Working Paper
The dynamics of spatial and local inequalities in India

Studies of the spatial dimensions of inequality in developing countries are mostly restricted to states, provinces, or districts, typically the smallest geographical units for which data are representative in national surveys.

We introduce a procedure to calculate inequality between and within smaller spatial units in the context of India, taking advantage of census and satellite data available for a large number of characteristics at the level of the village and the urban sub-district (block). Using prediction models based on those characteristics and estimated at the district level, we impute average per capita consumption expenditure for villages and urban blocks in 2004 and 2011. These imputations allow us to calculate (spatial) inequality between villages and blocks and to derive (local) inequality within these spatial units.

We find that the divergence observed for states and districts is not amplified at lower levels of disaggregation. Hence, the increase in inequality in urban India is mostly due to rising inequality within urban blocks. Neither rural inequality nor its local and spatial components have changed much at the national level, but there is substantial heterogeneity between states and across poor and rich districts. Finally, we find that urbanization, growth of employment, and ‘good’ jobs may be moving hand in hand with falling spatial inequalities but rising local inequalities. On the other hand, the expansion of literacy and access to banking and sanitation are linked to lower rises in inequality.