Club-Convergence and Polarisation of States: A Nonparametric Analysis of Post-Reform India

Sabyasachi Kar, Debajit Jha, Alpana Kateja
JEL codes: 
IEG Working Paper No. 307

The objective of this paper is to study the dynamics of the distribution of regional per capita income of Indian states in the post reform period, in order to identify trends towards convergence-club formation, polarisation or stratification during this period. We adopt the distribution dynamics framework that uses kernel density estimates, stochastic kernels and ergodic distributions in order to identify these trends. The results show that there is polarisation in India in the post-reform period and this is due to the contrary growth dynamics of the middle income states resulting in the vanishing middle of the relative income distribution. Since polarisation increases the possibility of conflict, this study highlights one of the undesirable consequences of the current growth process in India.