Economic Reforms and Regional Disparities in India

This paper makes an attempt to re-examine the issue of inter-state inequality of growth and standards of living across 14 major states within the convergence analysis of neoclassical growth paradigm after economic reforms from 1993-94 to 2004-05. Despite inconclusive evidence for β-divergence in per capita real income, the evidence in favour of β-divergence in secondary and tertiary sector in per capita terms shows the rising inter-state inequality of growth and standards of living across the Indian states during this period. This indicates that growth rates of the relatively better off states of these sectors have grown faster than that of the worse off counter parts. Thus, Policy makers and planners can think of creating the investment climates through private-public partnership in different lagging sectors of the states to achieve the balanced inter-state growth and to catch up the standards of living of the better off states.