A Fixed Effects Analysis of Absolute Income Convergence Across Indian States from 1970 to 2020

Abstract

This study investigates the evidence of absolute income convergence among fifteen central Indian states over a multi-decadal horizon spanning from 1970 to 2020. Using a Fixed Effects (FE) panel data model to control for time-invariant, state-specific heterogeneity, such as geographic location, historical institutional frameworks, and climate, the analysis tests the Neoclassical “catch-up” hypothesis against the realities of India’s evolving macroeconomic landscape. The methodology focuses on the relationship between initial per capita income levels and subsequent growth rates across several temporal benchmarks, including the pre-reform era of centralised planning and the post-1991 period of market liberalisation. The research explores whether the Indian sub-national economies are moving toward a unified steady state or if internal barriers continue to foster persistent inequality. By evaluating absolute beta-convergence through a longitudinal lens, this paper contributes to the sub-national growth literature by identifying structural breaks in the convergence path. The use of the Fixed Effects approach ensures a robust estimation by neutralising regional characteristics that could otherwise distort the findings, providing a cleaner assessment of the “absolute” path to parity in a diverse federal union.