Inequality, polarization and trend of convergence in economic growth in India

The persistence of regional disparity has been one of the major policy concerns of the Government of India since 80’s. The accentuation of regional income inequality particularly during the period of liberalization and globalization raises question about the role of market controlled regime in bringing about equitable development all over the country. Still after twenty years of performance in neo-liberalised environment, the debate continues about whether excessive reliance on market creates development distortion by aggravating inequality further. Under this backdrop, this paper makes a renewed attempt to evaluate the growth performances and the trend & pattern of inequality in PCNSDP of India. The paper also examines the nature of convergence of PCNSDP of Indian states using panel data framework for nearly forty years period (1970-71 to 2009-10). The results reveal that Indian states have experienced with an unprecedented acceleration in growth rates along with sharp increase in inequality and polarization especially in the post reform period. The econometric analysis establishes the trends of absolute divergence but conditional convergence of PCNSDP for the period 1980-81 to 2007-08. The pattern of distribution of public and private investment is found to play the crucial role in bringing about inequitable development in India.