The Impact of Infrastructure Provisioning on Inequality in India: Does the Level of Development Matter?

Abstract

ABSTRACT This paper analyses the link between physical infrastructure and inequality and focuses on 17 major Indian states. The Gini coefficient was used as the dependent variable computed using data on monthly per capita consumption expenditure (MPCE), which was estimated from unit-level records of the periodical Household Consumer Expenditure surveys of National Sample Survey Organization for the years 1983, 1987–88, 1993–94, 2004–05, and 2009–10. By evaluating Indian states with different levels of development the paper shows that the impact of infrastructure on consumption inequality across states differs not just for the type of infrastructure but also for the income category the state belongs to. Additionally, some components of infrastructure, mainly power and roads, tend to increase interpersonal inequality at the regional level. The results of this study do not prescribe abandoning transportation projects or infrastructure development but instead recommend that the government should emphasize investments in complementary policies.