Macro Economic overview of Growth and Inequality in Assam Using Time Series Analysis

Background/Objective: Concentrating on Assam, this study makes an attempt to investigate the growth-inequality dynamics of the state taking account of factors like government expenditure on health and education.

Methods/Statistical Analysis: The study adopts time series analysis to test the relationship among income inequality, economic growth and social sector variables like education and health in Assam. The data over the period 1981-82 to 2011-12 is used in an ARDL framework to look into co integration and error correction mechanism.

Findings: The results derived are suggestive of the presence of a long term relationship between income inequality and economic growth, given the government expenditure on education and health. The findings show that government expenditure on education in Assam have the desired redistributive effect in narrowing the inequalities with time, but the results for government expenditure on health are alarming. Further, the results support the validity of Kuznet's 'Inverted U hypothesis' in case of Assam.

Application/Improvement: Government commitment towards provision of social services like government expenditure on education and health should be further streamlined to ensure that the expenditure is redistributive in dealing with income inequalities in the state.