India’s economy is growing. GDP is rising, cities are expanding and digital infrastructure reaches the corners of the country once considered as remote. And yet something is wrong. Why are there deep regional inequalities, despite decades of impressive growth? Why do some districts bloom while their neighbors are left behind? And is it time to admit that growth just can’t solve inequality?
Based on a unique dataset from District Interior Product (DDP) and Human Development Index (HDI) values, we have a classic development theory, the Kuznets curve, at a more detailed level than ever tested in India. For the first time proposed by Nobel Prize winner -economist Simon Kuznets in the 1950s, the theory states that inequality rises in the early stages of economic development and falls as soon as an economy ripens (see Figure 1). It is an attractive idea: just wait and the growth will eventually become Bilder. But what we found is both more complex, less automatically and more urgent.
Spatial inequality
We measure spatial inequality using the share of the output of a state that comes from the best -performing district. The idea is simple: if a district is responsible for a disproportionate share of the State of State (GSDP) gross inland, the development is probably concentrated and the inequality between districts is high. In states such as Karnataka and Uttarakhand, the photo is grim. Bengaluru contributes almost 38 percent of the total GSDP from Karnataka; Dehradun is good for more than 31 percent in Uttarakhand. These figures underline the rise of what could be called ‘superster districts’ – urban centers that attract disproportionate investments, infrastructure and competent work, leaving the rest of the state behind.
Our empirical analysis supports the Kuznets hypothesis at a wide level (see Figure 2). In early developmental stages, spatial inequality is relatively low, especially because opportunities are limited across the board. As the development comes into effect, often driven by industrialization and urbanization, economic activity is concentrated in a few hubs, which increases spatial inequality.
But as the development continues and the benefits of growth begin to distribute, through education, health services and better infrastructure, inequality starts to fall. Kerala, with one of the highest HDI scores in our monster, is an example of this process. The long -standing investments in human capital and decentralized government have resulted in a relatively balanced regional development and lower spatial inequality.
However, the curve is not deterministic. States with similar HDI levels can have enormously different inequality profiles. Tamil Nadu and Karnataka, for example, both fall within the same HDI band (about 0.69), but the top district in Tamil Nadu contributes only 12.3 percent of his GSDP compared to 37.8 percent in Karnataka.
It is clear that policy at state level, historical investment patterns and institutional capacities determine how the development unfolds. Tamil Nadu, for example, has a deliberate strategy of industrial decentralization followed by setting up industrial estates in multiple districts, such as Hosur, Tiruppur and Sriperumbudur, so that economic activity is not limited to capital. This is supplemented with a strong emphasis on welfare schemes, including universal school meals and public health initiatives, which have contributed to broadening the benefits of growth.
The development of Karnataka, on the other hand, is disproportionately concentrated in Bengaluru, powered by its thriving technology and service sector, with relatively limited overflow to other districts. These different approaches explain why Tamil Nadu, despite a similar HDI level, shows considerably lower spatial inequality than Karnataka.
Madhya Pradesh presents a different development pattern. In contrast to states such as Karnataka, where special economic zones (SEZs) are focused on information technology (IT) and information technology-enabled services (ITEs) have stimulated economic growth, the SEZs of Madhya Pradesh are largely concentrated in processing and production industry. These sectors, although valuable, are usually more dependent on local sources and infrastructure and often do not generate the same scale of employment or economic couplings as the technology sector. As a result, only seven from the 55 districts of the State contribute to a disproportionate share of the economic output of Madhya Pradesh.
What does this all say? Firstly, economic growth is necessary, but not sufficient to reduce inequality. The assumption that the development will ultimately “drip” to the back of regions does not apply without intentional policy interventions. Development left to market forces has the tendency to privilege regions that already have a better infrastructure, human capital or political influence. Secondly, it reinforces the importance of decentralized planning and administration. The relative success of Kerala is not only about higher income levels; It is about how that income is generated and distributed. Investments in public health, rural education and local administration have contributed to the fact that no district dominates the state’s economy.
Thirdly, this has direct consequences for the policy priorities of India. The government’s focus on ‘ambitious districts’ is a step in the right direction, but much more needs to be done to control and reduce spatial differences. Substate data, such as GDP at district level and broken down HDI, must be systematically collected, standardized and used to guide the allocation of resources.
Instead of a one-size-fits-all development model, India needs region-sensitive strategies that take into account the unique strengths and vulnerabilities of each district. States must be encouraged to pursue balanced growth, not just maximize the output of their capital cities or IT -Hubs.
The writers are at Pahlé India Foundation
Published on June 28, 2025
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