This paper aims to explain the growth experiences of 14 major states of India between 1980 and 1998. Using two measures of convergence, σ-convergence and ß-convergence, we examine whether per capita incomes in the states have been converging or diverging. By both standards of convergence, India demonstrated overall divergence during 1980-;98, as well as during both the pre-reform and post-reform subperiods. Interestingly, the richer states experienced a degree of convergence during the post-reform period, whereas the poorer states did not. Divergence was most notable within the poorer group of states. A remarkable 82 percent of the cross-state variation in growth is explained by just the urbanization variable in India, with no hint of any conditional convergence after controlling for the degree of urbanization. The regression estimate shows that a 10 percentage point higher rate of urbanization is associated with 1.3 percentage points per year higher rate of annual growth. Copyright (c) 2002 Center for International Development and the Massachusetts Institute of Technology.

In this paper we suggest further steps that India needs to take in the process of her economic reforms. While the reform measures undertaken during 1991-96 have led to considerable deregulation and liberalization of the Indian economy, a lot still remains on India's unfinished reform agenda. The experience of East Asian countries along with that of China is taken into account in suggesting relevant lessons for the future course of India's economic reforms. Among other things, we highlight the need for much greater openness of the economy, deregulation of the private sector, exit policy, and reform of the labour and land laws. Besides, in our view, the government needs to focus its attention to, and provide larger resources for, primary health and primary education. The main quantitative conclusion is that India can expect per capita economic growth of a mere 3.5% per year under current policies, but could raise the overall per capita growth rate to as much as 7% per year under extensive market reforms that delivered a national saving rate and efficient market institutions similar to those of East Asia.India, economic reforms, East Asia,

This paper aims to assess the economic reforms in India undertaken during the 1990s. India has gone through the first decade of her reform process. Hence, an assessment of what has been achieved so far and what remains on the reform agenda is in order. Reforms in the industrial, trade, and financial sectors, among others, have been wide and deep. As a consequence, they have contributed more meaningfully in attaining higher rates of growth. A decade of opening of the economy has produced new dynamism, most dramatically in the information technology sector, but in others as well. The new technologies (especially information technology and biotechnology) give new opportunities for economic and social development. It is necessary to move swiftly to complete many of the reforms, which are now underway. Examples of such continuing reforms are the reduction in protection levels, continuing reforms in banking sector, product de-reservation for the small-scale industry, decontrol of prices, such as petroleum, reform of the power sector and so on. Among other things, sustaining higher rates of economic growth would require a more vigorous pursuit of economic reforms at both the federal and state levels. Significant reduction of fiscal deficit is the first order of business. Unless substantial fiscal consolidation is achieved, in our view, continued fiscal deficits pose India's greatest risk to future destabilization. Other critical reforms include, labor laws, exit policy, privatisation of state-owned enterprises, further opening-up of the economy to trade and foreign direct investment. In addition, there is a vast amount of economic reform that can be carried out to improve conditions in rural India, especially in the Gangetic valley. The reforms implemented so far have helped India attain 6 plus percent growth, however, should India be able to implement the remaining reforms and re-orient governmental spending away from inessential expenditures towards high priority areas of health and education and infrastructure development, then it is very likely to attain and sustain even higher rates of economic growth.

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