ICT in Regional Inequality Accompanied Growth in an Emerging Economy: Case of India
affiliation not provided to SSRN
March 27, 2012
The objective of this paper is to test the unconditional convergence (β and σ convergence, Barro and Sala-i-Martin, 1995) across 15 major Indian States from 1980-81 to 2010-11, and to explore the proximate reasons for the growing regional inequality. The present piece of work also carried out the convergence test (both β and σ convergence) in the Information and Communication Technology, i.e., ICT. The result shows that teledensity has gone up significantly in India, especially in the underdeveloped regions. However, even after five and half decades of planning, regional inequality still is a major issue. In fact, the reform regime has seen more of this evil. But, the reforms in the telecommunication sector have had a positive contribution towards reducing regional inequalities, even though reforms in other sectors have negative impact on reducing regional inequalities. Given the structural differences across the states, some degree of inequality among the States is indispensable. This inequality depends on the factors like; available of productive resources to the respective States, its optimal utilization, transfer of resources from the rich States to the poorer ones, either through the market forces or through the policies of transfers and grants by the center, and the policies of the respective States to enrich their resources. On the other hand the reforms in the telecommunication sector have raised the teledensity of the relatively poorer states than their richer counterparts. By using the Panel Co-integration technique, the present study concluded that, States those are primarily endowed with qualitatively better human resources (human capital) and have adopted an appropriate policy towards improving the quality of these recourses have a better growth rate over their counterparts. Similarly, States having higher teledensity and have a proactive ICT Policy grow faster than the others. However, the impact of a favorable ICT policy has a comparatively better impact on the growth (the long-run elasticity of human capital to growth is 0.65, whereas the same for teledensity is 0.78). Thus, the policy suggestion for the states, particularly poorer ones, is to improve the accessibility of the service of the telecommunication sector to all. This could be done by enhancing the quality of their telecommunication sector through the provision of better telecommunication infrastructure to the remote areas. Additionally, the States need to improve the human resources by effectively raising their spending on education, especially on IT education and health so that the telecommunication infrastructure can be effectively and efficiently used towards the growth of an aspiring economy.
Keywords: ICT, economic growth, convergence, human capital, teledensity, panel cointegration
JEL Classification: C22, C33, J24, O23working papers series
Date posted: March 28, 2012
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