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Rising inequality with high growth isn't this trend worrisome? Analysis of Kerala experience


  • K.K. Subramanian

    (Centre for Development Studies)

  • Syam Prasad

    (Centre for Development Studies)


The relation between growth, inequality and poverty is the central theme of the paper. While the fast economic growth under the neo-liberal policy regime helps reduce poverty, it increases inequality in income distribution in a way that retards the progress in poverty-reduction. The empirical validity of this proposition is examined by tracing trends in per capita income (NSDP) growth and Gini coefficients, estimated from the data on household consumer expenditure (taken as a proxy for income) of NSS surveys, in Kerala as compared to the pattern at all-India and major states during pre and post reform periods. The comparative scenarios of growth and inequality did not give clear evidence of any systematic pattern of association between growth and inequality in the case of Indian States. The focused study of growthinequality nexus in Kerala underlined the level of sacrifice on inequality made to achieve the current high levels of economic growth through excessive liberalization and globalization policies. A decomposition exercise of total poverty reduction into (1) growth effect and (2) distribution (inequality) effect revealed that the rising inequality retarded progress in poverty reduction. The results of growth and distributional elasticity of poverty, inequality growth trade off index, and other statistical tests showed that economic growth of Kerala is not "pro-poor" in nature. In short, findings emerging from the analysis of rising inequality with high growth signal some worrisome trends and send out a note of caution on the celebration of high growth rate with a blind eye on inequality, and also on meeting the goal of achieving the newly jostled "inclusive growth".

Suggested Citation

  • K.K. Subramanian & Syam Prasad, 2008. "Rising inequality with high growth isn't this trend worrisome? Analysis of Kerala experience," Centre for Development Studies, Trivendrum Working Papers 401, Centre for Development Studies, Trivendrum, India.
  • Handle: RePEc:ind:cdswpp:401

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    References listed on IDEAS

    1. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    2. L. R. Jain & Suresh D. Tendulkar, 1990. "Role of Growth and Distribution in the Observed Change in Headcount Ratio Measure of Poverty: A Decomposition Exercise for India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 25(2), pages 165-205, July.
    3. Deininger, K & Squire, L, 1996. "Measuring Income Inequality : A New Data-Base," Papers 537, Harvard - Institute for International Development.
    4. Angus Deaton & Jean Dreze, 2002. "Poverty and Inequality in India: A Re-Examination," Working Papers 184, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    5. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
    6. K.C. Zachariah & S. Irudaya Rajan, 2004. "Gulf revisited: Economic consequences of emigration from Kerala, emigration and unemployment," Centre for Development Studies, Trivendrum Working Papers 363, Centre for Development Studies, Trivendrum, India.
    7. repec:pri:rpdevs:deaton_dreze_poverty_india is not listed on IDEAS
    8. Ravallion, M. & Datt, G., 1991. "Growth and Redistribution Components of Changes in Poverty Measures," Papers 83, World Bank - Living Standards Measurement.
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    Cited by:

    1. K. Pushpangadan & G.Murugan, 2008. "Dynamics of rural water supply in coastal Kerala: A Sustainable development view," Centre for Development Studies, Trivendrum Working Papers 402, Centre for Development Studies, Trivendrum, India.
    2. Rajesh, K, 2009. "Participatory Institutions and People’s Practices in India: An analysis of Decentralisation experiences in Kerala State," MPRA Paper 29544, University Library of Munich, Germany.

    More about this item


    poverty; inequality; pro-poor growth; inclusive growth; economic growth;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs


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