European Regional Science Association
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European Regional Science Association
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The abstract for paper number 456:
Buddhadeb Ghosh, Humanities & Social Sciences, Indian Institute of Technology and Economic Research Unit, Indian Statistical Institute
, Calcutta, India, Prabir De, Bengal Port Ltd., Calcutta, India
How Different Categories of Infrastructures Affect Regional Level of Development? Evidence from Indian States
The purpose of this paper is to investigate the role played by different categories of infrastructure facilities in economic development across Indian states over different time spans during the last quarter century. Attempt is also made to test both the ‘absolute’ and the ‘conditional’ theories of convergence across Indian states. Infrastructure facilities have been decomposed here into three major categories (physical, social and financial), and appropriate weights are derived with the help of principal component analysis. A comparative static framework is developed in order to test the role of these infrastructure facilities as well to test the direction of the movement of the development trajectory of the states in infrastructure-income plane. The findings of the paper are statistically very significant and have serious implications for future regional policies under market economy for a heterogeneous economy. First, inter-state disparities in per capita income and in physical, social and financial infrastructure facilities have remained at an alarming high level over the same. Second, physical and social infrastructure facilities have been proved to be highly significant factors in determining the inter-state level of development. While financial infrastructure does not play any clear role, seaport dummy signals signs of importance of transport costs during the post-reform period after 1991. Moreover, physical and social infrastructures of the seventies alone determined the fate of Indian states in the nineties. Fourth, no substantial change has been recorded in the strength of the relationship between infrastructure variables and per capita income over different time spans, although there appears to be an upward shift of the implicit trajectory representing the states in infrastructure- income plane. Fifth, there does not appear to have any tendency towards convergence in a Barrovian sense even under the same institutional framework. Economic reforms undertaken in 1991 have not mitigated the ‘diverging’ tendency. It has been continuing unabated over time. Interestingly, one important implication in the post-reform period is that due to an expanding knowledge economy within old pockets of development, poverty has been tending to become a spatial phenomenon even within the states.
Therefore, quite contrary to general belief, the role of public policy in the post-reform era has to be much more exerting in curing the problem of growing regional imbalance while carrying on with the reform process. The most strenuous task of the policy makers must now be to undertake policies by which to reduce regional inequalities in various physical and social infrastructure facilities rather than simply to target equalization of public investment across regions. Otherwise, the on-going reform process may be badly thwarted by socio-potential disharmonies.
Given tremendous social, linguistic, religious and racial heterogeneity as in Europe, India’s unwillingness to develop more comprehensive and successful regional strategies of development was doubtless an outcome of the regime’s efforts to maintain a sense of national integration at the cost of greater regional self-determination. Industrial stagnation in the waning regions has compounded the problems of human capital formation in these disadvantageous regions. Eventually, the better-endowed people have concentrated in the better-endowed regions thereby resulting in a spatial concentration of poverty.
It goes without saying that the present paper suffers from some limitations. Some of these lacunas are as follows: aggregate indexation, failure to incorporate varying perceptions of “development” by different communities in different localities and failure to incorporate environmental factors. The question is: whether indexes constructed for various communities will be legitimately incorporated in a Rawlsian index of some kind or some conservative welfarist assimilation.
Keywords: Infrastructure, Inequality, Principal Component Analysis, OLS, Cook’s Distance Statistic, Comparative Static Framework.
Unfortunately full paper has not been submitted.