AP Report 2019-final

Development Assistance to Backward Regions
same as in Chapter ‘An Assessment of Loss
in Economic Capacity due to Bifurcation,’ the
growth rate in capital stock of BR is estimated
to be 11.75% per annum. The base year
capital stock is estimated using a Captial
Output Ratio (COR) of 3.5. The required
growth rate of capital stock, 11.75% per
annum is applied on the base year capital stock
to generate the series of annual changes in
the capital stock for next ten years.
Over the period of ten years, a total capital of
Rs. 26 Lakh Crore is needed, of which
Rs. 22 Lakh Crore would be generated through
saving internally. The remaining Rs. 3.94 Lakh
Crore need to be mobilised through other
means. In other words, almost 85% of the total
external investments needed for Andhra
Pradesh should flow to only BR regions. The
reason for this is the low base PCGSDP of
BR. Because of the low incomes, the internal
savings tend to be low, while the total
investments need to increase. Mobilising such
investment for BR may be too demanding,
even if a 50% crowding-in effect is assumed
for public investments.
In order to moderate the scale of external
investments for BR, the assumption of this
region’s PCGSDP equaling Andhra Pradesh’s
average PCGSDP is relaxed. This is done by
assuming that the ratio between the PCGSDP
of BR and State average will be maintained at
the current level of 90%. With this assumption
the required aggregate GSDP growth rate of
BR would be 11.3% per annum (as against
12.45% in the above scenario).
In this case, the total investment requirement
for ten years would be Rs. 22.1 Lakh Crore
(as against total investment estimated of
Rs. 51 Lakh Crore for the State as a whole).
Internal savings for BR in the ten years span
would be Rs. 20 Lakh Crore (as against
Rs. 46 Lakh Crore for the State). The remaining
part of the investments, Rs. 1.52 Lakh Crore
should come from external sources (against
Rs. 4.7 Lakh Crore for the State as a whole).
- 54 -