While the ongoing discrimination against the southern states, the indirect imposition of Hindi and Sanskrit, and punitive fiscal measures for not adhering to Modi’s directives had already created significant tension between the Union government and opposition-ruled southern states, the impending delimitation exercise—along with the Modi government’s ambiguous response—has further intensified the discontent exponentially.
While the proposed solutions to the delimitation process—such as postponing it or halting it permanently—aim to protect the federal balance and question the proportionality in vote weightage, the Hindu-Hindi Modi government appears to exploit the logic of equal vote value.
This strategy seeks to entrench and expand the political domination of the north over the south, effectively undermining the federal contract.
All these cumulative centripetal policies have triggered knee-jerk—and at times chauvinistic—responses from the southern states, often without addressing the structural and historically rooted causes that have led to the current predicament.
It is therefore essential to examine the deeper, structural reasons behind the federal imbalance, regional discrimination, and the political architecture that has sustained them.
Politics of underdevelopment
In both pre- and post-independence India, only certain states have seen significant development. Southern states and their leaders often attribute this to the region’s progressive social and political leadership.
While it is true that the south witnessed more progressive social movements and leadership before independence—with greater emphasis on education and employment for historically marginalised communities—this explanation alone is insufficient to account for the “BIMARU” regions (a term referring to the perennially underdeveloped states of Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh, and also meaning “sick” in Hindustani) that exist within the southern states themselves.
As economist Rathin Roy points out: “Dharmapuri district in Tamil Nadu has a literacy rate worse than 36 districts of Uttar Pradesh, which is three times as poor. Over 60% of Telangana and Karnataka’s per capita income is earned in just 3–4 districts of these states.”
Why then have progressive social movements and leadership in the south failed to prevent regional and social inequality within their own states? The answers likely lie elsewhere—in factors common to both the north and the south. Unless these underlying issues are examined and addressed, the north-versus-south debate risks obscuring the deeper structural problems and real solutions.
The persistence of underdevelopment is rooted in the logic of a capitalist political economy, which depends on internal colonies of cheap resources and labour to sustain developed metros. In this way, the politics of underdevelopment actively nurtures the politics of development. The “developed south,” for instance, benefited from colonial capitalist patronage as well as post-independence policy preferences. These came on top of certain historical advantages, such as a relatively progressive social climate in specific regions.
Colonial economy and internal colonisation
The seeds of regional discrimination were already embedded in India’s post-independence capitalist and state-capitalist development model. This model was inherited from the British colonial economic structure.
For example:
The British transformed India into a colony that supplied cheap raw materials to Britain’s capitalist industries.
To facilitate this, they selectively developed a few regions—mainly port cities like Madras (now Chennai), Bombay (now Mumbai), and Calcutta (now Kolkata)—which were vital for transporting goods.
The upper-caste and dominant communities in these regions benefited from British colonial education and administrative systems, making them more ‘developed’ compared to the rest of India.
Infrastructure such as railways, roads, and education were concentrated in these areas to maximise British profits.
However, post-independence, this colonial capitalist model was not dismantled. That said, it has to be noted here that the British government did invest in infrastructure in other parts of the country as well, including in centres such as Lucknow, Kanpur, and Surat.
A truly federal and socialist development approach would have ensured that resources were controlled by the people of each region and used for their own development.
Did independence lead to a shift in the development model?
Despite gaining independence, India continued to follow a capitalist—or more accurately, a state-capitalist—development model. Though it was officially described as a “mixed economy” or the “Nehruvian socialist model”, in practice, power remained concentrated in the hands of capitalists and upper-caste landlords. As some critics have aptly put it, it was “barking socialism while biting semi-feudalism and capitalism.”
As a result, the colonial economic structure remained largely unchanged.
The relative development of the south and underdevelopment of the north continued from colonial times.
One major factor that helped south India advance was the Freight Equalisation Scheme (FES).
This policy ensured that mineral-rich states like Bihar, Jharkhand, and Odisha could not benefit from their own resources. Instead, their minerals were supplied at subsidised rates to already developed southern states.
This 2018 research paper clearly explains how the FES scheme disadvantaged the mineral-rich states while benefiting Tamil Nadu, Andhra Pradesh, and other southern states.
Neoliberal India and the aggravated BIMARU
In the post-1991 era, as economic policymaking shifted from the state to market forces, private capital’s logic of profit maximisation began to dictate policy decisions. This led to the expansion and deepening of BIMARU-type conditions across the country.
In 1961, the gap in State Gross Domestic Product (SGDP) between southern and northern states was marginal. But under the neoliberal regime that followed 1991, this disparity widened sharply. The primary reason was the retreat of the state from the agrarian and manufacturing sectors—areas that urgently needed public investment.
Instead, high-skilled service sectors like IT and knowledge economies flourished under state patronage, while traditional manufacturing and agrarian economies withered. This created islands of prosperity surrounded by vast regions of policy-induced underdevelopment.
Thus, in north India—especially Uttar Pradesh and western Bihar—de-industrialisation took place, while the backward regions of the peasant agrarian economy in particularly backward northern states and the backward regions of the south also declined. This was not due to any generic reason but because of the logic of the neoliberal development model that the country was forced to pursue, independent of the parties in power.
