Planning as a tool for Regional Imbalance in India

• Regional planning means making different plans for different regions, according to their resources, stage of development, location and the aspirations of their people. Each region is treated as a planning unit with its own problems, potentials and priorities.
• National sectoral planning asks how much food, industry or power the country should produce. Regional planning asks where it should be produced, and for whom. It is planning with a map, not only with an economic model.
• In India, with its gaps between Goa and Bihar, between the industrial west and the mineral-rich east, and with the North-East’s connectivity deficit, planning has been the main instrument of spatially redistributive justice.
• The instruments have changed: public investment and industrial incentives in the early plans, area programmes from the 1970s, Finance Commission devolution and special category status, and now district targeting through the aspirational programmes.

Regional Planning as a Tool

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Spatial Differentiation and Complementarity

• Regional planning rests on the idea of areal differentiation in Richard Hartshorne’s The Nature of Geography (1939).
  • The earth is a mosaic of landscapes. Each is a unique combination of its elements, which sets it apart from its neighbours.
• Regional planning draws two rules from it:
  • use each landscape according to its own potential, not by a uniform template;
  • manage the complementary relationships between neighbouring landscapes, so that exchange benefits both.
• India as a mosaic:

• The planning synthesis: plan for each landscape’s potential, and ensure that the flows between them benefit the region of origin. Jharkhand’s coal should benefit Jharkhand’s people, and the North-East’s hydropower and biodiversity should serve its own development, not only the national grid.

Factors Determining Regional Planning

• Resource endowment and potential: mineral wealth (Chota Nagpur), water (the Indo-Gangetic Plain), forests (the North-East), marine resources (the coasts), solar radiation (Rajasthan), hydropower (the Himalaya).
  • Rajasthan’s planning has moved towards solar energy rather than water-hungry agriculture, a shift driven by its endowment.
• Stage of development: an agrarian, subsistence region needs different instruments from one that is industrialising, or one that is mature but congested.
  • Planning for the BIMARU States (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) differs from planning for the Mumbai Metropolitan Region or Bengaluru. The stage decides whether infrastructure, industry or urban management comes first.
• Geographical setting: coast, hill, desert, floodplain, tribal forest or island decides what is ecologically feasible, economically viable and socially acceptable.
  • Lakshadweep’s coral atolls, the Thar and the Himalaya each need their own frame.
• Aspirations of the people: plans divorced from local aspirations meet resistance and fail.
  • The Narmada Bachao Andolan, tribal rights movements and the statehood movements of Jharkhand and Telangana showed it.
  • The 73rd Amendment (1992) and the Forest Rights Act (2006) are institutional recognition that local voices must shape plans.

Objectives

• Correct regional disparities in socio-economic indicators. Uncorrected disparities take the form of sub-national tendencies: extremism, regionalism, statehood demands and insurgency. Correcting them is both a development goal and a matter of national security.
• Optimum use of space: regions have different comparative advantages, such as coal and iron in Jharkhand, solar radiation in Rajasthan, biodiversity in the Western Ghats and marine resources on the coasts.
  • Without spatial planning, these are over-exploited (the resource curse), under-used, or used to benefit distant populations. Planning allots land and resources to their highest-potential uses.
• Sectoral efficiency through regional integration: when agriculture, industry, infrastructure and services are planned together in space, complementarities emerge.
  • Steel from Chota Nagpur builds the cities of the Gangetic plain; Punjab’s surplus grain feeds the national food system; IT talent from all States flows to Bengaluru. Isolated sectoral plans cannot achieve this.

