The Impact of Infrastructure Provisioning on Inequality in India: Does the Level of Development Matter?

ABSTRACT

This paper analyses the link between physical infrastructure and inequality and focuses on 17 major Indian states. The Gini coefficient was used as the dependent variable computed using data on monthly per capita consumption expenditure (MPCE), which was estimated from unit-level records of the periodical Household Consumer Expenditure surveys of National Sample Survey Organization for the years 1983, 1987–88, 1993–94, 2004–05, and 2009–10. By evaluating Indian states with different levels of development the paper shows that the impact of infrastructure on consumption inequality across states differs not just for the type of infrastructure but also for the income category the state belongs to. Additionally, some components of infrastructure, mainly power and roads, tend to increase interpersonal inequality at the regional level. The results of this study do not prescribe abandoning transportation projects or infrastructure development but instead recommend that the government should emphasize investments in complementary policies.

KEYWORDS:

• Physical infrastructure
• regional inequality
• India

Notes

¹See Calderón and Servén (2004), Canning (1999), Demetriades and Mamuneas (2000), Easterly and Servén (2003), Fernald (1999), Holtz-Eakin and Schwartz (1994), Hulten and Schwab (2000), Roller and Waverman (2001), Sanchez-Robles (1998), Bajar (2015) amongst several others. For a detailed review see Romp and de Haan (2005).

²It is clear that prediction of inequality levels is beyond the scope of the paper. This is also difficult given the fact that data on inequality are available only at certain time points, and not continuously.

³The late Professor Raj Krishna termed India's GDP growth rate of 3.5 percent per annum the “Hindu rate of growth”.

⁴It is to be noted that household-level income data does not exist in India and consumption is commonly taken as a proxy for income by researchers in India.

⁵We do not have long time series data on inequality level. Given the kind of discontinuous data that is available we are not attempting to arrive at predictive results.

⁶For details see http://mail.mospi.gov.in/index.php/catalog/145

Additional information

Notes on contributors

Sumedha Bajar

Dr. Sumedha Bajar is currently a Post-Doctoral Fellow at National Institute of Advanced Studies (NIAS) working on NIAS-UNDP Initiative on Inequality and Human Development. She completed her PhD in Economics from Institute for Social and Economic Change, Bangalore, India in 2016. Her PhD Thesis is titled “Infrastructure and Economic Growth: Evidence from India”. This work is borne out of her PhD thesis. She was working as Assistant Director at National Institute of Labour Economics Research and Development, under NITI AAyog (formerly, Planning Commission) from 2014 till 2015. She received her M.A. in Economics from University of Hyderabad, India in 2010 and B.A. (Hons) Economics from Miranda House, Delhi University, India in 2008. She has interned at several places like United Nations Conference on Trade and Development (UNCTAD) and National Council of Applied Economic Research (NCAER), Delhi.

Meenakshi Rajeev

Dr Meenakshi Rajeev is the Reserve Bank of India Chair Professor in the Institute for Social and Economic Change, Bangalore, India. She graduated from IIT Kanpur and received a Phd degree from Indian Statistical Institute, Kolkata. She has published on a variety of research topics from both theoretical as well as empirical perspectives in national and international journals. Her recent publications include her book titled “Emerging issues in economic development” for Oxford University Press.