Growth And Inequality In India

In this chapter, I investigate the question of whether class structure matters in understanding the increasing inequality in India during the period of economic liberalization. I argue in the paper that almost the entire increase in the overall Indian inequality during this period is explained by the rising inequality between classes rather than within them (unlike, for instance, in China, where the entire increase in inequality during the same period is explained by the increase in the within class inequality). There is now clear evidence from the National Sample Survey quinquennial household consumer expenditure surveys conducted in 1993–1994 and 2004–2005 that increased distance between urban elites (owners, managers, and professionals), rural rentier classes (such as moneylenders and absentee landlords) who are more stratified at the top, and unskilled urban workers, marginal farmers and agricultural workers, who are increasingly more stratified at the bottom helps us understand the distributional dynamics of the Indian growth story. Also, the urban sector is both becoming more unequal among its own classes while it is also getting more stratified vis-à-vis the rural classes. I analyze the class structures in India and decompose (using the methodology of Yitzhaki, 1994) the overall inequality into inter-class and intra-class terms. Finally, I explain these changes by analyzing the Indian policies during this period.