The nature of the relationship between income inequality and economic growth, first formalised by Simon Kuznets in 1950, has come under much debate of late. At present, one understanding of this relationship is that given by what Oded Galor called the ‘modern perspective’, which, pointing the direction of causation from income inequality to economic growth asserts that the former imposes a significantly negative influence on the latter. To investigate the same in the context of India, subsequently, this study adopts the typical cross-country approach taken by other studies in this area and estimates the nature of the aforementioned relationship across a cross-section of Indian states. The results, however, disappointingly contrary to the ‘modern perspective’, show a strong significant positive impact of the existence of inequality on growth rates of Indian states, which, if anything, statistically asserts the existence of a trade-off between the two.
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