is heavily analysed in several studies from the viewpoint of openness and regional differences.

India has become one of the most important developing countries: during the past two decades it has achieved substantial economic development and it was integrated into the international division of labour. It is an active participant in international trade, a more and more open country following export oriented economic policy. The country itself can be considered successful but regional problems are significant. Seaside regions are more developed than inland ones. In addition landlocked regions are predominantly rural ones, where the population is employed in non-efficient informal sector.

India’s case confirms the strong correlation between openness and regional problems. It seems that here the opening resulted in unexpected problems. In order to alleviate regional differences India returned to the strategy of growth poles or cluster of clusters approach. The objective of the intervention is to create cooperation even in the informal sector in order to achieve more efficient and competitive production. However the detailed analyses of growth poles indicate that the centrum-periphery relation can remain for a long time.

The case of India clearly confirms that participation in International trade – contrary to the expectations and proposals of international organisation – cannot lead automatically to good results. The openness of a country can sometimes be disadvantages for regional differences.

Beáta Udvari, PhD student (University of Szeged, Doctoral School in Economics)
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