Sectoral convergence of GDP among indian states: a sectoral level study

The study examines sectoral beta and sigma convergence, structural breaks and the speed of convergence across Indian states in the agricultural, manufacturing and services sectors. Fixed effects model for panel data and QLR tests for structural breaks were used. The interpretation of the OLS estimate into the structural speed of convergence. The absolute convergence rate of the manufacturing sector was found to be 2.3% and the conditional convergence rate was 3.87%. The findings also show sigma (σ) convergence in manufacturing but divergence in other sectors and overall GDP. In the agricultural sector, there is a prominent structural break in 2008 which is in line with the global financial crisis transmitted through credit and trade finance channels.