Rich States, Poor States: Convergence and Polarisation in India

The distribution dynamics of incomes across Indian states are examined using the entire income distribution. Unlike standard regression approaches this approach allows us to identify specific distributional characteristics such as polarisation and stratification. The period between 1965 and 1997 exhibits the formation of two convergence clubs: one at 50% and another at 125% of the national average income. Income disparities across the states declined over the 1960s and then increased from the 1970s to the nineties. Conditioning exercises reveal that the observed polarisation is associated with the disparate distribution of infrastructure. In particular, education, the extent of irrigation and literacy are found to be associated with the formation of the lower convergence club.