Economic Inequality in India Over Time With Vidya Mahambare

Vidya Mahambare is an alumnus of Gokhale Institute of Politics and Economics, Pune. She is currently a  professor at the Great Lakes Institute of Management and the discourse of her session was regarding her ongoing research ‘Economic Inequality in India’. 

She began by recollecting some fond memories of her time at GIPE.She then conducted polls based on key Principles of Economics to introduce students to the subject of her talk. The questions were based on concepts like trade offs, incentives and price discrimination. 

The central question of the research was – What do different regional growth strategies of different states mean for local prosperity and inequality? 

Post liberalization, some states focused on manufacturing (Gujarat), while some pushed for high-skilled services (Karnataka). These were classified as Active Leaders. Likewise, few states had a historically strong manufacturing base which are now being conjoined with high skilled services (Active Leaders, E.g. Maharashtra, Tamil Nadu).Some states have depended majorly upon agriculture (Passive Leaders, E.g. Punjab, Haryana). In contrast, there are states that have seen growth in neither manufacturing nor high skilled services (Bihar).

The first observation of the study was that the contribution of Active Leaders in India’s GDP was almost three times that of the Passive Leaders, even though they have all grown almost equally.

Next, the structure of these state economies was studied and a hypothesis was formed that in states where the largest contribution comes from professional services (Karnataka), inequality will be much higher than in states where the largest contribution comes from manufacturing (Gujarat). The reason being professional services, although highly remunerative, don’t employ people in proportion to their contribution to the GDP. 

To test the hypothesis, several welfare indicators like CDI, BSI and HQI were taken into account and the hypothesis turned out to be as accurate as it can be.

Professor Vidya also mentioned that we need to rethink about simply creating low skilled manufacturing jobs and instead try creating medium-high skilled jobs.

 Once we had understood the historical policies of the states and their shortcomings, Professor Vidya urged us to pay attention to the upcoming budget based on these lines.

The session ended with a brief dialogue between Prof. Vidya  and Prof. Saylee about remittances that the “Passive Leaders” receive and how they are a huge part of why these states are so prosperous.

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