Growth and Employment in India: The Regional Dimension

Regional inequality (spatial inequality) has emerged as a key issue in recent discussions of development policy. States within India differ greatly in terms of economic growth and employment potential. In this paper, I examine some aspects of this regional employment growth in India spanning the period 1983 to 2004/05. My analysis is confined to 14 selected major states in India accounting for 93 percent of the population. My results confirm widening inter-state disparities in income in the first quinquennium of the 21st century a continuation of the trend of the 1990s. Across the 14 states urban bias in employment growth is found with employment in urban areas growing faster than in rural areas. All states are found to be diversifying with the pace of diversification lower in low income states. A positive association is found between initial level of diversification and subsequent employment growth. Geographic concentration of skill labour is observed in the sector financial and business services. Regional employment growth in India is found to be urban, unorganized and low productivity jobs. A positive relationship between initial educational attainment and non-agricultural labour productivity growth is observed. Inter-State disparity in educational attainment is likely to be a binding constraint