Working Paper Series No. E/304/2009
As a country progressively engages in international trade, its factors of production will enter increasingly into the export sector, where their return is higher, compared to the import competing sector. At the regional level too those states, which can attune their production structure to international demands, earn higher than other states and grow at a faster rate. Further if the newly-industrial states concentrate more on those sectors, a trend of regional convergence will be discernible. Then, the regional openness index, developed by Marjit, Kar and Maiti (2007), has been reconstructed by using two alternative weighting techniques to combine the export and import intensities, ranks of correlation of state production shares, respectively with national export and import shares of the states. The per capita net state domestic products have grown in all major states in India during 1980-2004 but at different rates resulting to the rise of regional disparity and the regional openness have been detrimental for this. The state, which moved away from importable production to exportable production, grew faster than the rate of others at least by 1-1.5% per annum. Definitely, a few newly-industrial states showed an increasing dependence on exportable production, but not all. Moreover, some of the industrially developed states (in terms of exportable share) it has been observed yet continue with importable production to a large extent.