The paper reviews evidence on the ways in which recent economic
growth has been uneven in China and India and what this has meant for inequality
and poverty. Drawing on analyses based on household survey data and aggregate
data from official sources, we show that growth has indeed been uneven—
geographically, sectorally and at the household-level—and that this has meant
uneven progress against poverty, less poverty reduction than might have been
achieved had growth been more balanced, and an increase in income inequality.
The paper then examines why growth was uneven and why this should be of
concern. The discussion is structured around the idea that there are both “good”
and “bad” inequalities—drivers and dimensions of inequality and uneven growth
that are good or bad in terms of what they imply for both equity and long-term
growth and development. We argue that policies are needed that preserve the
good inequalities—continued incentives for innovation and investment—but
reduce the scope for bad ones, notably through investments in human capital and
rural infrastructure that help the poor connect to markets.