Review literatur konvergensi dalam perspektif India

2.6. Review literatur konvergensi dalam perspektif India

During the last two decades, there has been a proliferation of studies on inter-state disparity across the Indian states using sophisticated analytical tools and better data giving emphasis on the question whether ‘conditional’ or ‘unconditional’ convergence has taken place in India. Among them, the list of the studies those have indicated the trend of divergence in Indian states during recent two decades is a quite large. But there are a few studies that reveal an on-going convergence trend in India. Let us discuss the findings of a few major studies.

Dholakia (1994) has pointed out a bit different result. His study analyzed 20 Indian states over the period 1960-90 finds notable tendencies of convergence of long-term State Domestic Product (SDP) growth rates. This, perhaps, appears due to the inclusion of the five special category Indian states and Delhi along with the 14 major Indian states. These special category states ( as classified by the Planning Commission ) are Assam, Himachal Pradesh, Jammu & Kashmir, Manipur and Tripura. Interestingly, Dholakia identifies 1980 as the year from when several of the lagging states started growing and the leading states beginning to stagnate. Cashin and Sahay (1996) also reach similar conclusions as Dholakia, finding absolute convergence in a study of 20 states over the period 1961-91. But, Dholakia’s study showed clearly that in India the basic determinant for the existing regionaldisparity in the level of income among states turns out into the disparity in the capital intensity or factor proportions. According to him, this directs the demand for direct governmental inventions in allocation of resources and policies to attract foreign investment subject to the lagging regions.

There have been some studies also through which no definite conclusion regarding the trend of convergence or divergence come out. For e.g., the study of Singh and Srinivasan (2002) looking at the period 1990-91 to 1998-99, however, this study found that the evidence does not permit one to reach very definite conclusions on convergence or divergence across the (14 major) states.

A lot of studies have found a divergent tendency across the Indian states during the last two decades. Among them, a short view is taken over the few studies. Rao, Shand, and Kalirajan (1999) suggest that per capita SDP in the Indian states have tended to diverge rather than converge in contrast to neo-classical growth model. Per capita SDP growth is positively related to their initial levels. States with better infrastructure and human resources have had an edge over the others in attracting investment in the post-reform era. Dasgupta et. al. (2000) also report a distinct tendency for the Indian states to have diverged during the period 1960-95 as far as per capita SDP is concerned. In terms of the shares of the different sectors within each state’s SDP, they find a tendency for increasing similarity across states in sectoral composition. Kurian (2000) finds widening regionaldisparities among the Indian states and a clear dichotomy between what he calls the forward and backward states. The former having higher levels of per capita income, better infrastructure, higher per capita resource flows and private investment and better social and demographic indicators. He finds that it is the level of private investment which is aggravating the differentiation between forward and backward states. In other words, the existing opportunities in forward states conducive to attract the private investment, is the pocket of generation of aggravating regional incomes. Ahluwalia (2000) analyzing the economic performance of the Indian states during the post-reform period suggests that not all the richest states got richer relative to poorer states. He cites Punjab and Haryana as two key examples. While these were the two richest states in 1990-91, their growth rates of per capita SDP in the 1990s were not only lower than in the 1980s, but also in both cases actually fell below the national average. He also points out that not all the poorer states lagged behind. While uggesting that two poor states, Rajasthan and Madhya Pradesh had performed well, some states with otherwise positive scores on various development indicators lagged behind. However, Alhuwalia does not offer an explanation for their better performance. Though in another study, Ahluwalia (2002) did not examine divergence through regression analysis, but his calculations of population weighted gini coefficients for the 14 major states showed a substantial increase, from 0.175 in 1991-92 to 0.233 in 1998-99. Like Kurian, in this study Ahluwalia similarly found private investment flows to be a significant factor in explaining cross-sectional variation in states’ growth rates. However, in any case, studies analyzing the ‘effect of globalization’ on inter-state inequalities and ‘the standard of living’ across the states in regionaldisparity are scarce.

Like many other studies the study of Marjit and Mitra has also observed that the states have been ‘diverging’ rather than converging in terms of their per capita income. In comparison with the U.S. economy, this study has pointed out that the cause behind their convergence substantially accrues to the strong homogeneous elements of industrial structure across the regions of U.S. The free factor mobility, especially labor, coexistent with a flexible universal (federal) rule of administration is the added advantage behind the sustained convergence. Their study indicates that differential wage rates as a reflection of deviation for Samuelson’s Factor Price Equalization theorem to be hold, is one of the important birthplace of the divergence.

Conclusively, it can be said that the dominant finding on Indian economy from various studies is strongly supporting the gradual increasing divergence among the major states of India. This finding casts doubts on the validity of the critical assumption of diminishing returns to reproducible capital as assumed in neo-classical model and at the same time, supports Kuznet’s inverted U relationship between inequality and economic growth in developing countries.

Within the strong purview of divergence of income as the major existing studies suggest, the existence of convergence is seen in some other arenas. They are basically the non-income factors. For e.g., Tushar Kanti Das (2002)² has done a study on the test of Convergence of wage rate across Indian states through a model of cross section and panel estimations for a last four decadal study of the pre-liberalization period. His formulated model has deflated the wage rate of each state by the all-India average wage rate. The finding is also indicating a trend of convergence. The study of Dasgupta and et. all³. It reveals out that the income originating from agricultural sector among different states of India are tending to be converged rather diverged.

1. In a nut-shell, from the consensus of most findings, though the overall state incomes are showing a divergent trend, but, from the aspects of wage rate and the share of agricultural sector incomes Indian states are following a trend of mild conditional convergence.