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SA071710_Does_Class_Vamsi_Vakulabharanam - SPECIAL ARTICLE...

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SPECIAL ARTICLE Economic & Political Weekly EPW july 17, 2010 vol xlv no 29 67 Does Class Matter? Class Structure and Worsening Inequality in India Vamsi Vakulabharanam I thank the Economic Research Centre, Graduate School of Economics, Nagoya University for inviting me as a visiting professor when this research was conducted. I thank Xue Jinjun, Wei Zhong and the participants of the workshop on “International Comparison of Income Inequality” conducted at Nagoya University, Japan on 27-28 June 2009 for their helpful comments and suggestions in preparing this draft. I thank Ajit Zacharias and Y V Reddy for their comments on an earlier draft. I also thank the participants in the seminar series at the Department of Economics, University of Hyderabad as well as Kerala University, Trivandrum for their comments. Vamsi Vakulabharanam ([email protected] ) is with the Department of Economics, University of Hyderabad, and a fellow at the India China Institute at the New School, New York. Does class structure matter in understanding the increasing inequality in India during the period of economic liberalisation? There is now clear evidence from the National Sample Survey quinquennial household consumer expenditure surveys conducted in 1993-94 and 2004-05 that increased distance between urban elites (owners, managers and professionals), rural rentier classes (such as moneylenders and absentee landlords) that are more stratified at the top, and unskilled urban workers, marginal farmers and agricultural workers, who are increasingly more stratified at the bottom, helps us understand the distributional dynamics of the Indian growth story. This paper analyses the class structures in India and decomposes the overall inequality into inter-class and intra-class terms. It explains these changes by analysing the Indian policies during this period. 1 Why Focus on Class Structure? I t is now well known that the Indian economy has been expe- riencing relatively high growth rates consistently exceeding 5% in every decade since 1980 (Dutt and Rao 2000; Economic Surveys 2000-09 , Ministry of Finance, Government of India). While there was a major regime shift in 1991 when India intro- duced market-oriented economic reforms in most of its sectors and increased its openness to the global economy, the Indian growth story continued. It is also acknowledged now that the income distribution has taken a turn for the worse since 1991 (Himanshu 2007). This reverses a trend of declining or stagnant inequality during the 1980s, when a growth spurt first occurred in India with a strong push from the state. However, trends in overall Indian inequality have been understudied except at a fairly general level such as the inter-household, inter-sectoral (rural vs urban) or inter-state level (Chaudhuri and Ravallion 2006; Himanshu 2007). While the already published work helps us understand inequality at a broad level, it does not illuminate the dynamics of how different groups/classes have begun to witness increases in relative prosperity or relative pauperisa- tion. Understanding this dynamics is crucial both to examine
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