Himachal Pradesh’s Missed Opportunity: How Uttarakhand Outpaced Its Neighbour in Industrial Growth

Himachal Pradesh’s approach to industrialization over the past two decades has come under scrutiny, especially in light of Uttarakhand’s remarkable success in the same period. A recently published EAC-PM Working Paper titled ‘The Great Convergence: A Case Study of Uttarakhand and Himachal Pradesh (2000 to 2020)’ has highlighted the contrasting outcomes of the two hill states, attributing Uttarakhand’s superior economic performance to its strategic approach to industrial development. The paper, co-authored by Shamika Ravi, a member of EAC-PM, and Alok Kumar, Principal Secretary for Industrial Development & MSME in Uttar Pradesh, presents a detailed comparison of the economic transformation of both states, emphasizing the impact of the Union Government’s Concessional Industrial Package (CIP) for hill states announced in 2003.

Despite having similar industrial policies in response to the central government’s offer, the key difference between the two states lay in their land and town planning policies. While Uttarakhand adopted a planned industrialization strategy, focusing on developing designated industrial estates with state-provided and financed infrastructure, Himachal Pradesh allowed industries to acquire land directly from farmers through private negotiations. This approach, although seemingly flexible, failed to yield the same level of growth as seen in Uttarakhand. The paper reveals that Uttarakhand’s industrial economy expanded by an impressive 9.5 times, significantly outpacing Himachal Pradesh’s more modest growth of 4.6 times.

The growth in Uttarakhand’s manufacturing sector acted as a catalyst for the broader economy, resulting in a Compound Annual Growth Rate (CAGR) of 11.05% in Gross State Domestic Product (GSDP) between 2000 and 2011. In contrast, Himachal Pradesh recorded a slower CAGR of 6.91% during the same period. The multiplier effect of manufacturing growth in Uttarakhand was not limited to GSDP alone; it also significantly boosted the state’s tax revenue. The paper reports that Uttarakhand managed to expand its State’s Own Tax Revenue (SOTR) base by more than 18 times over 22 years, effectively doubling its SOTR every five years. Himachal Pradesh, however, saw a relatively modest increase, with a 5.5 times growth in real terms.

The strategic planning and infrastructural support provided by the Uttarakhand government within its industrial estates proved to be a game-changer, attracting large-scale investments and fostering an ecosystem conducive to sustained industrial growth. In contrast, the lack of a well-defined land policy in Himachal Pradesh appears to have hindered its ability to leverage the benefits of the CIP effectively. The EAC-PM Working Paper suggests that Himachal’s reliance on allowing industries to negotiate directly with farmers for land acquisition may have led to fragmented industrial growth, limited by infrastructural constraints and inconsistent policy implementation.

Uttarakhand’s decision to ensure comprehensive infrastructure support, such as roads, power supply, and logistics within its industrial estates, created a competitive edge that Himachal Pradesh’s dispersed industrial clusters could not match. The paper’s findings underscore the importance of planned industrialization and the role of cohesive policy frameworks in driving long-term economic growth. With Uttarakhand having come into existence as a separate state only on November 9, 2000, its ability to surpass Himachal Pradesh, a more established state, highlights the crucial role of strategic planning and effective governance in transforming economic landscapes.

Himachal Pradesh’s policymakers may need to revisit their industrial strategies, focusing on centralized infrastructure development and streamlined land policies to enhance the state’s appeal as an investment destination. As the competition between the two neighboring hill states continues, the lessons from Uttarakhand’s success could serve as a blueprint for Himachal Pradesh to revitalize its industrial sector and accelerate its economic growth. The EAC-PM Working Paper not only sheds light on the divergent growth trajectories of the two states but also raises pertinent questions about the need for proactive and planned policy interventions to unlock the full potential of industrialization in hilly regions.

This is an auto-generated web media news report.
#HimachalPradesh #Uttarakhand #IndustrialGrowth #EconomicPolicy #ConcessionalIndustrialPackage #ManufacturingSector #HimachalVsUttarakhand #EconomicTransformation #IndustrializationStrategy #HimachalNews