ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Reforms and Regional Inequality in India

This article analyses the impact of pro-market reforms on regional inequality in India, both at the aggregate and the sectoral level. It draws on the "new economic geography" literature that evaluates the impact of reforms on regional inequality in a country, in terms of the centripetal and centrifugal forces generated in the economy. The results show that regional inequality in India remained largely unchanged during the 1980s but rose dramatically after the adoption of the reforms. This is mainly due to the fact that the per capita output from the industrial and services sectors showed convergence before the reforms and divergence afterwards.

Unorganised Sector Workforce in India

India's workforce comprises nearly 92 per cent in the unorganised segment, with the entire farm sector falling under the informal category, while only one-fifth of the non-farm workers are found in the organised segment. Estimates suggest that in the non-farm sectors, as we move up the income ladder, the share of the informal sector gradually declines. However, as far as the agricultural sector is concerned, irrespective of economic class, the share of the unorganised workforce remains flat. Further analysis reveals that the coverage of social security schemes has been extremely sparse among the economically and socially vulnerable sections. The pro-rich, pro-capital policy of the present regime is reflected in the recent downward revision of the interest rate to the subscribers of provident fund. Further, the move towards defined contributory schemes away from defined benefit schemes of pension funds is fraught with danger. Therefore, we argue that given the poor affordability and lack of an institutional mechanism, any design of social security that relies heavily on a contributory basis is bound to fail dismally.

Forecasting State Domestic Product and Inflation

At present, states in India make their own assessment regarding economic growth for their planning and budgeting purposes. These assessments are mostly derived from judgments rather than from serious econometric modelling. The regional econometric model developed in this paper aims to forecast growth rates of the aggregate and sectoral GSDP for the three states. It attempts to capture the medium-run trends and characteristics of the economy of each state, taking into consideration the structural changes in the Indian economy during the period.

Regional Growth and Disparity in India

Has regional disparity widened in the post-reform period? This study attempts to probe this question by analysing growth rates of aggregate and sectoral domestic product of major states in the pre- and post-reform decades. The results indicate that while the growth rate of gross domestic product has improved only marginally in the post-reform decade, regional disparity in state domestic product (SDP) has widened much more drastically. Industrial states are now growing much faster than backward states, and there is no evidence of convergence of growth rates among states. Disturbingly, there is now also an inverse relationship between population growth and SDP growth. This has serious implications for employment and for the political economy of India.
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