The coefficient on initial level of PCSDP is found to be positive in all the time periods considered, although a strong trend of divergence in PCSDP is observed only when considered over the entire post liberalization period of 1993 to 2011/12.
Thus, while the HDI and LR exhibit significant declining trend in regional disparity during 1990-2010, PCSDP displays significant divergence across states over the two decades under consideration.
Chain A representing the causality running from EG to HD estimates the effects of PCSDP averaged over the preceding five years (t-5) on HD indicators in a given year (t).
The estimated results show that economic growth measured by average PCSDP has a significant positive effect on all the HD indicators.
In order to capture the lagged impact of HD initiatives on EG, the variable chosen to measure EG is average PCSDP over succeeding three years.
For Chain B, the relationship between HD and EG was stronger in states with higher rates of growth of PCSDP.
The empirical exercise confirms the significance of a number of links in the two chains - including poverty rate and percentage of social sector expenditure in Chain A, and the rate of growth of PCSDP in Chain B, in addition to the important inputs of EG and HD, respectively.