The country’s regional division could make it—or break it
. It is already the world’s fifth-largest economy and is growing faster than any big rival, with a turbocharged stockmarket that is the fourth-largest of any country’s. It is also common knowledge that India’s prime minister,, is its most powerful in decades and that, as well as economic development, his agenda includes a Hindu-first populism that can veer into chauvinism and authoritarianism.
Understanding India’s divide begins with economics. The south has long been richer and more urban. The southern five of India’s 28 states contain 20% of the population, but account for 30% of its loans and for 35% of the flow of foreign investment in the past three years. Better government, education and property rights help explain this outperformance and have fostered enterprise and a more sophisticated financial system.
How will these geographical tensions be resolved? A thriving national single market is crucial to India’s growth because it allows firms to achieve economies of scale for the first time and permits a more efficient allocation of national resources, from energy to labour. Inter-state trade rose from 23% ofin 2017 to 35% in 2021, underpinning growth. Mr Modi has done an impressive job of creating nationwide infrastructure, from a unitary tax system to transport and digital-payments schemes.
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