Abstract
This study is an endeavor to examine the causes of rising inequality in India at the sub-national level and thus to arrive at policy implications in order to achieve targets under SDG 10. In a country like India, with striking heterogeneity, examining inequality at the more disaggregated level and understanding its causes is essential for sound policy making. Since the beginning of the economic reform in 1991, there has been a rising income inequality in India has been a cause for concern. Owing to opening up of the economy, the growth rates in states output have increased rapidly especially after 1993. This seems to have widened the income gap. However, thus far only a few studies have attempted to analyze the causes of rising inequalities in Indian states. This study, analyzing data from 18 major Indian states, finds that, in the post reforms period, structural transformation and trade liberalization cause inequality to increase in Indian states. On the other hand, the evidence on infrastructure leading to rise in inequality has to be dealt with caution on account of the presence of outliers. These results are believed to have important policy implications.
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Notes
- 1.
There is an extensive literature dealing with inequality and growth. While Berg et al. (2012), Berg and Ostry (2011) and Easterly (2007), among others, show the inverse relationship between inequality and growth, Galore and Zeira, (1993) show that inequality adversely affects the formation of social capital and in a way constrains an economy’s capability to use exogenous technological possibilities to its advantage, Barro (2000) is of the view that inequality, in a limited way, is necessary in developing countries as it allows few individuals to accumulate start-up capital. Roy and Sinha Roy (2017) provide cross-country evidence on the issue, and the result is found to hold good across different measures of inequality.
- 2.
Data are not available for 1994.
- 3.
Data are not available for 1994.
- 4.
Here trade openness cannot be used as import data at the state level are not available.
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Roy, R.P., Sinha Roy, S. (2019). SDG 10—A Probe into the Factors Underlying Differences in Inequality: Evidence at the Sub-national Level in India. In: Chaturvedi, S., James, T., Saha, S., Shaw, P. (eds) 2030 Agenda and India: Moving from Quantity to Quality . South Asia Economic and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-32-9091-4_7
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