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Mr. Paul Cashin and Ms. Ratna Sahay

This paper examines the growth experience of 20 states of India during 1961–91, using cross-sectional estimation and the analytical framework of the Solow-Swan neoclassical growth model. We find evidence of absolute convergence—initially poor states grew faster than their initially rich counterparts. Also, the dispersion of real per capita state incomes widened over the period 1961–91. However, relatively more grants were transferred from the central government to the poor states than to their rich counterparts. Significant barriers to population flows also exist, as net migration from poor to rich states responded only weakly to cross-state income differentials,