Regional Imbalance and Sub-national Tendencies

• Left Wing Extremism: rooted in the deprived tribal forest regions of Jharkhand, Chhattisgarh, Odisha and adjoining States, rich in minerals but poor.
  • Its roots lie in displacement by mines and dams without fair compensation, and exclusion from the benefits of resources.
  • Planning responses: the Integrated Action Plan (2010) for 82 affected districts, and the aspirational districts.
• Regionalism and “sons of the soil” movements (Maharashtra, Assam) against migrants from poorer regions reflect unequal development rather than ethnic incompatibility.
• Demands for new States: Jharkhand from Bihar, Chhattisgarh from Madhya Pradesh and Uttarakhand from Uttar Pradesh (all 2000), Telangana from Andhra Pradesh (2014). Vidarbha, Gorkhaland and Bodoland demands share the same root in perceived neglect.
• Insurgency and separatism in the North-East and Jammu and Kashmir had political roots, but economic marginalisation fed them.
  • Planning responses: special category status, North-East packages, the Non-Lapsable Central Pool of Resources, and PM-DevINE (2022). Development must precede political integration, not follow it.
• The political economy: when a region receives less than its share, sees its resources extracted for distant users, and finds its migrants unwelcome elsewhere, grievance and identity combine. Regional planning is therefore the spatial dimension of national integration.

Approaches to Regional Planning

• Two frameworks cut across all approaches: spatial or temporal, by what drives the plan; and regional or area development, by the scope of the planning unit.

Spatial and Temporal Approaches

• Spatial approach: area-specific planning for particular goals, built on the region’s own socio-economic and geographical factors rather than a national template.
  • Example: reducing poverty in hill areas through tourism, using scenic, cultural and biodiversity assets instead of imposing plains agriculture or heavy industry on unsuitable terrain.
  • It asks of local factors (livelihoods, skills, cultural practices) and geographical factors (terrain, climate, soil, water, connectivity) what is feasible, and builds on them.
  • Its tools are Central Place Theory, growth poles and growth centres, which allocate activities in space.
  • Recent examples: the Aspirational Districts Programme, with convergence of 42-plus central schemes in 112 districts; North-East packages for connectivity.
• Temporal approach: time is the organising factor; plans are built around time-bound targets for a region.
  • Example: the goal of doubling farmers’ incomes by 2022 organised credit, irrigation, markets and technology around a date. The goal was not met on time, which shows the risk of the approach.
  • Five Year Plans (First to Twelfth) and mission-mode programmes with deadlines are its tools: PMGSY for rural roads, Saubhagya for household electrification, Swachh Bharat for open-defecation-free status (declared 2019), the Jal Jeevan Mission for tap water to every rural home.
  • Monthly delta ranking on 49 indicators gives the aspirational districts a temporal urgency inside a spatial programme.
  • Climate targets add a time dimension to regional transition, such as a 45% cut in emission intensity by 2030 and 50% of installed power capacity from non-fossil sources by 2030, the second reached in 2025.
• The two are complementary: space decides where, time decides by when.

The Regional Planning Approach: Hierarchy and Complementarity

• Here planning is confined to a particular region and takes all its planning entities into account.
  • Example: developing the Chota Nagpur plateau as one unit, placing steel, power and mining at the right levels of its hierarchy of settlements.
• It applies Walter Christaller’s (1933) hierarchy of central places, with the growth pole and growth centre ideas of François Perroux (1955) and Jacques Boudeville (1966).
• Functional hierarchy: settlements depend on each other in a nested order.
  • A central village serves surrounding villages with a market, school, health sub-centre and panchayat office.
  • It depends on a town for higher-order services: a hospital, college, wholesale market, tehsil office.
  • The town depends on a city for still higher services: a university, specialised hospital, regional headquarters.
• In Christaller’s terms, each centre has a range (the distance people will travel for a service) and a threshold (the minimum population that makes it viable). Each serves a complementary region nested within that of the next higher centre. Settlements of different orders are not competitors; they provide different levels of service.
• The planner has two tasks:
  • identify the hierarchy: which villages depend on which market towns, and where tiers are missing;
  • allocate activities to levels, so that functions complement each other: primary schools in villages, secondary schools at block level, colleges in district towns, universities in regional cities.
• Transport and communication turn a point of development into a regional process. A growth centre at district headquarters cannot pass impulses to villages 50 km away without roads.

The Area Development Approach

• It targets specific problem areas or specific groups, rather than the hierarchy of a whole region:
  • problem areas: drought (DPAP, 1973–74), desert (DDP, 1977–78), hills (HADP, Fifth Plan), canal commands (CADP, 1974–75). From 2009 the land-based programmes merged into the Integrated Watershed Management Programme, now the watershed component of the PMKSY;
  • target groups: the Tribal Sub-Plan (1974–75) with Integrated Tribal Development Projects, the SFDA and MFAL agencies (1971) for small and marginal farmers, and DWCRA (1982) for rural women, the forerunner of today’s self-help groups under the NRLM.

