Issue of Convergence - A Study of Selected Western States of India

Abstract

There is no point to disagree that in recent time inequality has become a growing socio-economic problem. This problem has turned out to be more evident since the economic reforms of 1991. This paper attempts to examine the issue of convergence in terms of per capita net state domestic product in three selected western states of India from 1980–1981 to 2012–2013 and to that end we have applied the Barro regression analysis. But as there emerges non-stationarity problem in the context of absolute as well as conditional convergence, we have introduced time as an argument on the assumption of non-stochastic trend of the time series data. There has been strong evidence of absolute beta-convergence in Gujarat, Maharashtra and Rajasthan in the presence of time as an argument. We have also found strong evidence of conditional convergence in two states except Maharashtra. But there is no evidence of the declining dispersion of incomes among these three states. Sigma divergence among these states as implied by the dispersion of incomes among the states has mounted over time. Both liberalization and Crisis have no significant effect on the reduction of inter-state disparity.