Inequality: A China and India Perspective

In the years since the introduction of liberalizing market reforms in China and India, both countries have experienced rapid and sustained economic growth even as they have struggled with a simultaneous surge in economic and social inequality. This working paper traces the evolution of the post-reform growth in inequality and demonstrates the pervasive influence of location in determining and entrenching a spatial pattern to the deepening divides in each country. Though the centrality of location serves as a common link between China and India, the unique reform experiences of each country have led to distinct outcomes. Specifically, the paper illustrates how in China the spatial pattern of inequality stems from the divide between the interior western provinces and the rapidly growing coastal provinces, whereas in India the disparity is more apparent between urban and rural areas. The analysis outlines how policy choices in agriculture, hard infrastructure, soft infrastructure, migration and industry have affected income inequality and how these inequalities have manifested. In China, the export-led growth strategy employed after market-reforms has allowed the country to capitalize on its expansive coastline, resulting in a rapid rise in disparity between coastal and interior provinces coupled with rapid economic growth. Similarly, in India a booming service sector in the post-liberalization era allowed for a disproportionate increase in the importance and growth of urban centers at the expense of rural areas. While location alone cannot explain the post-reform experience of China and India, geographical factors underlie many of the forces which have driven the disparity. While this analysis is inherently context-specific and requires nuanced enquiry on a local level, the implications of this discussion are global in scope. The paper concludes with several questions which require a more inclusive exploration. Does the Chinese case provide evidence that regional inequalities, particularly those that result from geographical factors, are a necessary evil of growth and globalization? What lessons can India take from the growth experience of other nations, and in turn, what lessons can it provide? These questions, and others, may serve as the basis for a larger, multi-faceted and multi-sited project on global inequality