When a Rich State Has Poor Regions: The Geography Hidden Inside State-Level Growth

A State can become substantially richer while large parts of it remain only weakly connected to that prosperity.

Telangana illustrates the problem particularly clearly. In 2022-23, Hyderabad and neighbouring Ranga Reddy together generated 47.5% of the State’s economic output, even though they covered only 8.7% of its area and contained about 27.9% of its population, based on the 2011 Census.

The headline numbers therefore tell two different stories at once.

Telangana has a high-income economy. But that economy is also highly concentrated.

The question is not whether the State has grown. It has.

The more important question is how widely the economic process that produced that growth has spread.

Growth has a geography

Economic activity rarely distributes itself evenly across territory.

Firms benefit from being close to specialised workers, suppliers, customers, infrastructure and other firms. Larger concentrations can deepen labour markets, improve access to specialised services and make infrastructure more viable. Once these advantages accumulate in one location, they can reinforce one another.

This is the basic logic of agglomeration.

Existing economic activity can attract investment and skills. A larger pool of skills can raise productivity and make the location more attractive to firms. More firms then deepen the market around them.

The process can therefore become cumulative.

For a State, this creates an important distinction between where growth is generated and how far its economic linkages extend.

A metropolitan centre can become exceptionally productive without automatically creating comparable economic ecosystems in every surrounding district.

Telangana’s services structure illustrates this concentration. Real estate and IT, together with trade, hotels and restaurants, have become particularly important components of its services economy. Relative to Andhra Pradesh, Telangana’s services sector increased from about 1.25 times the corresponding sector in 2013-14 to 1.47 times in 2024-25.

That is a genuine transformation.

But it also makes the spatial question more important.

The Ranga Reddy story is not the same as the Vikarabad story

The contrast becomes sharper when the metropolitan region is examined district by district.

Ranga Reddy was carved out of Hyderabad in 1978, largely comprising the rural areas surrounding the city. Over time, its position changed dramatically. By 2014, it had overtaken Hyderabad as the leading economic district within the metropolitan region, with the expansion of the IT sector playing an important role.

The transformation is striking.

The undivided Ranga Reddy district had been among India’s 250 most backward districts in 2006. By 2023-24, its per capita income had reached about ₹9.5 lakh.

But the transformation did not extend uniformly across the territory that had once formed the district.

Vikarabad, which remained part of Ranga Reddy until 2019, recorded a per capita income of only ₹1.8 lakh in the comparison and accounted for just 1.5% of Telangana’s output.

The contrast matters because the two areas were not separated by some distant geographical divide.

Ranga Reddy became deeply connected to the metropolitan economy around Hyderabad. Vikarabad did not experience the same degree of integration.

Being close to a growth centre is therefore not enough. What matters is whether economic connections actually reach the surrounding region.

A State average can hide this distinction

This is where State-level statistics become incomplete without being incorrect.

Telangana’s per capita income reached ₹3.54 lakh in 2022-23. That figure captures the State’s aggregate economic performance. It does not reveal where that output is being generated.

The same problem appears whenever a State’s growth is concentrated in a metropolitan economy.

A State may become richer because high-productivity services, investment, skilled workers and real estate activity are increasingly concentrated in one region. The aggregate improvement is real. Yet the distribution of the economic activity behind it can remain highly uneven.

Three questions therefore sit behind the State-level number:

Who is participating in the growth?

Where is the new economic activity being generated?

How strongly are other districts connected to the growth centres?

GSDP is essential for measuring economic performance, but it cannot by itself answer those questions.

This creates a second map beneath the familiar map of Indian States.

Within a State there are metropolitan cores, industrial clusters, secondary cities, agricultural regions and peripheral districts. Their relationship with the State’s principal growth engine can be very different.

The geography within a State can therefore matter almost as much as the geography between States.

Concentration is not automatically a failure

There is an important qualification here.

Economic concentration is not inherently undesirable.

Development often begins unevenly. A technology cluster does not need to appear simultaneously in every district. A manufacturing centre does not require every town to industrialise at the same time.

A productive metropolitan economy can generate investment, employment, tax revenues and demand that eventually create opportunities elsewhere.

The issue is therefore not simply concentration.

It is transmission.

If firms in the metropolitan core develop supplier networks elsewhere, workers from other districts gain access to expanding labour markets, infrastructure connects peripheral regions to major markets, and secondary cities develop complementary economic functions, concentration can become a platform for wider growth.

If those connections remain weak, the metropolitan core can continue expanding while the rest of the State remains only partially integrated into the same economic process.

Telangana’s experience makes this distinction particularly visible.

Hyderabad and Ranga Reddy together account for nearly half of the State’s output while occupying less than a tenth of its area. The concentration itself reflects the strength of the metropolitan economy. The unresolved question is how much of that strength is transmitted beyond it.

Why administrative decentralisation is not enough

One response to regional inequality is to redistribute administrative institutions.

But administrative decentralisation and economic decentralisation are not the same thing.

A district headquarters can be established relatively quickly. A specialised labour market cannot.

An industrial park can be announced. A functioning network of suppliers, skills, finance, logistics and customers takes much longer to develop.

This matters because firms do not distribute themselves according to administrative boundaries alone. They respond to the availability of complementary infrastructure, workers, markets and business networks.

Creating a new district may change the location of government offices.

It does not automatically create an economic ecosystem.

The deeper challenge is therefore to develop additional centres of economic activity outside the dominant metropolitan region.

That requires connectivity, skills, urban infrastructure, reliable power, access to markets and institutions capable of supporting firms beyond the existing core.

The objective is not to reproduce Hyderabad in every district.

It is to create enough alternative economic nodes that participation in growth is not determined almost entirely by proximity to one metropolitan economy.

The lived geography of growth

Aggregate prosperity can coexist with very different local experiences.

For a household located within a rapidly expanding economic corridor, a State with rising incomes and strong investment may appear to be changing quickly.

For a household in a peripheral district, the same State can look very different.

That difference matters because development is experienced locally.

Jobs are local.

Infrastructure is local.

Hospitals are local.

Colleges are local.

Firms are local.

Migration decisions are local.

A State can therefore improve substantially on aggregate economic indicators while leaving a more difficult question unresolved: has the geography of opportunity changed?

This question becomes especially important as economies move towards services, technology and other activities that benefit from dense concentrations of skills and infrastructure.

Such sectors can raise State income considerably without automatically generating equivalent economic ecosystems across distant districts.

Metropolitan growth and geographically broad development are therefore related, but they are not identical.

Reading the map behind GSDP

The Telangana case suggests that State-level growth should be read at more than one geographical scale.

The first question is how much the State produces.

The next questions are different:

Where is that output generated?

Where are high-productivity jobs being created?

Which districts are becoming integrated with the main growth networks?

Which remain relatively disconnected from them?

These questions do not replace GSDP.

They complete it.

A State’s most productive metropolitan region may remain its greatest economic asset. The challenge emerges when too few other regions acquire the capabilities needed to participate in the economic system surrounding that core.

The objective, therefore, is not identical growth across every district.

It is broader participation in the growth process.

A rich State does not necessarily mean a uniformly developed State.

And the spatial distribution hidden behind the headline income number may reveal more about the next stage of development than the headline number itself.