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Economic Growth and Convergence Across Indian States

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Fayaz A. Bhat and Effat Yasmin

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The Indian Journal of Economics and Development
Year : 2018, Volume : 14, Issue : 3
First page : ( 456) Last page : ( 463)
Print ISSN : 2277-5412. Online ISSN : 2322-0430.
Article DOI : 10.5958/2322-0430.2018.00157.9

Economic growth and convergence across Indian states

Bhat Fayaz A.1,*, Yasmin Effat2
1Department of Economics, SAM Degree College, Budgam-191 111 (J&K)

2Department of Economics, University of Kashmir, Srinagar-190 006 (J&K)

*Corresponding author’s email: bhatfayaz10@gmail.com

JELCodes C23, D31, D33, O47, O40.

Online published on 27 September, 2018.

Abstract

The present study is an analysis of economic growth and convergence across 30 Indian states/union territories. For testing convergence two approaches were used viz. cross-sectional method and panel data method. These approaches are used to test âconvergence across Indian states/union territories for 1993–94 to 2012–13 time period. The data were obtained from Central Statistical Organisation (CSO) on GSDP per capita on two different prices, i.e. 1993–94 and 2004–05 (constant prices). Adjustment factor was used to convert the data to same base year prices of 2004–05. The results from fixed effect panel data model revealed that the states of India were converging to their steady states during the reference period 1993–94 to 2012–13 and hence proved the Solow’s interpretation of growth of developing economies. But while dividing the reference period into two sub-periods, 1993–94 to 2002–03 and 2003–04 to 2012–13, it was found that while during 1993–94 to 2002 period there was strong tendency of convergence and the period from 2003–04 to 2012–13 showed weak convergence across states from the steady state.

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Keywords

Convergence, cross-country regressions, economic growth, fixed effects, panel data, â-convergence.

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