• Group programmes in detail:
  • Tribal Sub-Plan: funds ring-fenced by ST population share, through ITDPs and ITDAs; PESA (1996) for Schedule V areas; the Modified Area Development Approach for pockets with over 50% ST population; the Forest Rights Act (2006) as a rights complement.
  • SFDA: for holdings under 2 hectares, left out of the Green Revolution: credit, technology, marketing. It led on to IRDP (1978, all-India 1980; leakage problems), then SGSY and NRLM.
  • MFAL: smaller holders and labourers, with credit and training for animal husbandry, fishery and sericulture.
  • DWCRA: the self-help-group model, which NRLM now extends to over 7 crore women (older count).
• Their weakness, across the record of backward area planning, was thin funding spread over large areas, and schemes designed for the nation rather than the region.

Instruments for Reducing Regional Imbalance

Fiscal Transfers: The Finance Commission

• The Finance Commission (Article 280) recommends every five years:
  • the States’ share of the divisible pool of Union taxes (vertical devolution);
  • how that share is divided among States (horizontal devolution);
  • grants.
• It is now the largest instrument of regional redistribution: tax devolution is about 41% of the divisible pool.
• How the formula moved towards equity:
  • up to the Sixth Finance Commission, 80% or more of the pool was shared by population alone;
  • from the Seventh, equity criteria such as inverse income or income distance gained weight;
  • the Tenth added area and tax effort, the Eleventh fiscal discipline, the Fourteenth forest cover and the Fifteenth demographic performance.
• Equity criteria dominate. The income-distance criterion gives more to States whose per capita income is furthest below that of the richest States. Area, forest cover and population add needs.
• Fifteenth Finance Commission (2021–26, chair N. K. Singh): 41% to States (42% less 1% for the new Union Territories of Jammu and Kashmir and Ladakh). It gave revenue deficit grants to States whose devolution did not cover their needs.
• Sixteenth Finance Commission (2026–31, chair Arvind Panagariya): report tabled on 1 February 2026 and accepted by the government.
  • It kept the States’ share at 41%.
  • It added contribution to GDP (10%) as an efficiency criterion and cut income distance from 45% to 42.5%.
  • It replaced inverse fertility with population growth 1971–2011, and counted open forests and gains in forest cover.
  • It discontinued revenue deficit grants and sector- and State-specific grants. Its grants of about ₹9.47 lakh crore are for local bodies and disaster management.

• Effect: poorer States receive more than their population share. Bihar gets 9.95% of devolution under the Sixteenth Finance Commission, Uttar Pradesh 17.62% and Madhya Pradesh 7.35%, while Maharashtra gets 6.44% and Karnataka 4.13%.
• Debate: the southern and western States argue that rewarding low income penalises success and that 2011 population weights reward high growth. The Sixteenth Commission’s GDP criterion was a partial response.

Special Category Status

• Origin: the National Development Council granted it in 1969, when the Gadgil formula for plan assistance was adopted. Assam, Jammu and Kashmir and Nagaland were the first.
  • It extended to eleven States: Arunachal Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand (2001–02).
• Criteria, taken together:
  • hilly and difficult terrain;
  • low population density or a sizeable tribal population;
  • strategic location on international borders;
  • economic and infrastructural backwardness;
  • non-viable State finances.
• Benefits under the Planning Commission:
  • Normal Central Assistance as 90% grant and 10% loan, against 30:70 for other States;
  • 30% of Normal Central Assistance reserved for them;
  • special plan assistance;
  • concessions in excise and income tax for industry.
• After 2015: NITI Aayog replaced the Planning Commission on 1 January 2015, ending plan assistance. The Fourteenth Finance Commission made no distinction between special and general category States in devolution, and the Union government has granted no new status since.
  • The benefit survives as 90:10 Centre–State sharing of Centrally Sponsored Schemes for the North-Eastern and Himalayan States, against 60:40 for others.
• Demands from Bihar, Andhra Pradesh and Odisha have been refused. Andhra Pradesh received special assistance equal to the extra scheme funding it would have had at 90:10.

