RICH STATES, POOR STATES: CONVERGENCE AND POLARISATION IN INDIA

The distribution dynamics of incomes across Indian states are examined us-ing the entire income distribution rather than using standard regression ap-proaches.The period 1965 to 1997 exhibits twin-peaked dynamics: there aretwo income convergence clubs at 50% and 125% of the national averageincome. Disparities across the states declined over the sixties and then in-creased. The observed polarisation is explained by the disparate distributionof infrastructure, in particular, that of education, irrigation and literacy inthe formation of the lower convergence club. Parametric analysis establishesirrigation, education, roads, industrial power consumption and bank depositsas infrastructure components explaining cross-state variation in growth.[...]