How do neighborhood characteristics and social cleavages within cities influence economic development? This study by PERI economist Vamsi Vakulabharanam and Sripad Motiram addresses these questions for the Indian cities of Hyderabad and Mumbai. The study conducts an inequality decomposition exercise to show that a substantial portion of intra-city income inequality is explained by social cleavages such as classes and social groups (caste and religion). The results show both that urban inequalities are stark, and that spatial co-existence of classes and social groups (a phenomenon that the authors term as “Grayness”) is pronounced, with Grayness exerting a strong positive impact on development.