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Inequality and Growth: Conflict or Convergence? 123

redistributive objectives are unimportant, but that redistribution is only feasible in a developing
economy if the size of the economic pie grows. In sum, for a developing country such as India,
where the growth potential is high and the scope for poverty reduction is also significant, the
focus must continue on growing the size of the economic pie rapidly at least for the foreseeable
future.

GROWTH, INEQUALITY, AND SOCIO-ECONOMIC OUTCOMES:
INDIA VERSUS THE ADVANCED ECONOMIES

4.4 In the advanced economies, Wilkinson and Pickett (2009), Atkinson (2014) and Piketty
(2020) show that higher inequality leads to adverse socio-economic outcomes but income per
capita, a measure of economic growth, has little impact. This section examines whether these
findings apply to India. For this purpose, Figures 1-7 display simultaneously the correlation of
socio-economic outcomes with inequality and income per capita across advanced economies
and across Indian states. In each figure, the top panel displays these correlations for the Indian
states while the bottom panel displays the same for the advanced economies; the chart on
the left displays the correlation with inequality while the chart on the right displays the same
with income per capita. These figures demonstrate clearly across a range of socio-economic
outcomes the stark contrast between India and the advanced economies in the correlation of
socio-economic outcomes with inequality and income per capita. Across the Indian states, it is
observed that both inequality and income per capita correlate similarly with socio-economic
outcomes. In these figures, inequality across Indian states is measured as the Gini coefficient of
consumption. As it is demonstrated in the Appendix to the chapter, the results remain robust to
using other measures of inequality.

4.5 Figure 1 shows clearly that the index of health outcomes correlates positively with
both inequality and income per capita across the Indian states. However, across the advanced
economies, inequality correlates negatively with the index of health and social outcomes while
income per capita correlates positively. Thus, while the conflict between growth and inequality
is clearly seen across the advanced economies, inequality and growth converge in their effects
on health among Indian states. Figures 2-5 show the same result using the index of education,
life expectancy, infant mortality and crime respectively. It is clearly evident from Figure 6 that
neither inequality nor income per capita among Indian states correlate strongly with drug usage;
however, inequality correlates strongly with drug usage in the advanced economies. On mental
health, Figure 7 shows that the effects of inequality and income per capita remain similar across
the Indian states and the advanced economies.