By Nantoo Banerjee
It is extremely encouraging to note that Assam is shaking off its historical “economic laggard” label to become one of India’s fastest-growing state economies. Assam’s economy is projected to grow at a nominal rate of over 17 percent in the current financial year, as against 6.6 percent expected for the whole of India. Assam joins four other Indian states – Uttar Pradesh, Karnataka, Telangana, and Gujarat – among the country’s top five fastest growing state economies. Assam is experiencing rapid expansion fuelled by large industrial investments, including the Tata semiconductor project and a host of mega power projects. Assam’s Gross State Domestic Product (GSDP) is projected to reach approximately Rs.8.13 lakh crore in 2026-27, expanding from last year’s Rs.7.24 lakh crore. This trajectory reflects an ambitious economic transition aimed at transforming the state into a Rs.10-lakh crore economy by 2028.
The size of Assam’s economy may still look quite small compared to India’s major state economies such as Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, and Gujarat which collectively contribute around 48 percent of the nation’s total GDP. These state powerhouses anchor the country’s economic growth, boasting a combined output that exceeds $1 trillion. Maharashtra alone accounts for 13.3 percent of India’s economic wealth. Yet, Assam’s unprecedented economic growth of 45 percent between FY20 and FY25 significantly outpaced the national GDP growth of 29 percent in the five-year period. Incidentally, several other small and mid-sized Indian states are powering India’s current economic growth, driven by rapid nominal GDP jumps, rising per capita incomes, and strong structural shifts. They include Meghalaya, Manipur (despite ethnic riots), Telangana and Haryana.
Assam clocked the highest five-year nominal CAGR of 17.32 percent, powered by infrastructure investments, agricultural modernization, and its position as the commercial gateway of the Northeast. Meghalaya has emerged as the second most encouraging northeastern powerhouse with a five-year nominal CAGR of 15.27 percent, benefiting from improved logistics, tourism, and services growth. Despite Manipur’s ethnic conflict primarily pitting the Meitei majority against the Kuki-Zo tribal minority, the state showcased robust economic acceleration, posting a five-year nominal CAGR of 15.04. Telangana, the 11th ranked Indian state by geographical size, achieved an average annual economic growth rate of 13.9 percent over the last five-year period. The IT/services, agriculture, and manufacturing mainly contributed to this growth. Sustaining one of the fastest growth rates among peninsular states, Telangana’s economy recently crossed the World Bank’s upper-middle-income threshold.
Tiny Haryana, ranking 20th among all Indian states in geographical size and covering only 1.34 percent of the country’s total landmass, has emerged as one of the country’s wealthiest provinces. The state boasts one of the highest per capita incomes in the country, with estimates around Rs.4.9 lakh. Its proximity to the national capital and thriving auto/manufacturing sectors continue to push it to the forefront of India’s growth rankings. Haryana’s Gross State Domestic Product (GSDP) growth has fluctuated during 2020–25, marked by a pandemic contraction and a strong post-COVID recovery. The state’s economic growth rate stood at 11.8 percent in 2024-25, driven heavily by the services and industrial sectors. Its economic growth is rapidly accelerating, anchored by the newly unveiled “Make in Haryana Industrial Policy” which targets Rs. Five-lakh crore in investments and 10 lakh jobs over the next five years. The state aims for an ambitious $1-trillion economy by 2047. Haryana recorded a historic 24.5 percent increase in its central tax share following the 16th Finance Commission recommendations, fortifying its financial stability for long-term development projects.
Notably, the country’s richer states are getting richer. Tamil Nadu and Karnataka are India’s fastest-growing major states in 2026. Tamil Nadu leads with year-on-year growth rates reaching up to 13.16 percent, followed by Karnataka, which continues to pace ahead with an average real growth rate of roughly 7.8 percent driven by its massive IT and communications sectors. Tamil Nadu’s Gross State Domestic Product (GSDP) for 2025-26 reached Rs.35.29 lakh crore (approximately $420 billion to $492 billion depending on the valuation). It remains India’s second-largest state economy and is firmly on track to becoming a $1-trillion economy by 2031. The state’s robust performance is largely propelled by aggressive capital formation and rapid expansion in electronics, textile, and engineering exports. On the other hand, Karnataka is averaging a 7.8 percent real growth rate, supported by the highly productive IT, telecommunications, and digital economy sectors in Bengaluru.
However, Maharashtra continues to be India’s largest and wealthiest state economy, showing an estimated real annual growth rate of 7.9 percent during the 2025-26 fiscal. This growth outpaces the estimated national average and maintains the state’s position as a top economic performer. Its nominal GDP is estimated at Rs.51,00,597 crore ($660 billion) and per capita income at Rs.3,47,903, which is significantly higher than the national average. It now accounts for nearly 14 percent of India’s total nominal GDP. The services sector, industrial manufacturing with major hubs in Mumbai, Pune, and Nagpur, and financial dominance are key drivers of the state’s economic growth. Maharashtra tops all Indian states in Foreign Direct Investment (FDI) inflows, bank deposits, and overall GST collection.
It may be interesting to note that India’s economic growth is primarily propelled by the services sector, manufacturing, infrastructure, and renewable energy. Robust private consumption, strong government capital expenditure, and favourable fiscal initiatives are helping the growth. The services sector accounts for over 60 percent of Gross Value Added (GVA). This growth is mainly led by financial, professional services, and information technology (IT) exports. Medium and high-technology industries have pushed manufacturing GVA growth past nine percent. Areas like electric vehicles (EVs), electronics, and advanced manufacturing are thriving, aided by Production Linked Incentive (PLI) scheme and budget exemptions. Increasingly large government outlays and a booming real estate market are leading to heavy capital formation and job creation. Focus on green energy, solar equipment production, and sustainability innovations represent a high-growth investment area. Fast growing banking and financial services and healthcare and pharma industries are also helping the country’s high economic growth despite the oil crisis due to the Iran-US war.
The good thing is Indian states and union territories, irrespective of their sizes and internal resources, are relishing the taste of growth and economic expansion. They are increasingly competing with each other to attract domestic and foreign direct investments offering attractive incentives. Competitive federalism is transforming Indian states into aggressive investment destinations. They are offering tailored fiscal benefits, including capital subsidies, land cost reimbursements, and optimized single-window clearances, leading a race to court global business. States are actively competing with distinct policies and targeted incentive models. The “economic growth bug”—the challenge of creating sustained, widespread prosperity—is now pushing Indian states. (IPA Service)
