West Bengal is the only large state to have its per capita income grow slower between 2000-2019 compared with 1990-1999 decade, while Bihar was the only state to have its citizens’ income contract in the decade post liberalisation, a new working paper by Economic Advisory Council to the prime minister has found.

This even as states like Telangana and Gujarat grew seven percent and 6.3 percent, respectively.

The study titled “State Budgets in India: Observational Time Trend Analysis from 1990 to 2020” by EAC-PM member Shamika Ravi along with Mudit Kapoor associate professor, Indian Statistical Institute, shows the relationship between growth, revenue mobilisation and development spending of states to establish why some poor states have failed to grow faster.

It found that Punjab and West Bengal, which lag behind in national average in real per capita growth, were also the ones that invested the least on capex.

“Perhaps this reflects the significant capital disbursement towards the discharging of internal debt. This leaves practically no room for capital outlay for development, which could be why these states are lagging in growth,” the authors noted in the report.

The authors also highlight a relation between growth and tax collections. The high growth states raised over 50 percent of revenue from own sources, while low growth states relied on central transfers and grants for their revenue needs.

The study also finds a correlation between size of the government and growth.

“In high-growth states such as Gujarat, expenditure related to administrative services decreased significantly, particularly post 2000, from 1 percent to less than 0.5 percent of the state NSDP,” the study noted, while it remained between 1.5 -2 percent for states like Bihar and Punjab.

The study also has a warning for states trying to revive old pension schemes, as it notes that share of pensions as a proportion of development expenditure had risen beyond 20 percent had the pension reforms of 2000 which entailed a shift to New Pension Scheme had not been initiated.

West Bengal was one of the states that did not adopt the New Pension Scheme.

“In West Bengal, the share of interest payments and debt servicing to development expenditure has been higher than the all-India level,” the study noted.

The Union government last week announced a new pension scheme that combines guarantee features of old pension scheme with contribution model of the new pension scheme.