Mystery of India’s Growth Transition

[via Brad DeLong] Dani Rodrik and Arvind Subramanian analyse India’s productivity’s surge in their paper: “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.”