Economic Reforms, Growth and Regional Divergence in India

Abstract

This paper examines long-run growth performance and regional divergence in per capita income across 15 major Indian states during the pre- and post-reform periods. Evidence shows that the divergence has increased the post-reform period. The divergence has been due to inter-state variations in production structures, human capital and infrastructure. Larger public investment in human capital and infrastructure for states with lower steady-state could improve overall growth performance and reduce regional imbalances. Ongoing economic reforms that seem to have led to an increase in growth as well as regional disparities of income need to be modified appropriately.

Productivity and convergence in India: A state-level analysis

“…Robust check is provided using the growth accounting framework and the results show high correlation between the two measures though they are different at state level. 1993-1996 1997-2002 2003-2004 1993-1999 1993-1996 1997-2002 2003-2004 1993-1999 1993-1996 1997-2002 2003-2004 1993-1999 1993-1996 1997-2002 2003-2004 1993-1999 -1995-1995-1996-1996-1997Punjab, Uttar Pradesh 1997-1998-1998Punjab 1999Punjab, West Bengal 2000-2001West Bengal 2001-2002West Bengal 2002-2003West Bengal 2003Gujarat, Punjab, West Bengal 2004-2005 Gujarat, Punjab, West Bengal …”

“…In the sample period of 1993-1994 to 1999-2000, 9 out of 14 states experienced productivity improvement. While during the period of 1993-1994 to 1996-1997, 6 states witnessed growth in TFP, the corresponding number was 7 and 14 during the periods 1997-1998to 2002-2003and 2003-2005respectively. During 1993to 1996-1997, the states experiencing positive growth in TFP were Rajasthan (3%), Kerala (2.3%), Tamil Nadu (1.8%), West Bengal (4.95%), Haryana (0.26%) and Maharashtra (1.15%).…”

“…Andhra Pradesh (middle income), Bihar and Uttar Pradesh (low income states) experienced decline in growth rate in the liberalization era. Ghosh et al (1998), using data for 26 Indian states over the period of 1960-1961 to 1994-1995, attempted to test the hypothesis of absolute convergence and found evidence for strong divergence. Similarly, Rao et al (1999) use data for the 14 major states over the period of 1964-1965 to 1994-1995 …”

Demographic Convergence and its Linkage with Health Inequalities in India

“…Also, the per capita incomes in the states of India are quite diverse (Dholakia, 1994;Ghosh et al, 1998;Dreze and Khera, 2012). The states that lag far behind the others in literacy rates are Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan and these states are also in a disadvantageous position in terms of poverty ratios and demographic indicators (Cashin and Sahay, 1996;Marjit and Mitra, 1996;Bandopadhyay, 2004).…”

“…The states that lag far behind the others in literacy rates are Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan and these states are also in a disadvantageous position in terms of poverty ratios and demographic indicators (Cashin and Sahay, 1996;Marjit and Mitra, 1996;Bandopadhyay, 2004). However, much of the earlier literature in Indian context heavily focused on GDP per capita convergence while there is not much evidence of convergence of other socioeconomic indicators (Cashin and Sahay, 1996;Marjit and Mitra, 1996;Ghosh et al, 1998;Dholakia, 1994;Trivedi, 2002).…”