Public Investment and Industrial Location Policy

• Public-sector location (Second Plan): integrated steel plants at Bhilai, Rourkela and Durgapur, and later Bokaro, were placed in backward mineral regions. Fertiliser and heavy electrical plants followed.
  • The Third Plan held that an area’s handicaps for big projects are not always basic: often they reflect only missing facilities and services.
  • They followed the resource base and Alfred Weber’s (1909) least-cost principle: iron and steel use weight-losing raw materials, so plants go near ore and coal.
  • They were meant to act as growth poles, but they became enclaves. Skilled jobs went to outsiders (engineers and managers from metropolitan areas), local tribal people got unskilled work, and displaced communities suffered cultural dislocation, alcoholism, drug abuse and trafficking.
  • The pattern recurs across mining, dams and industry: development projects are estimated to have displaced over 5 crore people since 1947, about one-third of them tribal, against a tribal share of 8.6% of the population.
  • The failure was social and economic, not geographic.

• The 1956 Industrial Policy Resolution made the reduction of regional disparities in industry an aim. Licensing was meant to steer private units to backward areas.
• Backward-area incentives (from 1969–70):
  • The Pande and Wanchoo working groups (1968–69) fixed criteria for industrially backward areas and recommended incentives.
    • B. D. Pande’s group named ten backward States and 238 districts, about 60% of the country’s area and population.
    • N. N. Wanchoo’s group proposed a higher development rebate; five-year exemptions from income tax, excise and sales tax; relief from import duty on plant and machinery; and a transport subsidy beyond 400 miles (650 km).
    • The NDC (1969) extended them to backward districts in all States: 241 at first, later about 247 districts.
  • Concessional finance from the all-India financial institutions (1970).
  • The Central Investment Subsidy Scheme (1971), a capital subsidy for units in selected backward districts, was withdrawn in 1988.
  • The Transport Subsidy Scheme (July 1971) for hilly, remote and inaccessible areas:
    • it covered Jammu and Kashmir, Himachal Pradesh, the hill districts of Uttar Pradesh (now Uttarakhand), Sikkim, the North-Eastern States, Darjeeling district and the island territories;
    • it paid 50–90% of the cost of moving raw materials in and finished goods out, between a designated railhead and the unit, for five years;
    • the Freight Subsidy Scheme (2013) replaced it and was itself discontinued in November 2016. Transport incentives now sit within regional industrial schemes.
  • Growth centres (1988): 71 centres with infrastructure for industry in backward districts, with poor results.
• North-East and hill packages:
  • the North East Industrial Policy (1997);
  • the North East Industrial and Investment Promotion Policy (2007–17);
  • the North East Industrial Development Scheme (2017);
  • the Uttar Poorva Transformative Industrialisation Scheme (UNNATI), launched in March 2024 for ten years;
  • special packages for Jammu and Kashmir, Himachal Pradesh and Uttarakhand (2003).
• Outcome: concessions mostly went to backward districts of advanced States, close to existing industry, rather than to backward States. Industry followed infrastructure, markets and skills.

Incentive-Oriented Programmes in Balance

• Kinds of incentive used:
  • fiscal: income-tax holidays for units in backward districts, the North-East and the hill States, and excise exemptions;
  • capital: investment subsidies on plant and machinery;
  • interest and insurance subsidies, as in the Jammu and Kashmir package;
  • transport subsidies for hill, island and North-Eastern units;
  • concessional finance from development banks.
• What worked: the 2003 package for Himachal Pradesh and Uttarakhand drew pharmaceutical and FMCG units to the Baddi–Barotiwala–Nalagarh belt and the Haridwar and Pantnagar estates. These are now among the main manufacturing hubs of the hills.
• What did not:
  • units clustered at the edge of the eligible area, near the plains and railheads, so remote areas gained little;
  • many closed or moved once concessions lapsed;
  • incentives favoured capital-intensive units with few local jobs;
  • claims were delayed, and some were fraudulent;
  • in the North-East, distance, insurgency and weak infrastructure outweighed subsidies.
• After GST (2017) removed excise exemptions, the incentive moved to budgetary support and to region-specific schemes such as UNNATI.
  • National schemes like production-linked incentives (2020) are not region-specific, and tend to favour existing industrial States.

