Abstract
India has undergone a rapid sectoral shift from an agrarian to a predominantly service economy in the post-reform period. The objective of this article is to understand and assess the impact of this shift on the inter-state income distribution during the period from 1993–94 to 2019–20. We have shown how inequality decomposition by income source can be used to disaggregate the inequality trend into its various contributory influences. Our results assist in understanding the role of sectors and sub-sectors in terms of their contribution to inter-state inequality. Our results show that the tertiary and secondary sectors are largely responsible for the growth in inequality, which was partially offset by the primary sector. The evidence at the sub-sectoral level is along the same lines, with manufacturing and an overwhelming number of tertiary sub-sectors contributing to the growth in inequality, while agriculture and allied activities playing a role in keeping a check on it.
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