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Regional Economic Growth and Inequality in India during the Pre- and Post-reform Periods

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  • Madhusudan Ghosh

Abstract

This paper evaluates the economic performance of 15 major states in India, and examines whether initially disparate states displayed any tendency towards convergence in real per capita income during the period 1960/61–2006/07. Though the growth performance of the states has improved in the post-reform period, since 1991 the states have diverged in per capita income. The states following different steady-state paths are classified into three clubs—one convergent and two non-convergent. The regional divergence and club convergence are explained in terms of interstate variations in physical and social infrastructures, state-level policy reforms, foreign direct investment flows and economic structure. The poorly performing states could improve their relative economic position by undertaking investments in physical and social infrastructures, and speeding up the reform process by liberalizing investment and infrastructure policies. As industry and services are the major sources of regional divergence, any effort to reduce regional imbalance must focus primarily on these two sectors.

Suggested Citation

  • Madhusudan Ghosh, 2012. "Regional Economic Growth and Inequality in India during the Pre- and Post-reform Periods," Oxford Development Studies, Taylor & Francis Journals, vol. 40(2), pages 190-212, June.
    • Handle: RePEc:taf:oxdevs:v:40:y:2012:i:2:p:190-212
    DOI: 10.1080/13600818.2012.677818
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    Cited by:

    1. Priyabrata Sahoo & Kirtti Ranjan Paltasingh, 2019. "Examining Growth–Inequality Nexus in Post-reform Odisha: A Sectoral Decomposition Analysis," Journal of Development Policy and Practice, , vol. 4(1), pages 12-34, January.
    2. Lekha Chakraborty & Pinaki Chakraborty, 2018. "Federalism, fiscal asymmetries and economic convergence: evidence from Indian States," Asia-Pacific Journal of Regional Science, Springer, vol. 2(1), pages 83-113, April.
    3. Madhusudan Ghosh, 2017. "Infrastructure and Development in Rural India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(3), pages 256-289, August.
    4. Daniele Checchi & Andrej Cupak & Teresa Munzi & Janet Gornick, 2018. "Empirical challenges comparing inequality across countries: The case of middle-income countries from the LIS database," WIDER Working Paper Series 149, World Institute for Development Economic Research (UNU-WIDER).
    5. Abhiroop Mukhopadhyay & David Garcés Urzainqui, 2018. "The dynamics of spatial and local inequalities in India," WIDER Working Paper Series 182, World Institute for Development Economic Research (UNU-WIDER).
    6. Nisha S. Simon & P. Natarajan, 2017. "Nonlinearity between Infrastructure Inequality and Growth," Review of Market Integration, India Development Foundation, vol. 9(1-2), pages 66-82, April.
    7. Bajar, Sumedha, 2014. "Infrastructure output nexus: Regional experience from India," Working Papers 319, Institute for Social and Economic Change, Bangalore.
    8. Abhiroop Mukhopadhyay & David Garcés Urzainqui, 2018. "The dynamics of spatial and local inequalities in India," WIDER Working Paper Series wp-2018-182, World Institute for Development Economic Research (UNU-WIDER).
    9. Fernhaber, Stephanie & Li, Dan & Wu, Aiqi, 2019. "Internationalization of emerging-economy new ventures: The role of within-country differences," Business Horizons, Elsevier, vol. 62(4), pages 497-507.
    10. Basanta K Pradhan & Rashmi Rastogi, 2015. "Mineral Resource Endowments and Investment Destinations: A Panel Data Analysis of Indian States," IEG Working Papers 354, Institute of Economic Growth.
    11. Pratap Kumar Mahakur & Narayan Chandra Nayak, 2019. "An investigation of intrastate income disparities and regional convergence in Odisha," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(2), pages 288-308, December.
    12. Friedt, Felix L. & Toner-Rodgers, Aidan, 2022. "Natural disasters, intra-national FDI spillovers, and economic divergence: Evidence from India," Journal of Development Economics, Elsevier, vol. 157(C).
    13. Priyabrata Sahoo & Debolina Biswas & Saswata Guha Thakurata, 2023. "Is Growth Pro-poor Among the States of India? A Poverty Decomposition Exercise During the 2000s," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 165(1), pages 107-133, January.
    14. Amit Nandan & Hrushikesh Mallick, 2020. "Does Gender Equality Matter for Regional Growth and Income Inequality? An Empirical Analysis for the Indian States," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(4), pages 439-469, May.
    15. Daniele Checchi & Andrej Cupak & Teresa Munzi & Janet Gornick, 2018. "Empirical challenges comparing inequality across countries: The case of middle-income countries from the LIS database," WIDER Working Paper Series wp-2018-149, World Institute for Development Economic Research (UNU-WIDER).
    16. Ali, Amjad, 2022. "Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries," MPRA Paper 116328, University Library of Munich, Germany, revised 2022.
    17. Daniele Checchi & Andrej Cupak & Teresa Munzi & Janet Gornick, 2018. "Empirical challenges comparing inequality across countries," LIS Working papers 756, LIS Cross-National Data Center in Luxembourg.
    18. Priyanka Dutta & Hemanta Barman, 2022. "Services sector growth and interstate income divergence in India," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 995-1015, October.
    19. Ankita Mishra & Vinod Mishra, 2018. "Re-examination of convergence hypothesis among Indian states in panel stationarity testing framework with structural breaks," Applied Economics, Taylor & Francis Journals, vol. 50(3), pages 268-286, January.

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