19 Pages Posted: 4 Jan 2007
Date Written: 2006
This paper looks at the implications of the liberalization process for the magnitude and nature of inequality in India and its possible ramifications for social harmony. Our discussion implies that the increase in household based rural and urban inequality for monthly consumption expenditure at the national level is not the result of inequality increasing within communities but is the consequence of widening inequality across communities. With regard to social unrest the distance factor among unequal entities does come into play and therefore the current mechanism of inequality increase at the household level should not pose grave dangers. Second, the impact of liberalization on consumption inequality overstates inequality in the income space as liberalization has increased the marginal propensities to consume of rich states and rich individuals. Thus, while liberalization has led to acceleration in the increase in inequality of consumption expenditure, the opposite is true of income.
Keywords: inequality, per capita income, expenditure
JEL Classification: A10, D63
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