Pathanamthitta is around 2,500 km south of Patiala. People in the two places speak entirely different languages, eat totally different food, wear completely different dresses and are as similar as chalk and cheese. Yet the states the two districts belong to-Kerala and Punjab-have one abiding commonality. They are the two best states in India to live in. That is if one counts only the large states. The north-south uniformity replicates itself when it comes to smaller states. Delhi and Pondicherry are India's best two small states. That throws water on the long held notion of the north-south divide!

The second India Today annual ranking of the best and worst states unravels many lesser known facets of life and work across India. The 2004 study goes way beyond the 2003 rankings but retains the basic objective: to capture the quality of life-at-work and life-after-work across the length and breadth of the country. Unlike last year when the performance of 19 major states was tracked, this year's study covers every single inch of Indian geographical space-30 states and five Union territories. Among the 30 states are included the two "half" states of Pondicherry and Delhi. The rationale: both states have chief ministers and elected assemblies.

A diverse universe of 30 states made it logical to classify them into big and small. But such a classification is more complicated than it seems. For states with the smallest area aren't the states with the smallest populations. Delhi ranks 29th among the 30 states in area, but is the 18th largest state in population. Arunachal Pradesh is the second least populated of all states in India, but ranks 14th in terms of area. Logically the definition of a small state should include both area and population. So large states are classified as those whose area is greater than 35,000 sq km and whose population is greater than five million. By this definition, there are 20 large and 10 small states (see tables and methodology).

Before you set out to find how good or bad your state is on eight critical parameters that shape business environment and quality of life, here are a few guideposts to keep in mind:

A state's performance isn't just a reflection of its current chief minister's performance. Historical legacies impact a state's performance-and thus its rankings-more than the present administration. A lower ranked state may well have a better administration than a state ranked high. That doesn't make the rankings wrong. It only proves that some states are being propelled to the top by their past. The incumbent government can, of course, either fritter away the historical advantages or build on them.

Being best is not the same as being perfect. So if Punjab is the best big state, it only means that on a set of parameters Punjab is better than other big states in India. The state has indeed lots to improve. A better indicator of a state's absolute performance is its score, not the rank. Ranks can hide more than they reveal. For instance, two states may have scores of 2.01 and 2.00 on a factor and be ranked first and second. Or may have scores of 2.01 and 1.00 and may also be ranked first and second.

SOFT POWER: States in the north and south got the lion's share of the booming service economy

India Today rankings and scores are based on facts (study) not perceptions (survey). If the results do not match your perception about the good and the bad among Indian states, treat this study as a reality check.

North meets South, leave East and West out

Across all parameters of performance and among all categories of states, the top ranked states are either from the north or the south. Punjab and Kerala are best big states. Delhi and Pondicherry are the best small states. Mizoram and Sikkim, the other top ranked small states can also be regarded as northern. Among the Union territories, Chandigarh and Lakshadweep walk away with the top honours. Why doesn't the west, perceived to be the most dynamic region of the country, figure among the best?

BIG MAN'S BURDEN: Punjab has to revitalise its rural economy (top); Kerala needs to use its manpower better

The surprise is the relatively poor performance of Maharashtra and Gujarat. For Maharashtra-India's second largest state in population and third largest in area-the explanation lies in the presence of large pockets of underdevelopment, like Vidarbha, that pull down the average performance of the state. Pockets of backwardness in districts like the Dangs, Dohad and Banaskantha keep Gujarat's average score and, therefore, its rank low. These two western states spend less on public heath and family welfare than do Himachal Pradesh or Punjab or Kerala. About 62 per cent of households in Gujarat and 64 per cent in Maharashtra have tap water as the principal source of water. In Himachal Pradesh 84 per cent of households and in Sikkim 70 per cent households have tap water. In basic education too, the average spread of services is better in many northern and southern states than in Maharashtra and Gujarat. It is the inequality within the two western states that has dragged their average performance down, since the India Today study places as much importance on the level of development as on the spread of development.

Then, of course, is the hypothesis that the better places to live in are those where the services economy (e.g. infotech, retail, trade, media) is thriving. And the erstwhile magnets of manufacturing are no more the best places to live in, even if they still offer large scale traditional jobs. The service economy has grown much faster in the north and south (e.g. Chandigarh, Bangalore, Delhi, Hyderabad) than it has in the west, barring perhaps Pune. The emergence of north as the consumption basket of India has helped the region pull in fresh investment. The industrial slowdown in the late 1990s, just when the service economy was booming, may have also pulled down the west.

The no-show of central and eastern Indian states in the top ranks is not a surprise. It is one more pointer to the growing socio-economic fragmentation of India.

Big toppers are on shaky ground

SMALL COMFORT: Small states like Delhi can [provide better access to infrastructure

Punjab and Kerala, who between them have bagged the top ranks on the nine categories of performance for big states, have been cashing in on their past and the complacency could soon lead to crisis. Punjab's headstart over other states has much to do with its success with the Green Revolution 30 years ago. The fastest growing state economy in the 1970s and 1980s, Punjab is now hamstrung by a debilitating fiscal crisis, stagnating agriculture and virtual absence of reforms. On an average every resident of Punjab carries a debt of Rs 8,500-four times the level of per capita debt in Bihar and Uttar Pradesh. A recent World Bank report warns that Punjab could lose its rank as the most prosperous state and will be overtaken in per capita income by at least four states-Gujarat, Karnataka, Maharashtra and Tamil Nadu-within a decade.

In the social sector, Punjab is a bundle of contradictions. A high female literacy rate coexists with rampant female infanticide. Of the 10 districts with the worst sex ratio in the country, four are in Punjab. Agriculture is still the state's growth enzyme but the debt of farmers is on the rise. On the law and order front, Punjab may be a relatively safer place due to less physical crime but white collar crime is notoriously high.

Down south, God's Own Country has been unable to translate the best educated and most healthy people in India into productive economic agents. Kerala's relatively high per capita income is buoyed more by repatriations from the 10 million Malayalis living overseas than from incomes generated within the state. The state ranks a lowly 14th-its worst rank-among 20 big states in investment environment and eighth in budget and prosperity. One state for Punjab and Kerala to look at could be Himachal Pradesh which is emerging as a model for combining high levels of social progress with impressive gains in economic development (see following story: Leaders and Laggards).

MALL MANIA: States with a large urban population are seeing a retail boom

Small is still beautiful

The overarching message of the 2003 states' ranking was that small states are better states to live in. The message didn't go down too well with some big states. Even though the format of data used for ranking was comparable across all sizes of states, arguments were made that smaller states are easier to administer and should be ranked separately. Doing so doesn't change the message. The best states to live in remain the relatively smaller states. Punjab and Kerala account for less than 6 per cent of the population of 20 big states. The best small state, Pondicherry, has a population of less than 10 lakh. In fact none of the 10 most populous states of India, which together comprise 84 per cent of the country's population, are among the top two rankers on any of the parameters.

No wonder the case for creating smaller states is getting stronger. Last year, Union Finance Minister P. Chidambaram has advocated breaking up Maharashtra and Uttar Pradesh into more manageable units. Experience has been encouraging. On overall performance, Uttaranchal is seven ranks ahead of the state it was spun off from in 2000-Uttar Pradesh.

Reasons for the better performance of small states go beyond ease of administration. Their small geography makes access to basic services-hospital, schools, roads-easier for people. That matters a lot since this study places almost equal importance on adequacy and availability of amenities. Of course, it helps if the state makes an extra effort to improve their availability. For instance, Pondicherry has five medical colleges (four private), five engineering colleges, host of colleges including a nursing and dental college and a polytechnic. Typically, small states also have a higher percentage of urban population and, therefore, do not have to deliver public services to remote rural areas. Easier access to administration, relative sufficiency of social and physical infrastructure and higher percentage of urban population makes smaller states more attractive to the services industry which thrives on good manpower and institutions.

These are advantages big states can do little to compete with-unless of course they decide not to be big as well.

Live well in the Northeast. And do what?

The north-eastern states and Sikkim, barring Assam, enter the state rankings for the first time and they do so with a big bang. Mizoram and Sikkim top the charts on health, education and law and order-three basic necessities of good life. Sikkim's per capita spending on primary and middle level education is the highest among all states-big or small. With 89 per cent literacy, Mizoram is next only to Kerala, and Meghalaya has the distinction of being the only Indian state to send more girls to school than boys. Despite the difficult terrain, 70 per cent of Sikkim's households have tap water at home-compared with just 9 per cent of households in Assam. On the five factors under law and order, most north-eastern states outperform all other states. The only laggard among the nine states that are east of West Bengal is Assam, and on a few parameters Tripura.

The high levels of achievements in education and health is partly the legacy of the matriarchal society in parts of the Northeast, particularly Mizoram. A higher status of women has a strong positive correlation with better literacy and hygiene. All north-eastern states are also recipients of liberal grants from the Central government. At last count, the grant was close to Rs 6,000 per family per month. Some states have made better use of the money than others. That shows up in the growing disparities in the region. Sikkim has turned itself around in the past 10 years. Mizoram's rise as a state with good law and order and stable investment environment is particularly commendable, given its troubled past (see state profiles in following pages).

But despite a good life and relatively less stressed infrastructure, by and large, north-eastern states are unable to generate the two essentials ingredients of high growth: big buck investments and productive jobs. There are many reasons for this. The infrastructure in most state is good for use within states, but access from the rest of India is still limited and time consuming. Insurgency played havoc with tourism development in the past and still continues to do so in Manipur, Tripura and Nagaland. Experts bet on two things to trigger a self-sustained growth in the Northeast: the economic revival of eastern states (West Bengal, Bihar and Orissa) and, better still, a freer trade and travel to India's neighbours-Thailand, Myanmar and Bangladesh. For either or both to happen, the country has to focus on the east.