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From “Hindu Growth” to Productivity Surge: The Mystery of the Indian Growth Transition
Author:
Mr. Dani Rodrik null

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Mr. Arvind Subramanian
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Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 077
Language:
English
Publication Date:
01 May 2004
DOI:
https://doi.org/10.5089/9781451850024.001
ISBN:
9781451850024
ISSN:
1018-5941
Pages:
42
Keywords:
WP; terms of trade; productivity growth; India dummy; growth transition; State party
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper explores the causes of India's productivity surge around 1980, more than a decade before serious economic reforms were initiated. Trade liberalization, expansionary demand, a favorable external environment, and improved agricultural performance did not play a role. We find evidence that the trigger may have been an attitudinal shift by the government in the early 1980s that unlike the reforms of the 1990s, was probusiness rather than promarket in character, favoring the interests of existing businesses rather than new entrants or consumers. A relatively small shift elicited a large productivity response, because India was far away from its income-possibility frontier. Registered manufacturing, which had been built up in previous decades, played an important role in determining which states took advantage of the changed environment.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund