Growth Convergence and Spillovers Among Indian States: What Matters? What Does Not?

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Convergence and spillovers across countries and within countries are old, but recurrent policy concerns, and India is no exception to this rule. This paper examines convergence and spillovers across Indian states using non-stationary panel data techniques. Results on convergence among Indian states are generally found to be similar, but more nuanced, than previous studies. Generally speaking, there is evidence of divergence over the entire sample period, convergence during sub-periods corresponding to structural breaks, and club convergence. There is strong evidence of club convergence among the high-and low-income states; the evidence for middle-income states is mixed. Dynamic spillover effects among states are small. JEL Classification Numbers: C23, O40, O53

Club Convergence among the Major Indian States During 1982–2014: Does Investment in Human Capital Matter?

“…The twin-peak observations from kernel plots and the findings from the transition matrices of our study support the claim of club-convergence process across the 15 major states. Bandyopadhyay (2004Bandyopadhyay ( , 2011, Ghosh (2008) and Sodsriwiboon and Kalra (2010) have explored the presence of two-club convergence of income across Indian states and our findings are found to be consistent with their studies; however, Chaudhuri, Mazumdar, Teachout, and Marimoutou (2007) have observed three peaks in their documentation of polarization using a different methodology based on regression tree approach.…”

Inter-state Growth Spillovers in Indian Major States: An Empirical Analysis

“…Sodsriwiboon and Kalra (2010) have characterized a dynamic relationship for the high-, medium-, and low-income states of India through a system of equation. Each period of growth has been regressed with its own lag as well as the lag of the other two periods, taking into consideration of fixed effects of each group.…”

“…The rest of the state's agriculture and industry in the pre-reforms period have influence for Haryana, Gujarat, Himachal Pradesh, Tamil Nadu, Uttar Pradesh, Bihar, and Kerala, whereas, in the reform period, they have influence for Rajasthan, Maharashtra, Kerala, and Punjab. Sodsriwiboon and Kalra (2010) have characterized a dynamic relationship for the high-, medium-, and low-income states of India through a system of equation. Each period of growth has been regressed with its own lag as well as the lag of the other two periods, taking into consideration of fixed effects of each group.…”