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This paper investigates the process of convergence and catching-up among major Indian states during 1980/81-2004/05-a period of economic liberalisation and accelerated economic growth, and also analyses the factors that enhance economic growth and lead states towards an identical steady state. In particular, we examine the role of agricultural conditions in this process. Results indicate absolute divergence in income levels across states. However, after controlling for structural characteristics of states there is a strong tendency of convergence among states. Physical infrastructure and human capital are found to enhance economic growth, but alone are not sufficient for convergence. For convergence, the investment in physical infrastructure and human resources should be accompanied by a reduction in employment pressure on agriculture by improving labour market linkages of agriculture with non-agricultural sectors, and by promoting growth-enhancing labour-intensive agricultural technologies. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]