Sharp Economic Divide Across Indian States; Top 5 States Contribute Nearly 48% of India’s GDP
Mumbai: Although India remains the world’s fastest-growing major economy, there are significant disparities in income, fiscal stability, employment and economic growth across states. Most economic activity is heavily concentrated; With Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka and Gujarat accounting for nearly 48 per cent of India’s GDP in FY25, the bottom ten states account for less than 3 per cent, according to the White Paper ‘States of India: 2026’ by Client Associates, a multi-family office managing over $7 billion in assets.
The study found that Maharashtra alone contributed 13.3 per cent to the national GDP, strengthening its position as the financial and commercial capital of India. While Tamil Nadu recorded the highest annual growth among the top five states at 16 per cent in FY25, Uttar Pradesh achieved a 5-year CAGR of 15.3 per cent, making it one of India’s most closely watched economic transformations.
Interestingly, while India attracted Rs 4.22 lakh crore in FDI equity inflows in FY2025, five states namely Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu accounted for 83.3 per cent of the total inflows, with an annual increase of 14.7 per cent. While Tamil Nadu and Haryana are emerging as fast-rising FDI destinations, Uttar Pradesh and Rajasthan are emerging as investment hubs driven by policy reforms and infrastructure development.
Rohit Sarin, Co-Founder, Client Associates, said: “India’s growth story is concentrated among a handful of states, with a few economies growing above 10 per cent while others continue to push the national growth rate closer to 7 per cent. The real opportunity lies in broadening economic momentum beyond the highest growth states. If more states accelerate reforms, industrialization and investment attraction, India has the potential to move towards double-digit growth. Achieving this will require stronger private sector participation, sustainable investment spending and a deeper pipeline. More reforms that will attract large global capital flows.”
Nitin Aggarwal, Director, Investment Research and Advisory, Client Associates, added: “Increasing inequalities in income and fiscal sustainability remain key challenges that India must address in the next decade.”
The report stated that Maharashtra’s economy is 133 times larger than Mizoram’s, while Goa’s per capita income exceeds that of Bihar by more than 8 times.
The report evaluated states on nine key economic and governance parameters (GDP size and growth, per capita income, inflation, fiscal deficit, debt sustainability, foreign direct investment inflow, employment, ease of doing business and sectoral composition) to create an investment readiness ranking.
The report found that economic size does not necessarily mean individual well-being. While Sikkim, Goa and Delhi recorded the highest per capita income, Bihar ranked last with Rs 69,321.
The national average is Rs 2.58 lakh and only 16 states exceed this figure. Uttar Pradesh and Bihar continue to have high concentrations of poverty despite accounting for more than 27 percent of India’s population.
Gujarat ranked top due to its strong performance in job creation, foreign direct investment attraction and fiscal discipline, followed by Karnataka, Maharashtra, Jharkhand and Uttar Pradesh.
