Indian Journal of Economics and Development, Vol 4 (3), March 2016 ISSN (online): 2320-9836 ISSN (Print): 2320-9828 Macro Economic overview of growth and inequality in Assam using time series analysis Farah Hussain* 1 , Priyanka Bharali 2 1 Assistant Professor, Department of Economics, Assam Women’s University, Jorhat, Assam, India, Zip code: 785 004 2 Research scholar, Department of Economics, Dibrugarh University, Dibrugarh, Assam, India, Zip code: 786 004 farahhussain05@gmail.com 1 , priyankasm13@gmail.com 2 Abstract Background/Objective: Concentrating on Assam, this study makes an attempt to investigate the growth-inequality dynamics of the state taking account of factors like government expenditure on health and education. Methods/Statistical Analysis: The study adopts time series analysis to test the relationship among income inequality, economic growth and social sector variables like education and health in Assam. The data over the period 1981-82 to 2011-12 is used in an ARDL framework to look into co integration and error correction mechanism. Findings: The results derived are suggestive of the presence of a long term relationship between income inequality and economic growth, given the government expenditure on education and health. The findings show that government expenditure on education in Assam have the desired redistributive effect in narrowing the inequalities with time, but the results for government expenditure on health are alarming. Further, the results support the validity of Kuznet’s ‘Inverted U hypothesis’ in case of Assam. Application/Improvement: Government commitment towards provision of social services like government expenditure on education and health should be further streamlined to ensure that the expenditure is redistributive in dealing with income inequalities in the state. Key Words: Economic Growth, Income Inequality, Kuznet’s hypothesis, Time series analysis, ARDL Co integration 1. Introduction India has come to be known as the ‘bright spot’ among the emerging markets in the world economy, successfully emerging out as a strong economic power not susceptible to the downfall in the advanced world economies in recent times. The emerging markets captured attention among the world economies for their budding growth rate becoming a beacon of hope, which have however given away to gloom in later times. While China’s economy has slowed down and Brazil got mired in stagflation, Russia is in recession, battered by Western sanctions and the slump in the oil price. Further, South Africa is plagued by inefficiency and corruption. Amid the disappointment, India stands out as one big emerging market. The Indian economy has been growing at about 7.5 per cent per year for the last twelve years, with minor deviations up or down in specific years. The Indian economy has made considerable progress as far as growth is concerned amid economic woes faced by the other emerging economies. The stock market has boomed, in part because foreign investors remain keen buyers of Indian assets, even as they pull money from other emerging economies. The rupee is firm. The central bank has even expanded its foreign-exchange reserves to a record $330 billion—thus keeping the rupee from rising by more. The economy is likely to pick up further. The recent falls in commodity prices, which have hurt raw-material exporters such as Brazil, Russia and South Africa, are a boon for India, which imports 80% of the oil it consumes. Rich economies may fret about the dangers of falling prices around the world; Indians, on the other hand, are pleased they no longer have double-digit inflation at home [1]. The International Monetary Fund is predicting India that it will grow faster than each of its BRIC counterparts for the first time since 1999. The larger picture of the Indian economy, therefore, seems very satisfying. However, rising economic growth does not also indicate economic development taking place at same rates in the country. In India, the pace of economic development lags behind because of the existence of social evils like poverty, inequality, 1 www.iseeadyar.org