In early January, residents in parts of Indore, India's cleanest city, reported sudden outbreaks of vomiting and diarrhoea after consuming tap water supplied to their homes. As local hospitals experienced a sharp increase in patient volume, authorities later confirmed that the supply in affected areas had been contaminated. The episode resulted in several deaths and left over 200 people requiring medical attention.
While the immediate focus has been on accountability and corrective action, it has exposed the narrative of urban efficiency that Indore and, by extension, Madhya Pradesh, have showcased for urban governance and sanitation reforms for years. Experts said that water supply systems, often stressed by rapid population growth and ageing pipelines, sit at the intersection of public health, labour productivity and municipal finances.
Notably, the World Health Organisation (WHO) estimates that 50 per cent of malnutrition is associated with repeated diarrhoea or intestinal worm infections resulting from unsafe water, poor sanitation, or poor hygiene. The WHO estimates that 1.4 million deaths occur annually due to inadequate drinking water, sanitation and hygiene, mostly in low- and middle-income countries.
“Indore is a textbook case of infrastructure stress. Urban migration has outpaced the replacement of underground utilities. The city looks clean, but legacy systems are under strain. This reflects a broader problem: municipal service delivery systems are underfunded. Urban local bodies in India generate less than 1 per cent of GDP in revenue, and in Madhya Pradesh, dependence on state transfers remains high. Even model cities become vulnerable when visible outcomes are prioritised over systemic engineering,” said Vikas Singh, Senior Economist and Author.
Addressing the Rajasthan DigiFest–TiE Global Summit 2026 in Jaipur, Madhya Pradesh CM Mohan Yadav stated that his state is witnessing balanced development across sectors, including IT, manufacturing and healthcare. He added that MP was ranked as India's third-highest investment-attracting state in 2025. "Madhya Pradesh offers profitability in every sense. Industry-friendly policies, improving infrastructure and an investor-supportive government have created an enabling business environment,” he said.
However, for a state positioning itself as an investment destination and urban success story, such disruptions draw attention to the less visible stresses on civic systems that support everyday economic activity. When basic services such as water supply fail, the fallout extends beyond public health to households, small businesses, labour productivity and municipal finances.
Singh warned that without reforms, the state faces two key risks: regional divergence and climate stress. “If the Indore–Bhopal–Gwalior corridor continues to attract the bulk of investment while the rest of the state lags, distress migration and social pressure will follow. Falling water tables will raise the fiscal cost of service delivery. Madhya Pradesh has moved from potential to performance, but the next phase is not about more announcements.”
Polished Growth And Fractured Foundations
Experts noted that Madhya Pradesh has recorded steady gains in sectors such as agriculture, food processing, manufacturing and renewable energy, aided by its central location, expanding road network and relatively lower land and labour costs. But challenges persist around urban infrastructure quality, public service delivery, access to timely credit and regulatory capacity, which economists say could constrain productivity and investor confidence if not addressed alongside growth initiatives.
At the DigiFest–TiE Global Summit, additional chief secretary for Science and Technology Sanjay Dubey also said tier 2 cities such as Indore and Bhopal are increasingly positioning themselves as technology hubs. He highlighted incentives under the state’s latest policies, including subsidies of up to Rs 30 crore for IT investments of Rs 100 crore, Rs 34 crore for drone technology projects and Rs 38 crore for semiconductor ventures.
"The state's economy shows a mixed picture, not calling it a fragile state yet. Some cities like Indore and Bhopal are growing as service and logistics hubs. However, employment quality remains problematic. While its economy shows resilience in output recovery and fiscal stability, I am less convinced about its ability to generate stable and quality employment at scale. This coexistence, I believe, signals unbalanced growth," said Pallavi Gupta, Assistant Professor, Sarla Anil Modi School of Economics at NMIMS.
The state government records showed that over 25.6 lakh job-seekers registered on the MP Rojgar portal as of mid-2025, spanning graduates, professionals and secondary school pass-outs, showing persistent labour market frictions despite low headline unemployment figures. Yadav, however, earlier stated that recent initiatives under the public-private partnership model to establish new medical colleges and hospitals aimed at strengthening healthcare infrastructure and increasing the availability of trained doctors.
