Dani Rodrik and Arvind Subramanian try to understand the sources of India's growth acceleration:
Posted by DeLong at April 13, 2004 10:52 AM | TrackBack | | Other weblogs commenting on this postDani Rodrik and Arvind Subramanian (2004), "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition" (Cambridge: NBER Working Paper No. w10376): Most conventional accounts of India's recent economic performance associate the pick-up in economic growth with the liberalization of 1991. This paper demonstrates that the transition to high growth occured around 1980, a full decade before economic liberalization. We investigate a number of hypotheses about the causes of this growth favorable external environment, fiscal stimulus, trade liberalization, internal liberalization, the green revolution, public investment and find them wanting. We argue that growth was triggered by an attitudinal shift on the part of the national government towards a pro-business (as opposed to pro-liberalization) approach. We provide some evidence that is consistent with this argument. We also find that registered manufacturing built up in previous decades played an important role in influencing the pattern of growth across the Indian states.
Boy! I know nothing about India. I'm just amazed that 12 hours later, no one has bothered to comment on this post.
Posted by: john c. halasz on April 13, 2004 05:18 PMHaven't read the paper, but I'd argue that Dhirubhai Ambani and his company, Reliance Industries, played a pivotal role in this transformation. The stock markets and investing public play an equal, if not bigger, role than the government, and Reliance brought about that change of attitude in India.
Despite the recent scandals, US is amazingly efficient at deploying capital and I hope India can get to that level soon.
VA,
I have heard arguments to the contrary. The contrary argument has been that some of the biggest industrial houses in India have leveraged government to stall policies that would induce greater competition. Reliance has apparently had a considerable role in this.
One could of course argue that this also bought them time to prepare for competition and hence policy changes came at a time when they were ready to expand beyond what was possible in a closed market. After all a non-free market would mean that consumption is relatively constrained.
I don't know how one would quantify a change in business attitudes (I cannot read the NBER article because it needs subscription), but it is plausible that the industrialization under a mixed economy did build up infrastructure capacity which remained relatively underutilized. By capacity, I mean here the ability and skills required to build physical infrastructure. When a more business policy shift did occur, it was possible to expand rapidly with this existing capacity. I am no economist and so I am likely to be wrong about this.
To support this argument, I can only offer up some anecdotal evidence. When I was growing up in India in the 1980's and early nineties, there were a very large number of engineering and science graduates being produced by colleges in India. There was also a very high rate of unemployment and underemployment even among these graduates. Many of these graduates worked in small scale and traditional manufacturing firms or were employed by government public sector undertakings. Starting in the early nineties, when a combination of changes in government policy and technological advances created a fledgling software industry, the employment outlook for these graduates improved very significantly. One might argue that this is not the best of examples, because software is not a manufacturing industry and hence requires relatively low initial investment. However, a better example is the auto and auto parts industry in India. There were already companies which were locally manufacturing these items in large quantities. Government policy shifts did is made it a lot more lucrative for industries like these to upgrade the quality and scale of their operations. It also made selling and manufacturing these products more efficient and cheaper by removing tax and other constraints, thus enabling them to access larger markets.
It was very hard and expensive to start a company previously due to the number of bureaucratic requirements. It was also expensive to transport many kinds of goods across state borders due to complicated taxation laws. It was also difficult to raise money, either by borrowing or through the stock market because interest rates were very high and banks would generally be disinclined to provide loans to industry (I think this was partly due to a conscious government policy and the banks were all nationalized in the late 1960's, and partly because since the banks were nationalized, they had a lot of bad loans (this due to them being used for political populist schemes, and had a limited ability in collecting their loans). I guess a measure of "business friendliness" would be to look at the nature of government policies in these matters.
It seems to me that excepting the software industry, the greatest contribution to economic growth is in sectors of the economy where there has been a big presence of local Indian companies (e.g Pharma, automobiles, steel). To me it is not entirely surprising that Indian growth has increased (of course 10% is probably hard to explain.). If India had a free market in the late 50's and 60's instead of the late 80's on, I think the story would have been different ?(and probably much worse).
Posted by: vk on April 13, 2004 11:34 PMHere is a non-paying draft of this paper...
http://ksghome.harvard.edu/~.drodrik.academic.ksg/IndiapaperdraftMarch2.pdf
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to a foreign account. There were series of in house unaccounted
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the help of in house NNPC officials headed by Guaius Obaseki and
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Managing director. We are now soliciting for assistance to receive this
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