Analysis of inter-state and inter-region beta-convergence of growth rates in India in post-reform period

Abstract There is a long-standing debate among scholars over the convergence versus divergence of the regional growth rate of per capita income in India. The present study tries to resolve this debate in light of the latest available data by using Beta-convergence analysis in a panel data framework. The results indicate the presence of unconditional divergence and conditional convergence in the case of both inter-state and inter-region analysis, which shows that the unconditional divergence may be due to the presence of omitted variable bias. The results also show that the primary sector is associated with the reduction of interstate and inter-region income inequality, while the growth of the tertiary sector is correlated with increasing interstate and inter-region income inequality. Therefore, the findings of the study imply that the phenomenon of service-led growth in the post-reform period was accompanied by the widening gap in the growth of various states and regions of India.