Once a leader, South now lags in GDP growth

BANGALORE: The southern states, which led in economic growth for many years, are now beginning to lag. In the past five years, all the four major southern states saw real GDP growth rates below the national average, according to a study done by consultancy firm McKinsey & Co for CII.

Compared to the national average of 8.7% real GDP growth between 2005 and 2010, Andhra Pradesh and Tamil Nadu were significantly lower at 7.4%. Karnataka was close to the national average at 8.5% and Kerala at 8.1%. These states' larger GDP base, given that they had previously been growing faster than the national average, is seen to be partly the reason for this.

But the McKinsey report points to other factors, too: in particular rising land prices, significant shortage of labour, infrastructural bottlenecks and growing congestion in Bangalore, Chennai and Hyderabad.