Regional Growth Dynamics in India Since Independence

The Indian economy passed through two distinct regimes in the period after independence. The first regime attempted a heavily regulated mixed-economy model for close to four decades, before shifting to a liberalized, privatized, and globalized second regime following the reforms in the early nineties. These two regimes have manifested in the form of two growth episodes—a pre-reform period of relative stagnation and a post-reform period of rapid economic growth. These higher growth outcomes in recent times has also coincided with increased regional inequalities, with some states prospering while others stagnated. This might suggest that the regional growth dynamics has changed drastically as a result of the reforms. Is there any empirical evidence to support this hypothesis? This paper investigates this question using a long time series of regional data for the pre-reform and post-reform period. The study finds that there was no qualitative difference in the regional growth dynamics during the two periods, with persistent non-convergence and club formation of per capita GSDP in both. The individual regions also largely remained in the same clubs across these two episodes. There was some quantitative difference between the two periods however, mainly in terms of an accelerated divergence between the clubs themselves in the post-reform period. The study concludes with some discussion of the differential policy approaches that are needed for regions in high-income and low-income clubs.