Economic reform and the transmission of growth impulses across Indian states

Abstract

While several studies in regional economics and development economics have repeatedly suggested that selected regions are capable of exerting powerful growth impulses on national growth and development, there are studies in the literature which have raised doubts about the existence of transmitting growth impulses from one region to another. The objectives of this paper are to test whether there are any significant growth‐transmission effects across Indian states and to examine whether institutional improvements induced through economic reform have improved such transmission effects. Using data from both pre‐ and post‐1991 economic reform, this study suggests that the growth impulses passing from one state to another have been limited, although it appears to have increased in the post‐reform period. What is evident from this study is that the structure of the state economies, in terms of their sectoral composition, and the quality of their human capital and infrastructure, is a relevant variable from the policy point of view in boosting the growth spillover effects from the leading to the lagging states.