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The objective of this study is threefold–first, to develop a Regional Competitiveness Index (RCI) for measuring competitiveness of sub-national regions for India; second, to test this index for its ability to explain regional growth, which validates usage and applicability of this index; and third, to further investigate if the competitiveness of states is in turn caused by economic growth, i.e. it is tested if there is a bidirectional causality between competitiveness and regional growth.

The data of indicators used in the index are from sources available freely in public domain. The competitiveness index is constructed using equal weightage supported by principal component analysis (PCA) technique. The causal relationship analysis is done using panel data of 10 years from 2008 to 2017 for 32 Indian states/union territories. The generalized method of moments (GMMs) is used for this dynamic regression estimation.

Based on RCI score, states have been ranked and through rank analysis, the authors observe the performance status of these sub-national regions and are able to categorize them as improving, no change or deteriorating in regional competitiveness. Using the GMM estimation, the association between RCI and economic growth is found to be significant at 10% level. This shows that regional competitiveness as captured through the RCI score is able to explain regional economic growth and economic disparity among the sub-national units. Further, that RCI score is found to Granger-cause growth, while growth does not lead to better RCI scores. This establishes the usefulness of RCI as an important policy variable to compare states and provide direction for sectoral reforms.

The limitations of the study include (1) broad assumption that these sub-national regions belong to a uniform macro-economic and technology environment, and (2) data constraints as it is a longitudinal study. The study implies that the composite index could capture differences in regional competitiveness explaining regional economic disparity and that competitiveness causes higher economic growth and not vice versa.

The RCI score can prove to be a useful indicator of economic performance of different states and can be used by national and state policymakers to compare and assess regional disparity among different states. The pillar-wise scores will be useful for in-depth study of weakness and strength of the sub-national territories.

Construction of an RCI for sub-national territories and analysis of panel data for longitudinal study of ten years is unique in the regional competitiveness literature.

Developing composite index-regional entrepreneurship, technological readiness and institution quality index (RETRIQ) of regional entrepreneurship, technology readiness and quality of institution to measure regional competitiveness. This study, also, aims to test econometrically the effectiveness of the index in capturing the economic performance of the sub-national regions.

The data of eight indicators used in the index are from sources available freely in the public domain. The causal relationship analysis is done using panel data of 10 years from 2008 to 2017 for 32 Indian states/union territories. The generalized method of moments (GMM) is used for this dynamic regression estimation.

Based on RETRIQ, 32 states and union territories of India have ranked. The estimation using GMM shows a significant association between the composite index and economic growth.

The limitations of the study include the broad assumption that these sub-national regions belong to a uniform macro-economic and technology environment and data constraints as it is a longitudinal study. Then, the implication of the study is that the composite index-RETRIQ could capture differences in regional competitiveness explaining regional economic disparity.

The index will be useful for policy implications in the assessment of competitiveness disparity.

It is a composite index of regional entrepreneurship, technological readiness and quality of the institution. The panel data across states along 10 years series is novel.