'The real divide is...': PM Modi's top advisor offers new twist on North-South debate

Sanjeev Sanyal, a noted economist and member of the Economic Advisory Council to the Prime Minister, has offered a fresh perspective on the country's economic disparities, now seen as a North-South divide. Sanyal argues that the real divide, however, lies not between North and South, but between East and West.

"India has a serious East-West divide. The north-south divide is not a serious divide. Just look at a map, it will spring out at you. Southern India's success is quite recent. It wasn't a particularly great performer till 1991. The real performance of the southern states [occurred] after liberalisation," he said in a recent episode of the podcast, Neon Show. 

"In fact, Tamil Nadu, which in 1960 was a high-performing state, actually by 1991 had lost share in some ways. Kerala had decent social indicators but otherwise wasn't a particularly high-performing state. And the real star performers are Telangana and Karnataka. Similarly, in Western India, Maharashtra has been a more or less steady performer. But Gujarat has done spectacularly well in the last 25-odd years. Goa has done very well. It now has per capita income three times the national average and 10 times of Bihar."

Sanyal explained that while states in the South and West have experienced impressive growth since economic liberalisation in the early 1990s, the Eastern states like West Bengal and Bihar have lagged behind. This economic lag is especially evident when comparing income levels. While Goa and Gujarat boast per capita incomes substantially above the national average, eastern states like Bihar continue to struggle. "Bihar's per capita income is only 33% of the national average. It is no longer deteriorating in the last decade or so... [but] before that, it had been continuously declining," the economist noted.

In Sanyal's assessment, a range of governance issues — including outdated policies, inconsistent law enforcement, and a lack of business-friendly regulations — continue to hold back Eastern India, even as other regions advance. He highlighted West Bengal's economic decline as emblematic of the region's struggles. "West Bengal used to be the rich cousin in 1960. Its per capita income despite all the chaos of partition was 27% higher than the national average. Today, it is 15%. Odisha, on the other hand, which was always the poor cousin, is now actually has a per capita income higher than of West Bengal." 

"Similarly, Assam. Its per capita income was roughly around about national average in 1960s. It continuously deteriorated due to Assam agitation and all other disruptions that happened there. But in the last decade or so, it has significantly caught up."

Sanyal emphasised the role of law and order in fostering economic growth, pointing to West Bengal as an example of how lapses in governance can hinder development. "In some of these states, Law and Order — as can be seen in what is happening in West Bengal — is a major issue,” he said, noting that even in a well-connected city like Kolkata, governance issues have slowed progress.

This concern for West Bengal’s trajectory is not new for Sanyal, who previously spoke passionately about the decline of Kolkata, once a thriving cultural and economic hub. In March this year, the economist said that former West Bengal Chief Minister Jyoti Basu and the Communists destroyed the economy of Kolkata and Bengal.

Sanyal highlighted the importance of having important urban hubs that drive high economic growth. He said the states with high performance often have anchor cities propelling their development. For instance, he said, Bengaluru drives Karnataka's economy, while Hyderabad fuels growth in Telangana. Maharashtra's success is anchored by the Mumbai-Pune corridor and Nagpur, while Gujarat benefits from a more distributed network of cities like Ahmedabad, Rajkot, Baroda, and Surat. 

The economist noted that Kolkata should serve as a comparable anchor for the East, not only for West Bengal but for the entire region. He argued that with Kolkata's existing institutions and significant historical infrastructure, it holds unmatched potential to stimulate Eastern India's growth. "This web of urban drivers is a key part of high growth. Kolkata should have been that anchor of the East. So bringing back Kolkata is not just about reviving West Bengal, it is an anchor of the East. If you really want to get eastern India going, you've got to get Kolkata going."