Spatial Dynamics of Regional Inequality and Fiscal Policy in India: 1991–2023

Spatial Dynamics of Regional Inequality and Fiscal Policy in India: 1991–2023 | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Spatial Dynamics of Regional Inequality and Fiscal Policy in India: 1991–2023 Vinay Kumar, Rekha Ravindran, Arfat Ahmad Sofi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7340704/v1 This work is licensed under a CC BY 4.0 License Status: Published Journal Publication published 30 Oct, 2025 Read the published version in Networks and Spatial Economics → Version 1 posted 7 You are reading this latest preprint version Abstract In this study, we use trends in GDP gaps per capita or relative GDP per capita indicator as an aggregate alternative measure to show regional per capita income inequality between the states of India. The measure captures spatial divergence in income levels by comparing each state's GSDP per capita to the national average. Utilizing spatial econometric models to identify local and global effects of fiscal and political determinants on income inequality. The results consistently indicate that increased social sector expenditure, rather than mitigating inequality, is positively and significantly associated with higher relative inequality. The results indicates regressive public service delivery, elite capture, and spatial fiscal emulation among neighbouring states. Regarding fiscal deficits exhibit robust inequality-enhancing effects. Higher deficits are associated with reduced redistributive capacity and increased debt servicing, disproportionately benefiting capital-owning groups. These effects also spillover to adjacent states, consistent with theories of fiscal competition and inter-jurisdictional policy mimicry. Political economy variables also display spatially mediated influences. Single-party governments and non-centrist ideological regimes are associated with greater inequality, whereas regional parties are linked to more equitable outcomes. Significantly, the magnitude and significance of spatial effects vary with the choice of spatial weight matrix. Queen contiguity and KNN5 matrices yield consistent results, whereas distance-based matrices attenuate direct effects while amplifying spillovers—mainly for political variables—highlighting the sensitivity of spatial inference to network structure. These findings emphasise the imperative of spatially sensitive and politically cognizant fiscal frameworks to address India's persistent and geographically entrenched inequality. spatial dependence fiscal policy political indicators spatial interaction India Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Published Journal Publication published 30 Oct, 2025 Read the published version in Networks and Spatial Economics → Version 1 posted Editorial decision: Revision requested 16 Sep, 2025 Reviews received at journal 16 Sep, 2025 Reviewers agreed at journal 20 Aug, 2025 Reviewers invited by journal 18 Aug, 2025 Editor assigned by journal 11 Aug, 2025 Submission checks completed at journal 11 Aug, 2025 First submitted to journal 10 Aug, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7340704","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":503447509,"identity":"f0293ccf-a68b-4d74-b02f-22a29a6be033","order_by":0,"name":"Vinay Kumar","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA8ElEQVRIiWNgGAWjYDACZhBxwIaHjQGIEgoYeMCiCYS1pPGwsYG0GBCjBQwOHGZgAGlhMCDCXQbHeQ9+5jlzXoZPvvfYgwcGdjIM7IcfMDzcgUfLYb5kaZ4bt4EO40s3SDBI5mHgSTNgSDyDW4tkM4+BNM8HkBYeM4kEA2agX3IYGBLb8Gox/s3z4RxMSz0PA/8b/Fr4mXnMgA47ANNymIdBgoAtIC2Wc84kA7XkpQG1HOdhk3hmcACfFjb+M8Y33hyzs5dvPntM8kdFtT0/f/LDhz/xaAEBJh4UQ4D4AH4NDAyMPwipGAWjYBSMgpENAF6GQBP5vV5FAAAAAElFTkSuQmCC","orcid":"","institution":"Indian Institute of Technology Bhilai Bhilai","correspondingAuthor":true,"prefix":"","firstName":"Vinay","middleName":"","lastName":"Kumar","suffix":""},{"id":503447511,"identity":"4f45ffe0-dc90-4850-83da-32abab6f6b52","order_by":1,"name":"Rekha Ravindran","email":"","orcid":"","institution":"Indian Institute of Technology Bhilai Bhilai","correspondingAuthor":false,"prefix":"","firstName":"Rekha","middleName":"","lastName":"Ravindran","suffix":""},{"id":503447514,"identity":"e94dd9ce-52eb-4912-a78a-b9890db18d39","order_by":2,"name":"Arfat Ahmad Sofi","email":"","orcid":"","institution":"Birla Institute of Technology and Science, Pilani - Goa Campus","correspondingAuthor":false,"prefix":"","firstName":"Arfat","middleName":"Ahmad","lastName":"Sofi","suffix":""}],"badges":[],"createdAt":"2025-08-10 19:53:23","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7340704/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7340704/v1","draftVersion":[],"editorialEvents":[{"content":"https://doi.org/10.1007/s11067-025-09711-0","type":"published","date":"2025-10-30T15:57:44+00:00"}],"editorialNote":"","failedWorkflow":false,"files":[{"id":95039977,"identity":"cf6d8b26-9393-4a20-b7b6-6dfdc2bf2229","added_by":"auto","created_at":"2025-11-03 16:06:48","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":602202,"visible":true,"origin":"","legend":"","description":"","filename":"SpatialDynamicsofRegionalInequalityandFiscalPolicyinIndia19912023.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7340704/v1_covered_9c8fa55d-54aa-4ca5-b6a3-003681b6c5c8.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Spatial Dynamics of Regional Inequality and Fiscal Policy in India: 1991–2023","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":true,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"networks-and-spatial-economics","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"nets","sideBox":"Learn more about [Networks and Spatial Economics](http://link.springer.com/journal/11067)","snPcode":"11067","submissionUrl":"https://submission.nature.com/new-submission/11067/3","title":"Networks and Spatial Economics","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"em","reportingPortfolio":"Springer Hybrid","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"spatial dependence, fiscal policy, political indicators, spatial interaction, India","lastPublishedDoi":"10.21203/rs.3.rs-7340704/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-7340704/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"In this study, we use trends in GDP gaps per capita or relative GDP per capita indicator as an aggregate alternative measure to show regional per capita income inequality between the states of India. 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