Siddaramaiah's claim of south Indian states subsidising northern counterparts nothing but economic fallacy

The pre-poll politics happening in Karnataka is probably the worst of its kind which the country has witnessed, since its Independence. We have to look at events like having a separate flag and the present debate on the sharing of revenue with the north Indian states in the same series of events.

The argument that south Indian states support the poorer north Indian states doesn’t make even a rudimentary economic sense. If we stretch the same logic at a global level, then the richer countries shouldn’t be a part of free trade agreements with poorer nations. The European countries shouldn’t have agreed to join their economies, irrespective of the state of their individual economies. Presently, Germany as one nation is essentially supporting the rest of the European economies to be afloat.

 Siddaramaiahs claim of south Indian states subsidising northern counterparts nothing but economic fallacy

File image of Karnataka chief minister Siddaramaiah. Getty Images

The answer to this is twofold. Firstly, the poorer states or economies even though being relatively poor, provide for a healthy market for the relatively economically richer states. For instance, even though per capita of Uttar Pradesh is well below the national average and is poorer than Tamil Nadu. But Tamil Nadu’s economy which is largely dependent on the automobile sector finds a huge market in Uttar Pradesh. This is manifested by the fact that Uttar Pradesh has the third highest number of registered automobiles in India.

Therefore, states like Tamil Nadu have a higher income, due to, among other reasons, the huge free market of the poorer states they get in India. In reality, the higher contribution of revenue from higher income states towards the development of lower income states is also in the interest of the higher income states. This is because this is how they increase the buying capacity of the population of the lower income states, enabling them to buy products from the industries in the higher income states.

At an international level, a similar example can be seen in the European Union, where Germany, is supporting the economy of other European countries, so that a healthy market for German goods exists in its vicinity and its economy thrives. The same is also true for the mandate of the World Trade Organisation, which aims to create a free market globally.

Secondly, any economy has three sectors – agriculture, industry and services, which are referred as primary, secondary and tertiary sectors respectively. The income in the secondary and tertiary sectors is naturally more because of the nature of economic activity they undertake. For instance, manufacturing automobile will lead to more economic profits instead of agriculture. However, the importance of primary sector can’t be undermined primarily because it takes care of the most basic human necessity, that being food.

In India, the southern and western states are more industrialised and hence are higher income. The northern and eastern states are primarily dependent on the primary sector and hence are lower income. However, they do take care of the food security of the country. This is something so basic that we even fail to notice and to the contrary undermine it, simply because it doesn’t result in a higher income.

Also, the agricultural activity in the north and east Indian states has been more ecologically sustainable, which is evinced by the fact that the groundwater levels in these parts of the country are at a far better level than the south and west Indian states.

The same is indicated by the figure below, which gives us the condition of groundwater assessment units, across the country:

Categorization of ground water assessment units.

Categorization of ground water assessment units.

It can thus be emphatically said, that the contribution of north and east Indian states, has been immense in terms of the food security of our country, which is an enormous one considering the pressure of our large population. This fact can’t simply be undermined because the output of agriculture is less than the industrial and tertiary sector, in solely economic terms.

Hence, such a conclusion being drawn by the politicians like Siddaramaiah, in addition, to being an unrequired threat to the national integrity of the country, can only be uninformed or simply political.

The author is a senior research fellow with the Department of Humanities and Social Sciences, IIT Bombay. He can be reached at He tweets @raghavwrong

Updated Date: Mar 27, 2018 20:38:07 IST