ECONOMIC REFORMS AND REGIONAL INEQUALITY IN INDIA
Keywords:
Economic Reforms, Regional Inequality, Divergence, States Of India, Convergence and PovertyAbstract
India's economic reforms, launched in 1991, raised national growth rates and reduced poverty, yet they were followed by widening differences between states. This paper reviews the evidence on regional inequality in India, drawing on published studies, state income data and official poverty estimates. It finds that the post-reform period witnessed divergence in per capita income across major states, with the southern and western states and a few northern states pulling ahead while Bihar, Uttar Pradesh, Odisha, Madhya Pradesh and Assam remained behind. Private investment, foreign investment and bank credit flowed toward states with better infrastructure, skills and governance, while the dismantling of industrial licensing and the freight equalisation policy removed earlier mechanisms that had favoured backward regions. The paper concludes that reforms raised the level of growth for most states but also magnified initial differences and it recommends targeted public investment, fiscal transfers linked to need and improved state capacity in lagging regions.
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