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

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Patterns of Wealth Disparities in India during the Liberalisation Era

This paper examines patterns of wealth disparities in India using the all-India debt and investment surveys (1991 and 2002). We find that there have been increases in wealth levels in the country across virtually all groupings, accompanied by a small but perceptible rise in the level of interpersonal wealth inequality, whether examined by summary measures such as the Gini coefficient or by centile shares of wealth. We examine differences in wealth holdings by state and income in the two surveys as well as disparities according to socio-economic categories in 2002. There have been sharp differences in the growth rates of wealth holdings in the middle and upper income states on the one hand and poor states on the other, suggesting divergence in wealth outcomes. Faster growing states have seen larger increases in wealth inequality. Finally, there are large differences in the levels of wealth holdings according to socio-economic categories.

A critical task that has occupied economists over the last two decades has been to examine and explain the nature and causes of distributional changes in the era of market-oriented reforms. Researchers examining this question in the case of India have tended to focus primarily on the evolution of income and consumption.1 In doing so, they have, by and large, overlooked an important manner in which disparities appear to have manifested themselves in increasing levels of wealth and in changing concentrations of wealth across households, individuals, regions and groups. This is an important gap in the literature. The distribution of wealth has been recognised to play an important role in the development process by having a signicant impact on productivity, public good provision and occupational choice [Banerjee and Newman 1993; Bardhan et al 2000; Bardhan et al 2006]. In addition, many theoretical models have considered the impact of markets on wealth inequality with differing conclusions and policy implications [Stiglitz 1969; Banerjee and Newman 1993; Galor and Zeira 1993; Aghion and Bolton 1997; Piketty 1997; Matsuyama 2000; Ghatak and Jiang 2002; Ljungqvist 1993; Mookherjee and Ray 2003, 2006]. As such, apart from complementing research on income inequality, examining wealth inequality is valuable in itself.

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