Additionally, the NHSRC Human Resources for Health (HRH) report 2023 showed large vacancies across district hospitals and lower-level facilities. State Health Accounts (2019–20) indicated that out-of-pocket spending accounts for 52.7 per cent of total health expenditure in MP, higher than the national average of 47.1 per cent. Government health spending stands at about 1.1 per cent of Gross State Domestic Product (GSDP), limiting the state’s ability to close gaps in staffing, supplies, and facility maintenance.
According to the National Family Health Survey (NFHS)-5 data for 2019–21, about 89 per cent of households have access to improved water sources; only 28.1 per cent have piped water into the dwelling, yard, or plot. Around 13.7 per cent spend 30 minutes or more on a round trip to collect drinking water. Approximately 26 per cent of households lack any sanitation facility and practise open defecation.
Gupta stated that the state has long struggled with child malnutrition, anaemia, and uneven healthcare access. “These directly affect labour productivity, cognitive ability, and worker participation. Over time, these factors will quietly but persistently drag down the returns to physical investment and industrial growth.”
At the national level, current public investment in human development falls short of the levels required to sustain long-term economic growth compared with normative targets and global peers. Government data showed that India’s public health expenditure remains low at about 1.9 per cent of GDP in 2023-24, below the National Health Policy target of 2.5 per cent by 2025 and far behind peer emerging economies. Education spending also lags, with government expenditure at 4.64 per cent of GDP in FY22, the most recent year covered by World Bank data.
Currently, MP’s GSDP has reached around Rs 15.03 lakh crore in 2024-25, an 11.05 per cent increase over the previous year at current prices, according to the state’s economic survey. At constant prices, GSDP grew to Rs 7.12 lakh crore, a growth of about 6 per cent, while agriculture, manufacturing and services remain key pillars of the economy. Export figures stood at nearly Rs 68,965 crore in FY25, with engineering goods constituting the largest share, and cumulative FDI inflows since 2019 total roughly Rs 4,760 crore.
"Agriculture remains the base, but the real story is industry, which has grown by roughly 24 per cent in recent periods. The economy is expanding rapidly and across sectors. However, the resilience of this growth faces a ‘per capita hurdle’. Despite strong macro numbers, per capita income is about Rs 1.42 lakh, roughly 30 per cent below the national average. This tells us that growth is being driven largely by capital-intensive sectors rather than labour-intensive ones. The engine is powerful, but the transmission to households is still incomplete," Singh stated.
Economic Growth Without Development?
According to the NFHS round 5, the rural coverage of people living in households with an improved drinking-water source is lower at 85.7 per cent. Only 65.1 per cent use an improved sanitation facility, with a considerable rural gap at 59.2 per cent. Child diarrhoea remains common, with a prevalence of 6.4 per cent among children under five years of age, slightly higher in urban areas at 7.2 per cent.
Repeated enteric infections increase the risk of poor absorption and growth faltering, as shown in the high level of stunting in the state (35.7 per cent). In Madhya Pradesh, the State Health Accounts (2019–20) indicate that household out-of-pocket spending accounts for approximately 53 per cent of total health expenditure in the state.
"Preventable health risks at the household level impose measurable economic burdens through out-of-pocket spending, income loss and poverty escalation. For poor households or those living near the poverty line, such spending can be catastrophic. National evidence indicates that catastrophic health spending places severe financial pressure on families: about 49 per cent of households in India experience catastrophic health expenditure. An estimated 46 million households faced financial hardship due to healthcare costs, with 29 million households experiencing hardship solely due to out-of-pocket payments for medicines," Poonam Muttreja, Executive Director, Population Foundation of India (PFI), said.
Economists argue that the next phase of Madhya Pradesh’s economic story will be decided less by policy announcements and more by institutional capacity on the ground. Singh pointed out that governance has become increasingly decentralised in its impact. “Growth is no longer decided in Bhopal alone. It is decided at the district and municipal levels,” he said, noting sharp disparities in administrative depth between major cities and peripheral districts.
“It is more accurate to call it a growth-development lag,” Singh stated. He added that the state leads in wheat production and industrial land allotment, yet it remains in the lower quintile of the Niti Aayog Health Index. The state has prioritised hard infrastructure such as roads and power, which boosts GDP quickly.
