Regional Disparities Across Indian States: Are the Trends Reversing?

Abstract

India has experienced consecutive decadal accelerations in aggregate growth rates, beginning in the 1980s, furthered by deregulatory policies resultant from the 1991 financial crisis, and continuing through the 2000s. This surge in economic growth has brought about significant prosperity for some states, while leaving other states nearly unchanged. Our research endeavours to document the regional disparities of growth across a sample of the 16 most economically prominent states from 1980-2010. The results indicate a lack of both β and σ convergence, along with a pronounced increase in the Theil index. Given the consistent results obtained from our analysis, we conclude that the growth experience has indeed been imbalanced. A continuation of the documented unbalanced regional growth could compromise national progress. Specifically, lack of convergence and heightened regional inequality could sabotage the great strides towards development achieved by India through deregulatory reform and liberalization policies, begun in the 1980s, although most notably undertaken after the financial crisis of 1991.