The Himachal Economy — Structure

Himachal is a small, high-income, resource-based economy: few people, high per-capita income by Indian standards, and an unusual dependence on three things — horticulture, hydropower and tourism — plus a large public sector and defence remittances.

Structure

• Services are the largest sector, driven by tourism, transport, trade and public administration.
• Industry is dominated by pharmaceuticals, cement and hydroelectricity.
• Agriculture and allied contributes under 10% of GSVA but supports roughly 60% of the workforce — the central structural problem of the state economy, and the reason 'diversification in agriculture and allied activities' is a named syllabus item.
• Per capita income is among the higher figures for Indian states; HDI is high, with literacy near 83% (2011) and strong health indicators.

Strengths

• Near-universal household electrification and very high rural road and school coverage.
• A strong human-development record — Himachal is the standard example of a hill state that converted public spending on schooling and health into outcomes.
• Hydel revenue and free power royalty from projects.

Constraints

• Small landholdings on steep slopes; less than 11% of the area is net sown.
• High per-unit infrastructure cost and a difficult fiscal position — a large committed expenditure on salaries and pensions.
• Heavy dependence on central transfers; limited manufacturing outside the BBN belt.
• Climate risk to the apple crop and to hydel generation.