The Hill Transport Subsidy in Focus

• Rationale: hill, island and North-Eastern units pay far more to bring in raw materials and send out goods, because of distance from railheads, steep roads and transhipment. The subsidy offset this locational disadvantage, so that industry could exist there at all.
• Design:
  • it was linked to a designated railhead for each area, such as Pathankot or Jammu for Jammu and Kashmir, Kalka and others for Himachal Pradesh, Siliguri for the North-East;
  • it covered both raw materials coming in and finished goods going out, for five years from the start of production;
  • plantations, refineries and power plants were excluded.
• Achievements: it kept small industry alive in remote areas, encouraged units in the North-East and the hills, and lowered the cost of essential goods made locally.
• Problems:
  • delays in State-level verification and payment;
  • irregular claims, hard to check across long supply chains;
  • little effect where power, finance and markets were also missing.
• From 2013 the Freight Subsidy Scheme tightened eligibility, and in 2016 it was ended. Transport support now comes within broader regional schemes for the North-East, Jammu and Kashmir and the islands.

Freight Equalisation

• From the early 1950s (commonly dated 1952; for iron and steel in force from 1956), the Union fixed uniform delivered prices for steel, and for coal, cement and fertilisers at various times, wherever the buyer was.
  • The aim was to let industry locate anywhere and so to spread it across the country.
• Effect: it removed the locational advantage of the mineral-rich east (Bihar including present Jharkhand, West Bengal, Odisha, Madhya Pradesh and Chhattisgarh).
  • Steel-using industry grew instead near markets and ports in Maharashtra, Gujarat, Punjab and Tamil Nadu, and its forward linkages went with it.
  • Studies of its long-run effects find it pushed iron- and steel-using industry out of eastern India.
• It was withdrawn after the NDC’s decision of December 1991, with effect from 1992 (often dated 1993). A residual freight ceiling lasted until 2001.
• Eastern India never fully recovered its industrial lead. Freight equalisation is the clearest case of a national instrument that widened regional imbalance.

Infrastructure as Regional Policy

• Since the 2010s, the main lever has been connectivity rather than subsidy:
  • industrial corridors with planned nodes, an echo of the growth-pole strategy;
  • Bharatmala roads and Sagarmala port-led development;
  • UDAN (2016) regional air connectivity;
  • PM Gati Shakti (2021), a national master plan that maps infrastructure layers for integrated planning.
• For the east, the Union Budget of July 2024 announced Purvodaya, a plan for Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh, with an industrial node at Gaya on the Amritsar–Kolkata corridor.
• Infrastructure reaches backward regions, but it can also drain them. Better roads let firms serve a lagging region from an established hub, the backwash Gunnar Myrdal warned of.

Special Area Programmes for Frontier and Hill Regions

• North-East:
  • the North Eastern Council (1971);
  • the Non-Lapsable Central Pool of Resources (1998), built from the rule that Union ministries spend at least 10% of their budgets in the region;
  • the Ministry of DoNER (2001);
  • the North East Special Infrastructure Development Scheme (2017);
  • PM-DevINE (2022), with about ₹6,600 crore for 2022–26 for infrastructure, social and livelihood projects chosen by the eight States.
• Border areas: the Border Area Development Programme (1986–87) for blocks on the international border, and the Vibrant Villages Programme (2023) for villages on the northern border, to stop depopulation and improve services. Programme-II (April 2025, ₹6,839 crore to 2028–29) extends it to other land borders.
• Hills and Western Ghats: the Hill Area and Western Ghats Development Programmes from 1974–75, later folded into the normal State plans and Finance Commission transfers.
• These programmes treat strategic and ecological regions as planning regions in their own right, not only poor ones.

