POLARIZATION, INEQUALITY AND INCLUSIVE GROWTH: KERALA’S EXPERIENCE IN THE REFORM PERIOD

Abstract

he relation between growth and distribution (inequality) has long been seriously discussed in economic literature but has remained contentious on Kuznet’s famous hypothesis postulating an inverted ‘U’ relationship between income and inequality. Recently, some empirical studies covering a large number of observations did not find evidence of inverted-U curve pattern of relationship between growth and inequality for individual countries.  Also some studies showed that since the mid-eighties, developing countries recording fast economic growth, witnessed simultaneous rise in levels of inequality and slow-down in the rate of poverty reduction. The recent trend in the studies on economic growth and distribution therefore is to challenge the earlier notions and advance alternative propositions (e.g. high growth trajectories affect income distribution adversely; the higher the level of inequality, the less impact economic growth has for reducing poverty, for any given level of growth; countries can moderate inequality and yet achieve reasonable growth rates and so on) for empirical scrutiny and remains a matter of concern.  Development policy tends to replace “pro-poor growth” (poverty reduction) which was the primary development goal until recently and to propagate with pomp, the concept of “inclusive growth”.  Exploring the reasons for the divorce of “pro-growth” strategy and reviewing ongoing discussions on the definition of “inclusive growth”, reducing inequality and poverty remains the core of inclusive growth strategy which is accorded prominence in the reform period. The present study reviews issues of inequality and polarization in the case of “inclusive growth” with reference to the reform periods. The study puts illustrates with Kerala’s contemporary situation, a proposition that increasing inequality is inherent in the faster rate of economic growth propelled by the neo-liberal policy regime, tends to inhibit progress in poverty-reduction and eludes “inclusive growth”. The periods of growth coincide with the periods of high levels of polarization in terms of incomes measured in terms of their proxy measured in terms of consumption expenditure. The gaps is widening within and across group identities also.