The effect of a state’s prosperity on disparities between groups

In an earlier article, we explored the progress over time in asset wealth as measured by the ownership of common durables and personal vehicles among disadvantaged groups, such as Scheduled Castes (SCs) and Scheduled Tribes (STs), and also the General Category (GC) at the all-India level. This article reports some startling findings about durable ownership among social groups across key Indian states, as reflected in data from the National Family Health Survey (NHFS) for 2015-16.

We constructed an asset index using data on 19 durables, including electric fans, colour TV sets, refrigerators, air-conditioners, computers (and internet access) and vehicles. With over 600,000 observations at the national level, each social group at the state level is represented sufficiently well. While we have done several robustness checks, the findings reported here could not be compared with any other study, since we were unaware of similar studies.

First, in all states, GC households do better than Other Backward Class (OBC) homes, which in turn are better off than SC/ST homes in that state on average asset-ownership outcomes. Second, Punjab, Haryana, Kerala and Tamil Nadu are India’s top states for the best outcomes for an average household across any social group. Third, while Punjab is the clear leader in asset ownership outcomes for every social group, Bihar has the worst outcomes for all social groups. Fourth, there is considerable inequality of outcomes for SCs/STs and OBCs within prosperous states too. Maharashtra, Karnataka and Gujarat lag significantly behind Haryana, Punjab, Kerala, and Tamil Nadu, with Gujarat showing the largest inequality between average outcomes. Fifth, among the relatively laggard states, inequality as measured by durable asset scores among social groups is the highest in Madhya Pradesh, followed by Jharkhand.

A typical OBC household in Punjab and Kerala is better off than an average GC one in all but two other major states. Similarly, Punjab’s lead in asset ownership is such that an average SC/ST home in Punjab has a higher durable asset score than an average GC one in all but four other major states. While per person real net state domestic product, a commonly used measure of average prosperity, was around ₹20,000 lower in Punjab at around ₹100,000 in 2015-16 than in Gujarat and Maharashtra, durable asset ownership even among the traditionally disadvantaged and backward castes is much higher, perhaps partly reflecting the impact of inward remittances.

In terms of underlying durable asset ownership, a comparison of other prosperous states reveals why asset scores across all social groups are higher in Punjab (Table 2). It is important to note that differences in asset ownership may arise on account of factors other than economic prosperity. For example, a combination of higher levels of regular tap water supply, cheaper electricity and larger homes in one state may promote washing machine ownership even when income levels are similar. Also, continuous and stable electricity supply may be a precondition for the purchase of a refrigerator. Similarly, a decision to buy a vehicle may depend on commute requirements and the availability of public transport. It would be interesting to repeat this analysis when NFHS-5 unit level data for 2019-20 becomes available, since the delivery of basic services has improved in recent years. Finally, differences in local culture in terms of the relative weights attached to the display of assets as signals of social status are also likely to play a part in decisions to purchase durable assets or vehicles.

In general, India’s prosperous states have been more successful in improving the asset wealth of disadvantaged groups. This supports the general consensus that raising overall levels of economic prosperity is an appropriate way to lower poverty levels. Second, state-wide differences in the implementation of affirmative-action policies may have played a role, given the differences among India’s prosperous states in terms of the asset wealth of their disadvantaged groups. Third, not only are the levels of asset ownership scores lower among the country’s laggard states, these states also have the highest inequality in terms of gaps between asset- ownership scores among different social groups. Fourth, all states still have a long way to go before closing the gaps between GC households and those of caste groups officially identified by India as disadvantaged.

Overall, there is little doubt that economic growth, and access as well as quality of delivery of basic services, are necessary for improving the well-being of all social groups. Without it, India’s affirmative-action policies aimed at bringing disadvantaged groups at par with others are unlikely to close the gap.

Vidya Mahambare and Sowmya Dhanaraj are, respectively, professor of economics at Great Lakes Institute of Management, Chennai, and assistant professor at Madras School of Economics