ECONOMIC INEQUALITY AND SUSTAINABLE DEVELOPMENT IN INDIAN STATES: A PANEL DATA ANALYSIS (2018–2023)

Abstract

India’s rapid economic growth over the past decade has coincided with persistent inequality and uneven progress toward the Sustainable Development Goals (SDGs). While national level assessments offer important insights, they often mask sharp sub national disparities in income, human development, and social investment. This study examines the dynamic relationship between inequality and SDG performance across 30 states and Union Territories of India during 2018–2023. Using a balanced panel dataset, the SDG Index score published by NITI Aayog is modelled as a function of the Gini Coefficient, Per-Capita Net State Domestic Product (NSDP), Literacy Rate, Unemployment Rate, Infant Mortality Rate (IMR), and Per-Capita Social Sector Expenditure. Panel econometric methods are employed, including pooled OLS, fixed-effects (FE) with state and year dummies, and random effects (RE) models, with robust standard errors clustered at the state level. Diagnostic tests and robustness checks (with lagged regressors) are also performed to ensure reliability.

The results reveal three major findings. First, contrary to expectations, inequality (Gini) does not show a significant negative effect on SDG outcomes in FE or RE models, suggesting that short-run state level changes in inequality do not strongly determine SDG performance.        Second, per-capita NSDP emerges as the most consistent positive predictor, particularly in the RE specification, underscoring the central role of economic scale in driving development outcomes. Third, literacy, unemployment, IMR, and social expenditure exhibit expected signs in some models but are generally not statistically significant, indicating that their effects are either indirect or operate over longer horizons. The study concludes that growth remains a strong driver of SDG outcomes, but inequality reduction and social investments may require deeper structural and institutional reforms to show measurable impact. These findings have clear policy implications for aligning India’s growth strategies with the equity and inclusiveness agenda of SDG 10.