Decentralised and District Planning

• The 73rd and 74th Amendments (1992) made local bodies constitutional and created District Planning Committees, so that plans could start where the problems are. The devolution of funds, functions and functionaries remains incomplete in most States.
• The Backward Regions Grant Fund (2006–07 to 2014–15) gave untied funds to about 250, later 272, backward districts, planned through Panchayats. Central funding ended when the Fourteenth Finance Commission raised devolution.
• Finance Commission grants to local bodies (about ₹7.9 lakh crore under the Sixteenth Commission) are now the main funds for local plans.

The Aspirational Approach

• The Aspirational Districts Programme (January 2018) chose 112 districts on composite deprivation.
  • It uses convergence of existing schemes, collaboration among governments, officials and civil society, and competition through monthly ranking on outcome indicators in health and nutrition, education, agriculture and water, financial inclusion and skills, and infrastructure.
• The Aspirational Blocks Programme (January 2023) applied the method to 500 blocks.
• It changes the unit from State to district and block, and the instrument from new money to better delivery.
• Independent appraisals of the Aspirational Districts and Blocks Programmes found the clearest gains in health and nutrition and in financial inclusion. Incomes are harder to move, because ranking cannot by itself create jobs or industry.

Outcomes and Assessment

Has Planning Reduced Imbalance?

• Income gaps have widened. Among the 20 major States, the ratio of the highest to the lowest per capita NSDP rose from 4.9 in 2011–12 to 5.6 in 2023–24 (RBI, Handbook of Statistics on Indian States).
  • Bihar’s per capita income in 2023–24 was about ₹62,000, against about ₹3.4 lakh in Telangana and Karnataka.
• Social gaps have narrowed. Multidimensional poverty fell from 24.85% (2015–16) to 14.96% (2019–21), fastest in Bihar (51.9% to 33.8%), Uttar Pradesh and Madhya Pradesh.
  • Every State improved on the SDG India Index between 2020–21 and 2023–24. Scores still run from 57 (Bihar) to 79 (Keralam (Kerala), Uttarakhand).
• Spending capacity has been equalised more than income. Per head, the Sixteenth Finance Commission’s devolution runs above the population share for poorer and hill States, and below it for richer ones:
  • Himachal Pradesh 1.56 and Chhattisgarh 1.52 times their population share, Odisha 1.24, Bihar 1.13;
  • Maharashtra, Tamil Nadu and Haryana only about 0.63–0.68 times.
  • Because Bihar’s population is so large, its high share of devolution still buys less per head than in the hill States.
• Industry remains concentrated in the west and south. Incentives and public plants could not offset markets, infrastructure and skills.

Why Instruments Fell Short

• Sectoral design: plans fixed sector targets; regional effects were by-products.
• Concessions without infrastructure: subsidies cannot overcome poor roads, power, skills and governance.
• Thin spreading: too many districts and centres qualified, so no backward region got enough.
• Political economy: advanced States captured “backward area” benefits for their own backward districts.
• Market forces after 1991: with licensing gone, investment went to the best-endowed regions.
• Contradictory national policies: freight equalisation and later industrial incentives worked against the east.
• Weak local institutions in the poorest States limited what transfers could buy.
• Political boundaries: most regional plans follow State lines because data do, though these rarely match geographic regions. The two that cross them, the Damodar Valley Corporation and the National Capital Region plan, had partial and little success.
• Weak foundations: regional planning depends on the quality of planning education, public awareness, efficient planning institutions and society’s grasp of the issues. In India it is still young.

The Way Forward

• Infrastructure and connectivity first in lagging regions: corridors, logistics parks and power reaching the east and centre.
• Resource-region bargains: local processing of minerals, District Mineral Foundation funds, and fair rehabilitation, so that the host region gains.
• Human capital: health, education and skills, as the aspirational programmes stress.
• Fiscal equalisation with incentives for outcomes, not only for need.
• Region-specific plans built from district and State visions, with regional authorities where problems cross State lines.
• Urbanisation of lagging regions: small and medium towns in the Gangetic plain and central India, so that migrants have nearer destinations than distant metros.
• Evaluate instruments by region: publish who gains from each incentive, subsidy and scheme, so that benefits meant for backward regions are not captured by advanced ones.