The decline of the agrarian economy and traditional low-skilled manufacturing sectors, in turn, produced backwardness and an unprecedented supply of cheap labour for the menial jobs of ‘new India’. On the other hand, the state’s fiscal and natural resources were diverted in the form of capital subsidies, cheap electricity, land, and water to attract private investment.
The enormous profits earned by IT and related sectors were thus not purely market-driven; they were built on state subsidies, access to vast tracts of cheap land, and a steady flow of inexpensive labour.
Yet, public discourse often frames the IT sector as a net job creator, glossing over the hidden costs. The agrarian and manufacturing sectors bear the brunt of these policies, suffering job losses as their resources are redirected toward services.
In reality, it is these so-called “backward” regions and sectors that are subsidising the “developed” ones—not the other way around. This structural imbalance, rooted in the corporate-capitalist political economy, produces persistent regional disparities. Without transforming this foundation, equitable development will remain elusive.
Fiscal centralisation: A tool of pan-Indian capitalism
Under Prime Minister Narendra Modi, the BJP has aggressively centralised control over the economic, cultural, and social domains, threatening the federal fabric of the country. However, political and administrative centralisation did not begin with the BJP. It has been a long-standing feature of Indian governance, including under Congress and regional parties.
Administrative centralisation began in 1951 with constitutional sanction. Political centralisation intensified between the 1970s and 1990s, and economic centralisation took root post-1991 under corporate pressure. This trajectory laid the groundwork for the current authoritarian phase under Modi.
Opposition parties often focus only on the BJP’s overt centralisation but fail to challenge the systemic causes behind it. Their resistance remains superficial, rarely questioning the deeper structures of power.
For instance, India’s fiscal architecture inherently favours the Union government. States have limited taxation powers but carry the bulk of welfare responsibilities, while the Union government enjoys significant taxing authority. The Modi regime has only exacerbated this imbalance.
While the Union government’s monopoly over surcharge and cess was formalised through a 2000 constitutional amendment under BJP rule, it had wide political support.
Similarly, while the southern states are right to criticise the Modi government’s discriminatory tax devolution, it's worth remembering that the Goods and Services Tax (GST)—a regressive system that burdens the poor more than the rich—was implemented with political consensus.
For example, Karnataka’s SGST revenue rose from ₹35,000 crore pre-GST to ₹95,000 crore in 2024–25. Indirect taxes, which disproportionately affect ordinary citizens, were already increasing by 14% annually; GST only accelerated this trend. At the same time, corporate tax was slashed from 40% to 25% in 2017.
This fiscal structure—backed by all major political parties—has institutionalised inequality, benefiting a pan-Indian corporate-capitalist economy. Modi’s regime has merely taken this to its logical extreme. Unfortunately, neither the opposition nor the southern coalition is willing to challenge this system or propose a more equitable alternative.
Labour and capital flow: from north to south
Neoliberalism has not only caused mass migration of labour from north to south but has also facilitated a reverse flow of capital—from the underdeveloped north to the industrialised south. This is evident from the RBI’s 2023–24 Credit-Deposit Ratio Report.
According to the report:
India’s banks collected ₹212 lakh crore in deposits and disbursed ₹169 lakh crore in loans, a national credit-deposit ratio of 78%.
States like Maharashtra, Telangana, Andhra Pradesh, and Tamil Nadu have credit-deposit ratios between 90% and 150%, receiving far more in loans than they generate in deposits.
Karnataka’s ratio is near the national average.
Bihar, Uttar Pradesh, Jharkhand, and northeastern states have ratios around 35–40%, indicating that deposits from these regions are largely invested elsewhere—mainly in the south and west.
While many in the south argue that their tax revenues are being redirected to the north, the reality is more complex. Bank capital from the north is flowing into corporate loans in the south and elsewhere. And it’s not small businesses that benefit—it's large corporations.
Over the past decade, corporate loan defaults have created ₹13 lakh crore in non-performing assets (NPAs), pushing the burden on taxpayers across the country.
Modi’s bias: Not just regional, but capitalist
It’s a mistake to view southern states’ fiscal and political marginalisation as mere anti-south sentiment from the Modi government. The real driver is India’s corporate-capitalist system.
The idea that Hindutva’s limited success in the south fuels this bias is also flawed. In fact, Hindutva is steadily gaining ground in every southern state.
Moreover, the common people of the north are not beneficiaries of this system. They are as marginalised by the neoliberal economy as the underprivileged in the south—evidenced by the large numbers of migrant workers from the north seeking livelihoods in the south.
Taxes collected from both regions are not reinvested for public good, but redirected toward corporate interests and mega infrastructure projects that benefit a few.
Reducing this structural exploitation to a simplistic north-vs-south binary risks misdirecting southern resistance toward migrants, rather than confronting the real cause: a political economy that thrives on inequality.
While the southern resistance to Modi’s fiscal and political discrimination is valid, meaningful and equitable development is impossible without challenging India’s entrenched neoliberal-capitalist structure.
The uncomfortable truth is that the opposition has been equally complicit in dismantling India’s welfare vision. Unless this consensus is broken, the disparities—regional, economic, and social—will continue to deepen.
This is not a north vs south problem. This is corporate capitalism vs India.
Shivasundar is an activist and freelance journalist. Views expressed are the author’s own.