SPECIAL ARTICLE Economic & Political Weekly december 8, 2007 47 Regional Dimension of Growth and Employment K V Ramaswamy Regional inequality has emerged as a key issue in recent discussions of development policy. States within India differ greatly in terms of economic growth and employment potential. This paper examines some aspects of this regional employment growth in India during 1983 to 2004-05. The results confirm widening interstate disparities in income in the first quinquennium of the 21st century, a continuation of the trend of the 1990s. Urban employment occurs strongly in initially urbanised states. All states are found to be diversifying, but at a slower pace in low income states. A geographic concentration of skilled labour is observed in financial and business services. T he regional disparities (interstate) in economic well-being are an unmistakable feature of economic growth and change in India. In the years prior to independence, a pattern of ‘agglomerated’ growth emerged, with islands of concen- trated growth but having very weak dispersal effects…As late as 1948, the presidency states (Bombay, Madras and Calcutta) accounted for 76.7 per cent of the total industrial workers and 77 per cent of indus- trial production… the share of mineral rich states of Bihar, Orissa and Madhya Pradesh was 9.6 per cent (industrial production)… The southern region around Madras and Bombay, and especially what later became the state of Gujarat, was better placed and had a better start in terms of agriculture and industry [Krishna Bharadwaj 1982: 609]. Later studies of regional disparities during the period of eco- nomic planning in India observed that the impulses of growth are more widely dispersed than before but confirmed the persistence of wide disparities in development levels [Srivastava 1994 among others]. Whether these development disparities have tended to accentuate or diminish in recent years of reforms, trade liberali- sation and grater integration with the global economy is an im- portant question with social and political economy implications. The issue of regional disparities in employment in recent years of openness is important simply because labour markets are the key avenue through which international trade and investment openness affects the domestic economy. The problem of regional income inequalities has attracted much attention in recent years [Sachs et al 2002; Ahluwalia 2001; Shetty 2003; Bhattacharya and Sakthivel 2004a; Bagchi and Kurian 2005 among others]. Most of these have focused on the disparities in per capita incomes and re- port a tendency for divergence. However, studies of interstate dis- parities in employment opportunities or labour market outcomes are very few and deserve equal attention. Among them, studies by Bhattacharya and Sakthivel (2004b) and Ahsan and Pages (2006) constitute the recent key studies with their detailed analysis of interstate differences in employment outcomes. The time period covered in these two studies from 1983 to 1999-2000 correspond- ing to the then availability of national sample survey (NSS) em- ployment and unemployment data. Other studies have focused on the impact of labour regulations and trade liberalisation on manu- facturing employment and labour demand [Besley and Burgess 2004; Hasan, Mitra and Ramaswamy 2007]. These two economet- ric studies mainly utilise state level data on manufacturing indus- tries available in the annual survey of industries (ASI). In this paper, I investigate the growth and structure of em- ployment in 14 major states of India during 1983 and 2004-05. This will help maintain comparability with two important recent studies of regional income disparities, namely, Ahluwalia (2001) and Sachs et al (2002). Sachs et al (2002) have carried out both the sigma and beta tests of convergence for the 14 major states This paper is based on a study done for the Institute of South Asian Studies, National University of Singapore, Singapore. I am grateful to an anonymous referee for helpful comments on an earlier draft of this paper. The usual disclaimer applies. K Ramaswamy (swamy1378@gmail.com) is currently at the Institute of South Asian Studies, National University of Singapore, Singapore.