SMALL SCALE INDUSTRIAL CREDIT AND ECONOMIC INEQUALITY: A STUDY OF THE MAJOR INDIAN STATES BEFORE AND AFTER REFORM

Indian economy witnessed a major break in its structure during the early nineties in the name of economic reform on the motive of not only to free the economy from its long standing restricted closed structure to relatively more market orientation but also to achieve high growth rate of the overall economy that might solve the persistent low growth problem which was ultimately hindering the process of economic development. As a part of the entire reform programme, reforms in the banking and financial sectors were also designed in line with the recommendations of the report of the Narasimham Committee that intends to relax the credit logging and tried to expand the financial funds to all the sectors and small scale industrial units in the states so that the goal of achieving higher growth rate of the overall output of the country is sustained. The observations regarding these above objectives reveal the fact of phenomenal rise in income growth as well as credit growth of the overall economy and state level after the inception of the reform programme. At the same time the first decade of the reform programme experienced a low profile of development because of the rising income inequalities across the states and regions. That is to say that the Indian economy could not achieve the target of inclusive growth, rather it excluded some sectors as well as classes of people from the growth impact. There are so many factors that contributed to the growth of inequalities across states. The present study tries to explore that divergence and inequality present in the distribution of small scale industrial credit may give possible explanation to the growing inequalities in income in the states of India.