Growth and Inequality in India: Analysis of an Extended Social Accounting Matrix

SummaryBased on an extended Social Accounting Matrix (SAM) for 2002–03, this study shows how sectoral growth in India affects inequality. A breakdown of the wage account into three educational levels and 10 sectors of employment improves the link between sectoral expansion and household income in the SAM. The results show that only agricultural growth reduces inequality, while growth in heavy manufacturing and services sectors raises inequality. Given India’s current growth pattern, inequality is likely to increase further. In an analysis of the standard SAM growth in any sector would appear to reduce inequality, which underlines the importance of our extension.