Gupta framed the risk as gradual rather than immediate. Weak sub-institutions, she said, can quietly erode the returns on capital investment over time. “The concern is not an abrupt slowdown but a slow degradation, lower productivity growth, suppressed labour participation, and widening regional disparities,” Gupta noted. In such a scenario, headline growth may persist while social mobility and industrial upgrading remain constrained.
From a public well-being perspective, Muttreja emphasised that economic ambition cannot be delinked from everyday functionality. Infrastructure deficits, she said, disproportionately burden women, informal workers, and low-income households by limiting mobility, market access, and time for paid work or education. These constraints, while often invisible in macroeconomic data, shape labour participation and income diversification across the state.
Corruption, Public Wellbeing And Economic Growth
Economic experts emphasise that MP's growth ambitions can not succeed without stronger public services and sustained investment in human capital. In that context, the government has doubled down on welfare-led social investment. Its flagship Ladli Behna scheme received a fresh boost after an increase in the monthly allowance from Rs 1,250 to Rs 1,500 for eligible women, effective November 2025.
CM Yadav said the initiative was not just income support but a tool to enable women to make independent decisions and help build a state “where every sister is safe, educated, empowered, and self-reliant.” However, critics argue that it risks being perceived as a vote-bank tool, drawing accusations of fostering dependency among female recipients. Detractors often ignite debates about gender equity, questioning whether similar support reaches men or economically marginalised communities and warning of potential social tension over targeted subsidies.
As Gupta wrote in her BW Businessworld column, women’s uptake of welfare schemes, often labelled as “freebies,” shows a rational response to structural constraints rather than populist preference. “Women are not choosing freebies over development; they are choosing predictable, individualised benefits over vague, collective development promises,” Gupta observed, showing how cash transfers replace missing public services, helping women manage risk and retain agency.
Muttreja also noted that women, children, especially girls, and informal workers are disproportionately affected by infrastructure deficits and inadequate investment in basic amenities. The lack of piped water supply and sanitation facilities at home forces women and girls to spend hours fetching water and queuing for toilets. "This creates high opportunity cost, reduces time for learning, increases school absenteeism, increases time poverty, and reduces time for self-care,” she noted.
Interestingly, the debate on ‘freebie culture’ comes amid broader scrutiny of state finances. The Comptroller and Auditor General of India (CAG) recently flagged suspected fraud of Rs 414.94 crore in bitumen procurement for rural road construction under the Pradhan Mantri Gram Sadak Yojana (PMGSY). According to the audit covering 2021-22, contractors across 71 of 75 Project Implementation Units in 49 districts allegedly submitted duplicate or fake invoices.
Notably, public reaction to high-profile spending elsewhere in the state has added fuel to the debate. The wedding of Anjanesh Shukla, the eldest son of BJP MLA Golu Shukla, in Indore, drew widespread attention on social media, with videos showing elaborate decorations, large gatherings, and reportedly Rs 70 lakh spent on fireworks alone. Online critics questioned the disparity in scrutiny, noting, “Why are only small businessmen are exposed? Why isn’t the income tax department sparing people like him?”
"The economic performance increasingly depends on whether sub-institutions can move from asset creation to asset management. If these challenges persist, the risk is not an immediate growth collapse, but gradual erosion along with the widening of regional disparities. MP could find itself stuck in a pattern of reasonable headline growth but limited social mobility, low HD indicators, and a lack of industrial upgrading. That is the real long-term cost,” Gupta stated.
World Bank estimates show that every dollar invested in nutrition can yield up to USD 23 in economic returns, while each health-sector job can generate about 3.4 additional jobs across allied industries. Yet this economic logic is unfolding amid eroding public trust in institutions.
The 2025 Edelman Trust Barometer shows India slipping to third place globally on trust in government, business and NGOs, with only 65 per cent of low-income respondents expressing confidence compared with 80 per cent among higher-income groups. It flagged widening resentment over wealth concentration, showing how gaps in inclusive service delivery risk weakening both social trust and the foundations of sustainable growth.
Meanwhile, for Madhya Pradesh, the Indore episode shows a central challenge facing fast-growing states: converting headline economic momentum into reliable, everyday functionality. As investment flows, policy incentives and industrial expansion lift output, weaknesses in urban services, public health and local governance risk eroding productivity, investor confidence and social trust. |
