Economic Growth, Relative Inequality, and Equity: The Case of India

This paper examines the links between economic growth, relative inequality, and equity (defined as an unambiguous reduction in poverty as well as an increase in social welfare) in the Indian context. For this purpose, the equivalent analytical results on poverty and social welfare orderings are applied to the price-adjusted size distributions of consumer expenditure for the rural, urban, and entire (rural plus urban) population of India over eight time-points between 1970 and 1989. Unambiguous improvement in poverty and social welfare was indicated in as many as 20 (rural), 21 (urban), and 22 (entire) populations out of 28 binary comparisons each. Improvement under somewhat more stringent assumptions was indicated in eight more cases. As many as 32 out of 71 comparisons involving improved equity were characterized by a rise in relative inequality. These results indicate that contrary to the earlier widely held perceptions, compared with the 1970s which was characterized by slow economic growth, the faster rate of growth in India in the 1980s was associated with more frequent equitable distributional outcomes.