Infrastructure development and income inequality in India: an empirical investigation

Abstract

The purpose of this paper is to investigate the relationship between infrastructure development and income inequality in India from 1991 to 2012, by using the auto regressive distributed lag (ARDL) bound testing approach. The co-integration test confirms the presence of a long run relationship between infrastructure development and income inequality. The ARDL test results indicate that infrastructure development does not help in reducing income inequality. Both inflation and economic growth amplify the income inequality both in the long run as well as the short run whereas trade openness comes out to be the indicator which is able to decrease the gap between rich and poor in India. The study calls for adopting economic policies and reforms which are aimed at developing and strengthening the infrastructure levels, bringing in more investment in order to achieve the much required inclusive growth, and ultimately reduce the income inequality currently prevailing in India.