Identifying the Economic Potential of Indian Districts

Despite its rapid growth in recent
decades, GDP per capita in India remains at a relatively low
level by international standards, and the country continues
to be marked by large subnational disparities in levels of
well-being. These large disparities naturally lead to
interest in India’s spatial landscape of potential for
economic development. Against this backdrop, this paper
presents the results of an analysis of underlying variations
in economic potential across Indian districts, where
economic potential is defined as the extent to which a
district possesses factors that are important determinants
of the ability to experience a high level of productivity.
The analysis is based on a simple composite Economic
Potential Index, which is constructed from variables for
which robust evidence exists of their importance as
determinants of local productivity. From the analysis, a
picture emerges of a heterogeneous landscape of economic
potential characterized by strong geographic clustering of
districts. The paper also reveals particularly high levels
of underperformance, relative to potential, for districts in
Uttar Pradesh.